Lupin Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Lupin reported a strong Q3 FY25 with robust revenue growth of 10.6% YoY to ₹5,619 crores and a significant EBITDA margin expansion to 24.3%, the highest in five years. The US business achieved a five-year high in revenues, and India formulations outpaced market growth. The company maintained strong regulatory compliance and continued to invest heavily in R&D, focusing on complex generics and specialty assets, while navigating challenges like muted respiratory growth in India and currency impacts in Emerging Markets.

Highlights

  • Reported strong performance across key markets with sequential and YoY growth, achieving the highest EBITDA margins in 5 years at 24.3%, up 420bps YoY.

  • US business delivered strong QoQ and YoY growth with revenues at a five-year high of USD 235 million, a 10.5% YoY increase.

  • India business grew by 11.9% YoY, with the India Formulation business recording 9.1% growth for 9M FY25 against an IPM growth of 8.2%.

  • Successfully filed Ranibizumab in EU and received EIR from USFDA for Pithampur Unit-1 with VAI classification, indicating strong regulatory compliance.

  • Strengthened diabetes portfolio by acquiring the Huminsulin range of products from Eli Lilly and 3 trademarks from Boehringer Ingelheim for the Indian market.

Concerns

  • Muted growth in the respiratory category affected overall India performance during the quarter, despite strong growth in other key therapies like Diabetes, Cardiac, and GI.

  • Emerging Markets (APAC and LATAM) registered a decline of 4.7% YoY in sales, primarily due to currency impact in LATAM markets.

  • Anticipated competition in products like Albuterol and Suprep® in the US market, which new product introductions are helping to offset.

Key financials

  1. Revenue ₹5,619 Cr +10.6%YoY
  2. EBITDA ₹1,366 Cr +33.7%YoY
  3. EBITDA Margin 24.3% +4.2%YoY
  4. Gross Margins 69.4% +3.4%YoY
  5. R&D Spend ₹434 Cr
  6. R&D as % of Sales 7.7%

What they filed

Q1 FY27: revenue up 25.6%, net profit up 27.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,106 4,208 4,486 5,709 4,068 −1%4,501 +7%5,235 +17%7,172 +26%
EBITDA1,115 1,411 1,746 2,730 1,176 +5%1,617 +15%2,282 +31%3,733 +37%
Net profit808 985 1,291 2,128 1,357 +68%717 −27%2,164 +68%2,715 +28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • US Business
    235 Mn Sales10.5% YoY Growth6.8% QoQ Growth
  • India Business
    11.9% YoY Growth
  • EMEA
    20.9% YoY Growth9.8% QoQ Growth
  • Emerging Markets
    ₹451 Cr Sales-4.7% YoY Growth
  • API
    4% YoY Growth

Capital allocation

high confidence
  • Capex ₹1,800 Cr
    • R&D spend, primarily for complex generics portfolio (nasal sprays, injectables, respiratory, biosimilars) ₹1,800 Cr
    As previously guided, we expect R&D to be around INR 1,800 crores for fiscal year 25, which would mean a significant increase in our R&D spends in Q4.
  • Debt Net ₹103 Cr
    Net debt was at INR 103 crores as against Rs 477 crores as on 31st March 2024.
  • M&A Huminsulin range of products from Eli Lilly Acquisition · Closed

    Strengthen diabetes portfolio in India

    We are very pleased to strengthen our diabetes portfolio by acquiring the Huminsulin range of products from Eli Lilly
  • M&A 3 trademarks from Boehringer Ingelheim Acquisition · Closed

    Strengthen India market presence

    and also 3 trademarks from Boehringer Ingelheim for the Indian market.

Guidance & targets

Margin

  • EBITDA Margin Margin · FY25 · High confidence 23-23.5%
    Putting all of this together, we believe that we should be able to deliver EBITDA margins in the region of 23-23.5% range in FY25.

    — Ramesh Swaminathan

Revenue

  • US Business Growth Revenue · FY25 · High confidence double digit growth

    Previously high single digit growth → double digit growth

    On a full year FY25 basis, we anticipate our US business to deliver double digit growth, ahead of our earlier guidance of high single digit growth in the segment.

    — Ramesh Swaminathan

  • US Business Sales Revenue · FY26 · Medium confidence USD billion plus
    We expect in fiscal year '26, the US should be at a USD billion plus and then look at how we can sustain the growth from there.

    — Vinita Gupta

Capex

  • R&D Spend Capex · FY25 · High confidence INR 1,750-1,800 crores
    For the full year, we expect R&D to be around INR 1,750-1,800 crores with a significant increase in R&D in Q4.

    — Ramesh Swaminathan

  • R&D Spend Capex · FY26 · Medium confidence INR 1,800 crores to INR 1,900 crores
    I would say, as an absolute there would be an increase but as a percentage of sales, it will perhaps be around the same levels. But given the focus that we have on more complex stuff and the like, this is inevitable. ... Yeah, that's a slight increase over that if necessary.

    — Ramesh Swaminathan

Tax

  • Effective Tax Rate (ETR) Tax · FY25 · High confidence 20-21%
    For the full year, we expect the ETR to be around 20-21%.

    — Ramesh Swaminathan

Other Income

  • PLI Income Other Income · FY26 · Medium confidence INR 200 crores
    So there would be a decline for sure next year. In the normal course, you would be expected to look at about INR 200 crores on an annual basis.

    — Ramesh Swaminathan

Market Share

  • Spiriva Market Share Market Share · next fiscal year · Medium confidence 40% plus
    So we are hopeful that we sustain this level into the rest of the quarter and into the next fiscal year to get the overall market share to hopefully 40% plus.

    — Vinita Gupta

M&A

  • Bite-size Acquisition Comfort M&A · Medium confidence USD 200 million to USD 250 million
    But having said that, we would be comfortable with a bite-size acquisition, USD 200 million to USD 250 million should be easy enough for us.

    — Ramesh Swaminathan

What to watch in Q4 FY25

Tolvaptan launch and contribution

H1 FY26
Current Expected Q1 FY26
Target Major contributor in H1 FY26

Why it matters

Tolvaptan is expected to be a major contributor to US business growth in the first half of the next fiscal year.

But I think it'll be safe to assume that Tolvaptan would be the major contributor in the first half of the fiscal year and the injectables should ramp up in the second half very nicely.

Risks & concerns

  • Potential US tariffs on pharmaceuticals

    high

    If implemented, tariffs could significantly impact the generic industry, leading to cost increases or drug shortages, with 70% of generic drugs imported into the US and 50% from India.

    Management acknowledged

  • Ongoing Mirabegron litigation

    medium

    The company continues to navigate litigation, with a decision on Mirabegron 2 patent expected in Q1 FY26, and will continue to litigate others.

    Management acknowledged

  • Muted growth in India's respiratory category

    medium

    The slow growth in the respiratory category affected overall India performance during the quarter, despite strong growth in other key therapies.

    Management acknowledged

  • Anticipated competition in US base products

    medium

    New generic competition is anticipated in products like Albuterol and Suprep®, which new product introductions are helping to offset.

    Management acknowledged

  • Forex impact on Emerging Markets sales

    low

    Emerging Markets sales declined 4.7% YoY, primarily due to negative currency impact in LATAM markets.

    Management acknowledged

Q&A highlights

6 direct
Timelines for key limited competition product launches in US Direct
So we are making progress on both applications with the agency and would expect that hopefully, approval sooner rather than later. But I think it'll be safe to assume that Tolvaptan would be the major contributor in the first half of the fiscal year and the injectables should ramp up in the second half very nicely.

Clarifies the expected launch timelines and contribution phasing for key growth drivers like Tolvaptan and injectables.

Asked by Kunal Dhamesha, Macquarie

Slow growth in India's respiratory therapy segment Partial
I mean the market seems to be that way. I mean sequentially the number is as an absolute number up actually for respiratory, but it's been lagging for a while versus the rest of the market. Even for nine months, the market was only at 4%. We were at 3% for nine months and I mean the quarter again has been disappointing.

Highlights a specific underperforming segment in the India business and management's view on market trends, indicating a potential drag on overall India growth.

Asked by Kunal Dhamesha, Macquarie

Sustainability and future quantum of PLI-related income Direct
So there would be a decline for sure next year. In the normal course, you would be expected to look at about INR 200 crores on an annual basis. But you have the benefit of actually taking up to a third more in a particular year alone, which we've taken advantage of this year. But obviously, it would impact on the total quantum of monies that you can claim over the next three years.

Provides clarity on the expected decline in PLI benefits for the next fiscal year, impacting future profitability, while confirming the overall duration of the scheme.

Asked by Bino Pathiparampil, Elara

Concerns about potential US tariffs on pharmaceuticals Direct
So we are monitoring it very carefully and the industry has made a strong pitch, both from AAM standpoint as well as IPA, the tariffs will have a significant impact on the generic industry if it was implemented. I mean 70% of generic drugs for the US are imported at present, 50% of generics come from India.

Addresses a significant macro risk for the pharma sector, detailing the potential impact on costs and drug supply, and management's advocacy efforts.

Asked by Surya Patra, Phillip Capital

Strategy and timelines for Semaglutide launches Direct
For the oral solid, which is an opportunity also in multiple markets, we have internal development. And for the injectable Semaglutide, we have partnerships in place. For a few markets, we have existing partnerships, others in the works. But we would expect the '27 calendar year to be in at least a handful of the open markets for Semaglutide.

Outlines the company's multi-pronged approach (internal development, partnerships) and timeline for entering the high-potential Semaglutide market.

Asked by Saion Mukherjee

Future investment and participation in biosimilars Direct
Actually, it's a promising trend on the biosimilars front in the US in particular in the last 12 months, both from a regulatory perspective with the FDA easing the requirements on interchangeability... So actually, it looks like the biosimilar market is starting to open up and, as it does, we'll continue to look at opportunities.

Indicates a renewed positive outlook and continued investment in the biosimilars space, driven by favorable regulatory changes and market dynamics.

Asked by Saion Mukherjee

Spiriva market share strategy and current performance Direct
So the team has done a really good job in activating multiple areas from a conversion standpoint, but we're starting to see some impact already in January where TRx share has become high 30's has gone to 38% level and NRx is 40% plus. So you know the multiple efforts on from a co-pay standpoint to ease the burden on the patient to access into Medicare/Medicaid through contracting, plus other avenues are starting to show results.

Provides an update on the progress and strategies to increase market share for a key product, showing early positive results from recent efforts.

Asked by Harsh Bhatia

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

Lupin reported a strong Q3 FY25, with revenues reaching INR 5,619 crores, marking a 10.6% YoY growth. The company achieved its highest EBITDA margins in the last 5 years at 24.3%, expanding 420 basis points YoY. Gross margins also improved to 69.4% from 66.0% in Q3 last year, driven by a better product mix, tailwinds on input costs, and increased efficiencies. Management expressed confidence in maintaining growth momentum and achieving EBITDA margins in the 23-23.5% range for the current fiscal year.

US Business Momentum and Pipeline

The US business delivered robust growth, with sales reaching USD 235 million, a 10.5% YoY and 6.8% QoQ increase, marking a five-year high. This growth was fueled by volume increases in inline products and contributions from new products like Mirabegron, offsetting anticipated competition in Albuterol and Suprep®. The respiratory portfolio continued its strong performance with high market shares. Lupin anticipates double-digit growth for its US business in FY25, driven by an exciting pipeline including Tolvaptan (expected H1 FY26) and injectables like Glucagon, Risperdal Consta, and Liraglutide (expected H2 FY26).

India Formulations and Strategic Acquisitions

India's business grew by 11.9% YoY in Q3 FY25, with the India Formulation business recording a 9.1% growth for the first nine months of FY25, outperforming the IPM growth of 8.2%. Key therapies such as Diabetes, Cardiac, and GI grew ahead of the market. The company strengthened its diabetes portfolio by acquiring the Huminsulin range of products from Eli Lilly and three trademarks from Boehringer Ingelheim, enhancing its portfolio of innovative medicines and market reach. Muted growth in the respiratory category, however, affected overall performance during the quarter.

R&D Investment and Regulatory Compliance

R&D spend for Q3 FY25 was INR 434 crores, representing 7.7% of sales, with almost two-thirds directed towards complex products. The company expects full-year R&D to be around INR 1,750-1,800 crores, with a significant increase in Q4. From a compliance perspective, Lupin received an EIR from the USFDA for its Pithampur Unit-1 manufacturing facility with a VAI classification. Other sites like Aurangabad, Dabhasa, Somerset, and Nagpur Injectable Facility also successfully completed inspections with zero observations, underscoring the company's commitment to regulatory standards.

Capital Allocation and M&A Strategy

Lupin reported a net debt of INR 103 crores as of December 31, 2024, down from INR 477 crores on March 31, 2024, effectively becoming a debt-free company. This financial strength enables strategic capital allocation, with a focus on building a specialty business in the US through acquisitions and internal development. The company is comfortable with bite-size acquisitions in the USD 200-250 million range, prioritizing India and specialty assets. Investments are also directed towards green propellant programs for its respiratory franchise and evolving its innovation pipeline.

ESG Initiatives and Ratings Improvement

In the last quarter, Lupin strengthened its ESG efforts, focusing on environmental and social areas. The company's operations remain 'Water Positive' year after year, and efforts to reduce Scope 1 and Scope 2 emissions through renewable energy projects are ongoing. Lupin received a Leadership ESG Score of 'A-' by CDP for Climate and Water, an improvement from last year's 'B' rating in Climate and 'C' rating in Water. The 'Lives Program' has benefited over 99,500 individuals, providing rural healthcare services to marginalized communities.

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