Aurobindo Pharma Limited (NSE: AUROPHARMA) Q1 2026 Earnings Call dated Aug. 05, 2025
Corporate Participants:
Unidentified Speaker
Santhanam Subramanian — Chief Financial Officer
Mangalam Ramasubramanian Kumar — Chairman
Analysts:
Unidentified Participant
Varun Mali — Analyst
Damayanti Kerai — Analyst
N. Ravikiran — Analyst
Presentation:
operator
You have joined the meeting as an attendee and will be muted throughout the meeting.
Unidentified Speaker
Yes, we can start. Thank you. Vander.
Varun Mali — Analyst
Good morning everyone. Welcome to our first quarter FY26 earnings call. I’m Varun Mali from the Investor Relations and the Corporate Communications Team. We hope you have received the Q1 FY26 financials and the press release that was sent out yesterday. These are also available on our website. I would now like to introduce you to our senior management on the call today. Dr. Satakarni Makapati, CEO, Aurobindo for Biosimilars, Vaccines, Peptides Business and Director, Aurobindo Pharma Ltd. Mr. Yugandhar Puwala, CEO, Ugfarma Specialties Ltd. Mr. Swami Iyer, CEO, Aurobindo Pharma USA Mr. V. Murlidharan, CEO, Europe Formulation Business Mr.
S. Subramanian, CFO, Aurobindo Pharma.
Varun Mali — Analyst
Ltd Ltd. We will begin the call.
Varun Mali — Analyst
With the summary highlights from the management followed by an interactive Q and A session. Please note that some of the matters we will discuss today are forward looking, including and without limitations, statements relating to the implementation of strategic actions and other affirmations on a future business, business development and commercial performance. While these forward looking statements exemplify judgment and future expectations concerning the development of a business, a number of risks, uncertainties and other important factors may cause developments and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward looking statements to reflect in future events or circumstances.
With that, I will now hand over the call to our CFO for the highlights.
Varun Mali — Analyst
Over to you sir.
Santhanam Subramanian — Chief Financial Officer
Good morning everyone. A very warm welcome to Aurobindo Pharma’s Q1 FY26 earnings call. Thank you for taking the time to join us today to discuss the Company’s financial and operational performance of the first quarter of the current fiscal year. Let me begin with a brief summary of our performance. Our consolidated revenues grew by 4% year on year to 7878 crores reflecting a steady start to FY26. This growth was driven primarily by continued momentum in our European and the growth market operations along with incremental contribution from our ARV segment. Our US formulation based business remained stable and resilient.
EBITDA for the quarter was 1603 crores with a margin of 20.4 at the EBITDA level. Q1FY26 includes a substantially lower contribution from GE Revlimat compared to both Q4, FY25 and Q1FY26. Q1FY26 was lower by about rupees 150 crores versus Q1.25 and rupees 550 crores versus Q4.25 ex. Development growth in EBITDA is 12% year on year. In another major development, we are pleased to share that we have secured the renewal of concern to operate as well as the wastewater disposal clearance from the Andhra Pradesh Pollution Control Board for our Pengi manufacturing plant. The facility successfully resumed operations on early hours of the 1st of July.
We continue to scale up the operations and have achieved encouraging yields and are confident of sustaining the momentum Business Highlights Let me now walk you through the key business highlights for the quarter. Overall formulation business witnessed a year on year growth of 7% with the revenues reaching 6,953 crores, contributing approximately 88% of the total consolidated revenues. This growth was led by strong performance in Europe and key emerging markets. API business accounted for 12% of the overall revenue, declining 16% year on year to 916 gross impacted by geopolitical challenges, business mix and the pricing pressures. US formulation US revenues experienced a year on year decline of 4% to 4.8 million, primarily attributable to the significant reduction in the transient product sales.
G Revolver a temporary moderation in customer demand due to seasonal dynamics destocking effects of the last quarter inventory due to anticipated tariffs despite lower G development, overall sales was partially offset by steady demand in our overall base business and a series of new product launches during the quarter. Also, our US injectable sales increased by quarter on quarter by 11%. We launched 15 new products in the US this quarter, filed 4 ands, received 14 approvals. European formulation Our European business continued its strong trajectory delivering 9% year on year revenue growth revenues reached 241 million this quarter, Euro 241 million this quarter compared to Euro 221 million in Q1 last year.
With this consistent performance across all European major markets, we will cross the milestone of 1 billion Euro in annual revenues for the region. By end of FY26 growth markets revenues increased by 9% year on year to 772 crores or $90 million supported by strong underlying performance across key countries. ERV revenue delivered a strong 55% year on year increase reaching rupees 355 crores or 41 million dollars. This was primarily driven by volume uptake and new tender wins in several geographies which we expect to sustain in the near term. Operational and Financial Highlights Gross margins remained stable for the quarter at 58.8% compared to 59.4% in Q1, supported by softer raw material prices and better product and business mix.
Our contribution amounted to 4629 crores. R&D expenditure was 367 crores representing 4.7% of the revenue. This continues to reflect our ongoing commitment to innovation and to build a robust pipeline, especially in complex generics and specialty therapy. Net CapEx for the quarter stood at $73 million, aligned with our investment priorities in expanding manufacturing footprint, enhancing compliance and automation. We generated a net cash inflow of 98 million during the quarter, improving our net cash position including investments to $140 million as of 6-30-25, up from 42 million as of March 31, 2025. Our finance cost declined to 4.9% from 5.5% in the previous quarter, benefiting from prudent treasury management.
Pat for the quarter was Rupees 3, 824 crores. Gross debt reduced to 884 million down from $930 million at the end of March 25, reflecting ongoing deleveraging and disciplined capital allocation. New projects further in the following areas where capex have been done and where revenues have been delayed include the following in biosimilars the approvals have started coming in from UU. We expect revenue to start from Q3 Q4 will well above the company average of ebitda margins. Approximately US$145million invested in China facility which has commenced production from Q4FY25 and invoicing started in Q1FY26. This facility with an initial capacity of 2 billion units plus is ramping up as expected and will begin contributing to revenue in the coming quarters and expected to break even at ebitda level by Q3FY26.
Third approximately US$70million in two US facility Dayton will start producing from Q2 Q3FY26 waiting for approval from the regulatory authorities.
Santhanam Subramanian — Chief Financial Officer
4.
Santhanam Subramanian — Chief Financial Officer
The PLA project where we all the approvals have been received and the plant has commenced reproduction since 1st of July. Production is going well and yields are improving. We are confident of generating healthy EBITDA from Q3 onwards on UGFI VISA plan. We expect to file more than 20 products in US and Europe from this site over the next two years on UGR3 we have invited the US FDA for reinspection.
Santhanam Subramanian — Chief Financial Officer
6.
Santhanam Subramanian — Chief Financial Officer
Approximately $13 million spent in biologic CMO balance 130100 million plus expected to be invested between now and March 27th. To reiterate, the company is not expecting any further greenfield capex investments in the near to midterm. We will be focusing on maintenance and replacement CapEx and capacity enhancements in the existing facilities. Company has a net cash position of $140 million as on June 25th. Looking ahead, we remain optimistic about sustaining our growth momentum. Our confidence is supported by expected volume expansion, continued product launches and a stable pricing environment, especially in the US and Europe. Ramping up of commercial operations at new manufacturing sites would further support the both top line growth and margin improvement in the upcoming quarters.
We are confident of achieving our internal target margin of 20 to 21% range in FY26. Lastly, our recent strategic US accusation will help us to continue the growth momentum in the medium term. We now look forward to taking your question. Our senior leadership team is happy to provide further insight, more details and clarifications wherever needed.
Questions and Answers:
operator
Thank you. Thank you sir. Thank you sir. We will now open the call for Q and A session. We will wait for a few minutes until the queue assembles. We request participants to restrict two questions and then return to the queue for more questions. Requesting you to identify yourself and your company name. Please raise your hand from the participant tab on the screen to ask a question. The first question is from Damianti K. Rai.
Damayanti Kerai
Hi, good morning everyone. This is Damyanthi from HSBC securities. So my first question is on rev limit. So just to clarify this 150 crore less number and then 550 crore less number versus 4Q. It’s at the EBITDA level, right?
Santhanam Subramanian
You can take that is at the top line level EBITDA. You can work it out yourselves. You must be knowing. I’m sure.
Damayanti Kerai
Okay, so this is at the revenue level. Okay, that was good. My question is on rev limit. Definitely. Pricing pressure has intensified and some of your peers have also mentioned this. So from opportunity perspective, do you think you can like still make some reasonable sales from this product in FY26 or. This is. This is an opportunity which is broadly gone now.
Santhanam Subramanian
Yeah, in fact I think we mentioned this in the last call as well. We have most of our revolver settlement quantities. We have sold it. We have nothing more to sell other than a minimal listing. So the price impact will not have any bearing on our future revenues. But at the same time we don’t expect significant sales coming from revenue as because we already sold off.
Damayanti Kerai
Okay, so it’s already exhausted the volume allotment which you have got and nothing much to look ahead.
Santhanam Subramanian
That’s Right.
Damayanti Kerai
Okay. My second question is, sir, if you can explain what has happened in the API and do you think it’s a. It’s a temporary phenomena and you can see recovery ahead.
Santhanam Subramanian
The turnover has dropped because of the. Mainly because of the pricing pressures. Otherwise I think over a period of time it will start recovering because it cannot sustain for a long time.
Damayanti Kerai
Right.
Santhanam Subramanian
That is the main reason.
Santhanam Subramanian
Yeah.
Damayanti Kerai
Okay. And my last question is, you are maintaining your EBITDA guidance for the year. So basically which will be the key drivers which makes you confident that you can achieve your earlier guidance.
Santhanam Subramanian
Yeah, because despite low G rev limit we have been able to maintain that. This is the con, this is the numbers of the last quarter is helping me to retain that confidence.
Damayanti Kerai
Okay, sir, I’ll get back in the queue. Thank you.
operator
The next question is from Tushar Manudane.
Unidentified Participant
Yeah, thanks for the opportunity. Am I audible?
Varun Mali
Yes, sir.
Unidentified Participant
With respect to the, let’s say operational losses for various plants. If I have to Club together for FY26, if you can share that number and subsequently you know how to think about that number for FY27 considering any new plan that might come up in FY27.
Santhanam Subramanian
See last year we have incurred losses predominantly as you know, in PNG queue and other things.
Santhanam Subramanian
Right.
Santhanam Subramanian
And as I explained in the, in the original, in the script itself I said we are expecting good EBITDA starting Q3 onwards. So the losses will come down.
Santhanam Subramanian
Right.
Santhanam Subramanian
So that is, that’s the main thing. Out of the total thing, PNG was the biggest last last year and hopefully.
Santhanam Subramanian
That will not get continued.
Unidentified Participant
So this year how much that number for this like first two quarters. Given that the scale up probably will have benefit coming from second half.
Santhanam Subramanian
See last quarter was around very low number, around less than 50 crores.
Santhanam Subramanian
Right.
Santhanam Subramanian
But one good thing is we started the production, we had a good production in. I mean even though the plant really the first output came sometime in the second fortnight of July, we had a good ramp up. And what is very encouraging is the yields are improving day by day and hopefully it will get stabilized in the month of August and September. So that is the reason we think by Q3 onwards we’ll able to do well. That’s the main reason.
Unidentified Participant
And so just to add that like how much PLI income to consider for this year?
Santhanam Subramanian
I think we will be expecting anywhere between 7,000 to 8,000 tons production.
Santhanam Subramanian
Right.
Santhanam Subramanian
That means at least you can take more than half of it. Maybe around 150 crores type. I mean but the clear numbers, etc will be known in the next quarter. Because the key thing is we need to sustain this yield improvements which has happened in the last three, four days in this month of August and September. Then that will give you a very clear indication in the next quarter.
Unidentified Participant
Understood. And just one more from my side. So maybe the basis contract, the rev limit business is no more. But given so any case, increased competition and also beyond contract, will we be able to sell? Or it’s like because of the contract will not sell itself and so the other guys have their share and subsequently the pricing still remains steady. How to think about rev limit as.
Varun Mali
A product in general? The entire market will open up from the 1st of February 2026 and we are getting prepared to take more market share starting from February 2026. So even though like we will have limited sales of for next one to two quarters, but we expect Q4 we will because the entire market will open up and we have capacities to take the market share. So it will be an open market game at that point of time.
Unidentified Participant
Got it. So this is helpful. I have more questions.
operator
I’ll join. Thank you. Thank you. The next question is from Tarang Agarwal.
Unidentified Participant
Hi, good morning. Am I audible?
Varun Mali
Okay. 1.
Unidentified Participant
On the API business, you. You spoke about pricing pressure. I mean this pricing pressure is on account of, you know, domestic supply being more aggressive or is it because of imports or is it because of both?
Varun Mali
Because of both.
Unidentified Participant
Okay.
Unidentified Participant
Because a 16 decline is something to the best of my knowledge, I’ve never seen in this business in the last multiple quarters.
Varun Mali
While it may be a 16% on the top line, it may not be that much percentage in terms of the volume.
Varun Mali
Right.
Unidentified Participant
Okay.
Varun Mali
And plus, you know, this quarter is always a summer quarter. So the offtake is also very low across the. Across India.
Unidentified Participant
No, got it. Okay.
Unidentified Participant
Second question is on UGL. I mean if you could give us the US sales numbers of UGF for Q4 and Q1, Q4 of 25 and Q1 of 26.
Varun Mali
So we are not giving that number separately, Tara.
Santhanam Subramanian
Okay. But in general we already mentioned that the regular injectable sales is growing and we have shown a growth of 11% over time.
Unidentified Participant
This 11% is on a year on year basis.
Santhanam Subramanian
Correct. Year on year as well as quarter on quarter. It is almost similar number. Okay.
Unidentified Participant
And the European exposure of Yujia or Row exposure of user continues to be in the ballpark of 35 to 40.
Santhanam Subramanian
Million dollars a quarter. Yeah, it is. It’s a split of. You can say that it’s around $50 million there then Europe is $100 million and the growth markets like Canada, Brazil continues to grow. So overall we are trying to shift the balance of sales. It’s around 70, 30. We are planning to shift it to 6040 and we are hopeful of doing that. Got it.
Unidentified Participant
The third question is on Theranium Dr. Just wanted to check. I mean I think the initial estimate of capacity creation was about thousand crores which was later upended to about 1500 crores. I think Subhusa did call out in his opening comments. So of some outlay already being done. If you could just rehash in terms of what’s happening there and in terms of, you know, are you seeing incremental demand in that business?
Santhanam Subramanian
Good morning Taran at Theranium. As you know we initially started the project with the 2 15K mammalian cell culture bioreactor line and the CAPEX guidance was around thousand crore, close to 1,000 crore. To complete the project and fully commission.
Santhanam Subramanian
It.
Santhanam Subramanian
In the CMO space. What we are trying to do is that we are working towards strengthening our collaboration with msd. This means that or this translate into addition of the need to add two more 15k bioreactor manufacturing lines and its associated purification and utility capacities. These lines will also come into full operation somewhere in 28. So the additional CAPEX guidance that we provided of around 350 to 400 crore essentially is to enhance capacities and strengthen our collaboration with msd, if that answers your question.
Unidentified Participant
It does, it does.
Unidentified Participant
That’s quite helpful.
Unidentified Participant
So just a couple of more. One, on the free cash generation, last two quarters consistently almost about $100 million of free cash generation for the business on each quarter basis. Is that the trend that we should work with or you know, some working capital expansion?
Unidentified Participant
Should probably.
Unidentified Participant
I mean the place that I’m trying to get at is, is the business now at a point of time where 400 to $450 million of regular free cash generation is something that’s visible for you. That’s one and second on Lannet. If you could just you know, walk us through the transaction and why it would take about 8 to 12 months for the transaction to achieve closure.
Unidentified Participant
Thanks. Those two from my end.
Santhanam Subramanian
Yeah, I’ll answer the first one. So Swami will answer the second one. In terms of the free cash flow we have, I mean we have reduced the working capital considerably and that is what helping. Apart from that, the CapEx overall CapEx has come down in the last two quarters. Like this quarter, the overall CapEx is around 73 million including the new market PLA everything put together around 73 compared to earlier trend of around more than 100 million. So that is also helping. So there is a working capital improvement taking place and there is improve. I mean there is a reduction in the capex that is a reason why it is there.
We will strive, we will endeavor to achieve cash generation of 100 million quarter on quarter. I mean subject to any strategic expenditures being incurred.
Santhanam Subramanian
Okay, sure Swami.
Unidentified Speaker
Okay. So on the linet acquisition this is subject to FTC approval. Obviously there’ll be a lot of back and forth. We have given nine months as a matter of abundant caution. It could be earlier but obviously we will do whatever we can to expedite this. If it gets clearance earlier, obviously the integration would happen earlier.
Unidentified Participant
So just wanted to understand, I mean are there, I mean how difficult or how soon can you integrate this business? What are the synergies that you’re looking between both the setups and some, you know, some metrics on the broader market of in which the target is operating?
Santhanam Subramanian
Sure. So we believe that integration is very easy because we have similar kind of product. They are in ADSV segment, they are mostly into control substances. And even the other product that they have, we believe that those are very close to what we have. What they have. One other advantage is they had a strong VD team which we have started working on now. And they also have bit of in licensing. That is going to be clearly one synergy. The other synergy they have got 70 plus active product and many of them are in controlled substances.
They are all in niche area where the products are in short supply. We believe based on what we have seen quarter on quarter trend that there could be good potential for an upside in this business. They have been consistently able to get the quota. They have been consistently able to utilize the quota which is very important. And the market pricing is pretty stable. We also think there are some synergies in terms of rationalization of some of the resources that would immediately. Some of these could be low hanging fruits. And another factor is that they have a good CMO business with a few countries with approval in some of the other markets which we think we’ll be able to tap better because we got good presence in those markets.
And our understanding is that some of the products that is being manufactured there at Lannat could have a good potential in one of our neighboring countries. And also we can spread out a little beyond that because they do have the regulatory approvals for those countries. They also have manufacturing capability for oral solids liquids and potent substances. The manufacturing capacity is not Fully utilized. They utilize only to the extent of ballpark around 40% which gives us 60%. Aurobindo has a large portfolio. We can quickly leverage our large portfolio to bring in some more product which are in demand in the US Especially for the garment markets.
And that could be an immediate gainer. Lannet has also discontinued some of the products we think there is scope for with our procurement practices. With our ability, we believe that we can revive those products especially for the government market. And not last but not the least, they have a very good workforce in the manufacturing. They all have very long tenure and the wage level, everything is very, I would say very comparable or better. So that gives us good, good feel about these whole acquisition net net. We are very upbeat about this.
Unidentified Participant
Wonderful sir. Thank you.
Unidentified Participant
And all the best.
Santhanam Subramanian
Thank you.
operator
Thank you. Next question is from Surya Patra. Yeah, thanks for the opportunity, sir. My first question on the US business you have commented about destocking impact.
Unidentified Participant
What is this nature of this, these talking, sir?
Unidentified Participant
Is it anything relating to tariff related preparation or can clarify this?
Santhanam Subramanian
Yeah, Surya, what Subu had alluded to was primarily, you know, the tariff is supposed to go into effect from April 1st. If you see there was a huge surge, much more than the normal quarter surge in the quarter ending March. We believe that some of the wholesalers have stocked up the product in anticipation. They will also ask us to keep it more inventory and they themselves seem.
Santhanam Subramanian
To have soaked up.
Santhanam Subramanian
We have not seen a decline in the demand of the oral solids in the US Nor have we seen any loss of awards, any major award. So we are understanding, it is our understanding that this is primarily because the wholesalers have stocked up during the last quarter and they are winding down those positions.
Unidentified Participant
Okay, so it is a quarter specific issue then? I believe yes.
Varun Mali
Not just that. And you know, for Q1 there’s been a fairly good quarter especially on the total volume that has been sold from the wholesalers. Typically Q1 is non seasonal quarter, but it’s been a fairly decent quarter, I would say.
Unidentified Participant
Sure, sir. My second point is about the Penzi plant, sir. So now having resume our operation there, what is the kind of visibility that.
Unidentified Participant
We are having in terms of the.
Unidentified Participant
Ramp up and also in the previous quarter that we had indicated about the mip, the minimum import price. So what is the update on that front? Whether that is a kind of a necessity given the current situation and what is your like risk assessment about that relating to the Pengi, if you can.
Varun Mali
So in terms of the Penge production, as I. As I Said it’s the production is improving in the last three, four days and the yields are improving. We believe, I mean we are very pretty confident this going will be very good in the coming two months and we will able to do very well in the Q3.
Varun Mali
That is what we believe.
Varun Mali
And in terms of the map, I’m not sure we can talk about it in detail because there are a lot of things are happening so probably we may able to talk about it in the next call.
Unidentified Participant
Okay, My last question is about the European business. Obviously that we have been seeing a very strong performance consistently since last few quarters.
Unidentified Participant
And you have already guided about.
Unidentified Participant
A kind of strong growth in the FY26. So my point was about the margin performance there sir. With the new capacity additions, what is the kind of outsourcing that we are dependent on external resources for European operation now and what it is likely to improve to by the end of this year and hence what margin performance that one should anticipate for the European business.
Unidentified Participant
Morning. Yeah.
Santhanam Subramanian
From the market perspective I can handle this. Yeah. Then on the plant related subo I.
Santhanam Subramanian
Would suggest you to do that.
Santhanam Subramanian
Surya, first of all, pleasure speaking to you. Good morning and thank you for your compliments for the European business. Yes, we have been demonstrating the sustained.
Santhanam Subramanian
Momentum since last several quarters and happy.
Santhanam Subramanian
To be also posting a strong number this quarter. And coming to the third party sourcing versus in house, we are steadily moving the products in house as much as possible. Of course there are certain small volume or some technologies which we cannot handle. So this continue to come from the third party suppliers. But as far as the margins are concerned, where you would have known several.
Santhanam Subramanian
A few quarters ago where we were.
Santhanam Subramanian
In the mid teens but now we are going strongly much above to the high teens and touching the 20 mark very soon.
Santhanam Subramanian
So this is on the margin perspective. Yeah.
Santhanam Subramanian
So in terms of the production, I’m sure you must be knowing we have been having a capacity around 3 to 4 billion tablets as explained in the.
Santhanam Subramanian
Last or previous call.
Santhanam Subramanian
I’m not sure we have ramped up the capacity further and that has helped in terms of supplying more material and that is also one of the reasons the European team was able to take the sales to greater heights.
Santhanam Subramanian
Right.
Santhanam Subramanian
And we will continue to do that. And in terms of the margin also because of the announced production and we were able to increase the margin percentage also. And your last question was in terms of percentage we were somewhere around 50, 50 or slightly above in favor of the captive consumption.
Unidentified Participant
Okay, so just said whether the injectables have seen any ramp up in Europe?
Unidentified Participant
Yes, in fact we have been growing at a rate of 20% for European market because we find a lot of shortages happening in Europe and Murali’s team could take full advantage of the market situation there. So now like what’s happening is our capacity versus demand. Demand is outstripping the capacity. So we in fact we have taken a decision to add two more lines, oncology lines to take care of the European requirements. I’m quite positive that Europe is continue to grow. Okay. Okay, sure.
Sir. Yeah, thank you.
Unidentified Participant
Wish you all the best.
operator
Thank you. Thank you. The next question is from Neha Manpuria.
Unidentified Participant
Yeah, thanks for taking my question. You know two questions on the US Business Swami. Sir, if I look at the oral solid business, could you quantify how much would be the destocking impact? Just to understand, you know how the date business is done both from a.
Unidentified Participant
Year on year and a quarter on.
Unidentified Participant
Quarter perspective.
Santhanam Subramanian
You know it’s hard to quantify exactly that kind of amount. But what I’m saying is in terms of total demand for the US it has been pretty stable and we have got our awards intact barring few losses and few gains. So overall I think we are in good shape there. I am not exactly sure on how much. My guess would be could be anywhere between half a month to one month. That’s my guess because if the wholesalers have stocked it, they would have stocked it for at least 15 days to one month for the tariffs.
That’s solely my guess. I can’t say precisely.
Unidentified Participant
Understood. And then I’m just wondering about the U.S. business decline quarter on quarter and Yogindra’s comment that the injectable business seems.
Unidentified Participant
To have been improving.
Unidentified Participant
If it’s just 15 days of, you know, 15 days or one, one month of destocking, you know the entire six, you know, 550 crores decline quarter on quarter, just rev limit. I mean if I were to look at the last quarter injectable based or ugrbase that we used to mention, it seems like the X rev limit business isn’t actually showing as much improvement or.
Unidentified Participant
You know, normalcy as you know what.
Santhanam Subramanian
We seem to be looting. So what am I missing here?
Unidentified Participant
In the U.
Santhanam Subramanian
S Business you cannot do that. No, US business is not the only the solid orals and injectable. We have the branded injectable, we have the OTC from direct dispatchers from India.
Santhanam Subramanian
Which is a significant amount.
Santhanam Subramanian
So it’s a combination of everything. So if you say this is a remote, I mean if you Direct it and then is it because of the oral etc. It is not like that. It’s a combination of many things.
Santhanam Subramanian
Okay.
Unidentified Participant
What I’m trying to understand is that, you know, how far are we from the injectable business getting back to, you know, the pre disruption level, you know, is it 20% lower, 30% lower? That’s what I’m trying to understand.
Santhanam Subramanian
Yeah.
Santhanam Subramanian
Okay, that’s.
N. Ravikiran
Yeah. Let me just clarify a few things. Yes, the G re was much higher in Q4. Your assumption is to some extent right. Second thing is we are back to predescript levels with respect to injectable business. I’m very, very confident my entire injectable business is growing and all the production facilities are back and running and UGS3 is back. So we are very, very confident that we have come back to the pre disruption levels.
Unidentified Participant
Understood. And my last question is on Leonard. Leonard also had a very good portfolio that they were planning to file.
Unidentified Participant
I think you also alluded in your.
Unidentified Participant
Presentation in Leonard that you know, there are some and T minus one opportunity. Are these opportunities still valid? You know, once we finish integration, you know, the acquisition of Linnet and also will there, do you think given the portfolio overlap based on IQVI data that we have with Linnet, there would be divestment that would be required to get FTC approval in your view?
Santhanam Subramanian
First things first. On the pipeline, we not only get the products in commercial stage, we also get the products in pipeline. There are some good pipeline products. That’s what I would like to say at this point of time we are quite excited about what they have in pipeline. At least a few products. Now as far as the FTC is concerned, FTC has to review this. The sheer volume of work that they have to do because I mean, you know, it’s a big company, we have to submit all the data about all the product and they would take time reviewing it.
So it could take time. But we feel very, we feel optimistic that we should be getting it and getting for the entire portfolio of commercial products in the pipeline, barring few where there could be conflict. So overall we, like I said before, we are quite upbeat on what we will, what we are likely to get here.
Unidentified Participant
Thank you so much.
operator
Next question is from Bino.
Unidentified Participant
Hello.
Damayanti Kerai
We can’t hear.
Damayanti Kerai
Bino, hello,
Unidentified Participant
can you hear me now? Yeah, yeah. Okay. Okay. Hi, good morning and good evening.
Unidentified Participant
First question, Subaru.
Unidentified Participant
Sir, our gross margin is holding up at about 59%. You mentioned that rev limit was down QOQ by about I think $70 million and there was pricing pressure in the APIs as well. So what’s helping us hold up the gross margin at 59% which is comparable.
Santhanam Subramanian
QOQ as explained in the in the original script itself. Now, it is a combination of multiple things. There is a positive favorable mix in terms of the businesses. Then for example, when the APA business percentage of revenue share goes down automatically it increases the weighted average because the APA does not give the margin same as the company average margin like that. And we also had good UGR done well. Plus we also the existing product profile also good in the solid world. So it’s a combination of multiple things. We know.
Unidentified Participant
Okay. And second, what are the PNG prices in the market today and what is your latest estimate about your profitability levels? At what price you would be profitable?
Santhanam Subramanian
I think the current market price is anywhere north of 20.
Unidentified Participant
Right.
Santhanam Subramanian
We will be profitable somewhere around, I mean we’ll be breakeven somewhere around maybe couple of dollars plus or minus. We’ll be profit, I mean we’ll have a break even couple of dollars plus or minus like that depending upon the yield in that particular month or the quarter.
Unidentified Participant
Okay, okay, understood. And last one question. For being eligible to get the PLI payment, is there a minimum level of production that we need in the year?
Santhanam Subramanian
No, there is no minimum level of production. Whatever you produce, you will get percentage on that. You will get the PLA incentive.
Unidentified Participant
Understood, thank you very much. I’ll turn back to you.
operator
Next question is from Sham Srinivasan.
Unidentified Participant
Yeah, good morning. Thank you for taking my question. Just the first one on the biosimilar launches in Europe. If you could just highlight what are the things that we need to keep in mind? I think the presentation talks about Q3, Q4, so the kind of infrastructure, the kind of preparation, you know, maybe initial market shares that we are targeting. So if you could help us outlay the commercial strategy.
Santhanam Subramanian
So to answer your question, we started making the manufacturing quantities for commercial supplies. In fact, we made one supply as well to meet the requirement in the UK market. So the first six months leading up to March would essentially be meeting the launch quantities, enabling our commercial operations teams and our partners to park the launch quantities in the markets they desire to. So I don’t have a number guidance for the first six months. It will be a very small single digit commercial revenue strickling in. The focus for us right now is to ensure that we have adequate supplies.
The supply chain is sorted out. Our QP testing services that we are stabilizing in Europe through CRO Partners and through our own set up in Malta, they function seamlessly in releasing and testing biosimilars, which is required in Europe. You need a qualified personal testing. So all this will take about a couple of quarters to stabilize. As you know that we have four product approvals that we received from Europe, three with the European Medicines Agency and Bevocov, Bevacigmab with mhra. So all four products, we are ready to supply these products into the European market. I hope to stabilize everything from supply chain to closing out on a couple of distribution deals that I am focusing on in Europe right now, in the markets that we are not directly present.
So in the markets that Aurobindo is directly present, Aurobindo will handle the commercial commercialization of these products. In the markets that we are not stronger, we have a few partners. For example, in Nordics we have Orion Pharma. In some other markets, I cannot disclose the names, but we are working on closing a few deals. So I see by the April quarter next we have a. We have fairly, we would have fairly stabilized commercial supplies and we will have some plans laid out for how much we will be able to sell in these markets for the year.
Shyam, that answers your question.
Unidentified Participant
Yeah, thank you. Dr. Sadkarni. Just if you could give us like you’re credited for the first European launch at your earlier shop. So, you know, in the last, whatever, you know, five, six, maybe even a decade of doing this, what are some of the big differences you see? Is profitability in Europe for biosimilars distinctly different now and lower perhaps. So if you could comment on profitability as well.
Unidentified Speaker
It’s a very subjective question.
Unidentified Speaker
I have been asked this question on multiple occasions from my first launch in Europe way back the India first launched in Europe way back in 2012 to now. Absolutely. There is a big difference in the pricing erosion that we are witnessing which affects the profitability margins. But what needs to be also understood is that the European landscape is extremely distinct in a manner that there are a few countries which are extremely tender driven, or solely tender driven, if I may use that word. And there are a few countries where the retail prices are still very exciting, where you can still make a good 85, 80% gross margins.
And there will be countries where you will make probably around 15 to 20%. So you need to look at Europe as a whole and see if a company is putting out a product at a cogs and a transfer price to its partners where it can still make an overall margin of say 40 to 60%. Then I believe that there are, they are still in the game. But having said that, in the last decade or so you definitely have seen in the chronic segment, when I say chronic segment, essentially like immunology, rheumatoid arthritis, etc. You are seeing a major drop, a major erosion in the, in the prices from my hospital days when I, when we launched insiximab.
The price erosion that I see now is very high. But still in the oncology segment, not the supportive oncology segment, the oncology segment. I still see the price erosions not reflecting to the extent what you see in the chronic segment. But having said that, Europe has a distinct flavor now with the price erosions that you are seeing. And any company, any biosimilar developer and manufacturer who wants to be serious in their European business needs to at least prepare them for an overall 50% margin from the entire European market. There will be some countries that will give you 70, 80%.
There will be some countries that will give you 10, 15%. As long as you keep your cogs in a manner that you have a overall margin of around 50%, you are good. Which also means that you need to have a good and strong commercial positioning in Europe, across Europe to make that happen. I hope that answers your question.
Unidentified Participant
Yeah. Thank you. Thank you Dr. Sadhguru.
Santhanam Subramanian
My second question is maybe I can contribute here in addition to the eloquent reply what you gave. For example countries like France, the generic substitutability trend is increasing where it was hardly one or two products earlier, now as many as nine products or in the list of generic substitutability and similar trend is to be expected in certain other countries as well, meaning there will be a higher volume uptake as we.
Santhanam Subramanian
Launch some of our products.
Santhanam Subramanian
So this is a positive trend for. Us which we would like to encash on.
Unidentified Participant
Helpful. Thank you. Just my last two questions. I’ll keep it very brief. First one are experiences of this lanet with the FTC vis a vis the Sandoz acquisition that did not go through Subu sir or Swami sir anything. What gives you confidence that we can get through this FTC bar this time around versus that field episode? And second question is just a data point on the opening remarks you said 12% growth excluding Revlimid. Is it US? Is it overall company? The numbers you have shared? I’m not able to come up with that number.
So if you could help us. Thank you.
Santhanam Subramanian
Yeah, first I’ll take the question on FTC Subhu. So on the FTC we don’t have any of the critical product that we think will have a conflict where we would. You know, we would be reluctant to look at it or we don’t expect that much that many products where we would have this issue. We think it will be a smaller list based on our understanding, based on the advice that we have received. And we think we should not have a problem with that kind of smaller list. What we are focused on are some of the products where we think it will go through without any much difficulty.
Obviously it’s a decision of ftc but that’s what gives us the confidence that the main products would be intact. So we have little more flexibility in this next.
Unidentified Participant
Yeah.
Santhanam Subramanian
So Shyam, this is. You talked about the 12%. No, it is year on year.
Unidentified Participant
Sir. Which. Which. Which geography. Sorry, is it us? Is it overall?
Santhanam Subramanian
It’s a.
Santhanam Subramanian
Overall.
Santhanam Subramanian
Overall. I’m saying overall group as a whole.
Unidentified Participant
Okay, sir. And us would be what? Sorry, us.
Santhanam Subramanian
We are not given any specific number directly. We never used to give. But this is the overall Aravinda as.
Santhanam Subramanian
A whole on consult basis.
Santhanam Subramanian
Okay, sir. Thank you. All the best.
Santhanam Subramanian
Next question is from Srikanth.
Unidentified Participant
Hi, good morning. Thanks for the opportunities. I have three questions. First question is on our.
Santhanam Subramanian
I think Shikant, my request to you is since there are three, four people are still waiting. Can you receive two questions?
Unidentified Participant
Sure sir, no problem.
Unidentified Participant
So firstly on the annual guidance last quarter we talked about single digit growth. However, with the pen g restarting and you are giving encouraging comments on the project. Do you see any requirement to upgrade our annual guidance?
Santhanam Subramanian
No, I told you no. I will able to give you a better picture in the November quarter.
Santhanam Subramanian
After that it is your call what.
Santhanam Subramanian
You want to do.
Santhanam Subramanian
Okay.
Unidentified Participant
And sir, what are the utilization levels.
Santhanam Subramanian
At PG unit currently no PNG unit currently I’m. We are doing around 50 to 60%. We are trying to improve the yields. That is our primary objective. To cut down the losses. So that better yield will cut down the losses. And once we stabilize that in the next two months we will scale it up.
Unidentified Participant
Okay. And now that you are restricting. So just one more question. So on the control substance business we have seen some struggle by some of the Indian companies. Now if you can update what is happening in the control substance market and. And how do you see the kind of growth that can happen in the market and where do we stand to benefit from this opportunity? Thank you.
Santhanam Subramanian
So actually Shigan, I didn’t understand your question.
Unidentified Participant
What about the Indian companies?
Unidentified Participant
What did you mention?
Santhanam Subramanian
So. So in the past we have seen some of Indian companies Getting in control substance market in the U.S. however, there have been some challenges and therefore some companies we have seen shutting down their manufacturing units in the US. So now if you can tell.
Unidentified Participant
Yeah, understood.
Santhanam Subramanian
Yeah. Okay.
Santhanam Subramanian
So control subs are primarily put in two buckets. One is opioids, the other one is the non opioids. Okay. So what we are looking at right now from opioids have some problems. Opioids are some legal issues and they also have a lot of other issues. Many number of players in that market. Net net. You know if you take opioids it’s not so easy. It’s got a good market if you got the market share, but otherwise that can be challenging. Now what we are looking at right now, the control subsidiary as far as Lannet is concerned is mostly in the non opioid segment and these are ADHD products which are all in short supply.
So that’s how we feel very confident about it. And where we have opioid we’ll look at it. But essentially this line, it is all about the ADHD medication. And these are non opioid.
Unidentified Participant
Yeah, that is helpful sir. Thank you so much.
Santhanam Subramanian
Thank you.
operator
Thank you. The next question is from Kunal. Dha Mesha.
Unidentified Participant
Hi, thanks. Can you hear me?
Mangalam Ramasubramanian Kumar
Yes, we are able to hear you.
Mangalam Ramasubramanian Kumar
Yeah. Okay, thank you for the opportunity. First one on the Lennet menu, let’s see if there are overlapping products and if FTC guides you to kind of divest it. Would you be divesting on the Lennet side or would you be divesting on Aurobindo side? Kunal, that’s not. I call.
Mangalam Ramasubramanian Kumar
I wish it were. That’s what I call. That’s normally this is dictated by what FTC tells us because ultimately it is their decision.
Unidentified Participant
Right.
Mangalam Ramasubramanian Kumar
So we have reviewed if we divest, what the implication and if Lanet has to dive. So we feel confident that our business will still be good even if you divest our product or their product. Wherever the strength is. Ultimately it’s FTC call. If I take the worst case scenario, I think we are still in a good shape.
Unidentified Participant
And on the 15% EBITDA margin that you suggested in the presentation for the Lennet acquisition. So is it for a particular year or do you plan to plan to take it to 15%? How should we think about it?
Mangalam Ramasubramanian Kumar
This is the current run rate. I mean at this point of time, if I take the TTM trailing 12 months, if I take any period, we are somewhere around that. And I believe that’s a very con. That’s a Conservative estimate. We think that future we will be able to get margin of 15% or more.
Unidentified Participant
But. But sir, when I look at the implied gross margin based on the gross profit multiple that you have given seems like a 30% gross margin business. So I’m just wondering how we can achieve 15% EBITDA margin on 30% gross margin.
Mangalam Ramasubramanian Kumar
Yeah. So the 30% gross margin, what you have. Obviously I can’t go into product wise details. We have reviewed that, we have reviewed it product wise and then we think that there are some, there are some synergies. There are some options there. Overall we think that gross margin will also go up and EBITDA would go up.
Mangalam Ramasubramanian Kumar
Sure, sure. And then last one for subhouser, I still didn’t get the 12% X Rev limit growth because if I just adjust 150 crore in this quarter is the rev limit loss on a year. On year basis we would be at more like 6% growth. So I, I still don’t get how, how can we jump from 4% to 12% if we adjust for that 150 crore.
Mangalam Ramasubramanian Kumar
You discuss with me offline. I’ll explain to you.
operator
Sure. Okay. So yeah. Thank you. Thank you and all the best. Thank you.
Unidentified Participant
The next question is from Devang. Hello. Please go ahead.
Unidentified Participant
My question is with the US Government now prioritizing domestic manufacturing of generic drugs reportedly supported by Japanese funding under the trade partnership. What is the outlook of on the future of U. S generic business? Especially specifically, how do you see this initiative impacting competitive landscape and pricing environment? My first question.
Santhanam Subramanian
Yeah, so I can answer that Devang. First and foremost I didn’t know where the Japanese connection has come from. But yes, US government is pushing for manufacture in US and if any company is prepared for it, I think we are best suited for it. We have manufacturing facility in New Jersey which has already started some products. We can add more products at the FDA approvals. And then we have also got Lanet which has got a huge capacity. And if there’s a need, we have another facility. Another facility that’s waiting to be commercialized if there’s a need.
Plus we have a fourth facility that we can always do it with some time. So we are best suited for enhancing our footprint in the US Practically if it’s manufactured in the US the product pricing would go higher. It will not work the way it works with imports from India or other countries because the cost of the basic cost level will be little higher. Competition wise. If we had to supply from India, we are competitive. If you have to supply from us we would be competitive. US would be different price levels altogether. When can US manufacturing happen? Only when the supply from other countries are not cost effective.
And that can probably have happened due to duty structure. We are not sure what the government would do. We are ready whichever scenario happens, sir.
Unidentified Participant
Hart Lutnick in an interview on cnbc said that $330 billion which are coming from Japan will be used some part will be used for domestic manufacturing of generic drugs.
Santhanam Subramanian
Sure. If we are getting 330 billion, the infrastructure for eugenics will probably go up. If they invest it is a generic market and whatever that amount is, 330 million or 3 million, 3 billion or whatever the amount it’ll definitely go up.
Unidentified Participant
But around 15 billion.
Santhanam Subramanian
No, I’m not disputing that.
Santhanam Subramanian
If it happens.
Santhanam Subramanian
So if it happens, that’s so be it. But all that I’m saying the operating costs in the US would be higher. So if I manufacture us for the same product, it’s going to be higher. So the only way you can sell is if it is higher. So if I’m buying, selling and selling it from India, you have a price. If you manufacture new, it’s going to be a lot different. And if you are forced to manufacture new years, if they say that you have to do it, we’ll do it and we’ll be competitive. It’s a level playing ground.
Unidentified Participant
Thank you sir.
Unidentified Participant
And second question is when do. When are we expecting something on tariffs and how much will generics be excluded or not? Any insight?
Santhanam Subramanian
You know that is something President Trump can say. We, we cannot say at this point of time. We, we have not seen anything so far it might happen. But I’ve seen various press statements like you somewhere he has said that he’s going to do it after a year, he’s going to bring in a huge duty. But we don’t know. It’s definitely the president and the present administration call.
operator
We’ll now move to the closing remarks.
Damayanti Kerai
Thank you, thank you very much everyone for joining us on the call today. If you have any of your questions unanswered, please feel free to get in touch with the investor relations team at Aurobindo Pharma. The transcript of this call will be uploaded on our website, www.aurobindo.com in Ducos. Thank you very much once again and.
Santhanam Subramanian
Have a great day. Thank you very much to the management team. Ladies and gentlemen, on behalf of Aurobindo Pharma, this concludes today’s conference. Thank you for joining us. And you may now disconnect your line and exit the webinar. Thank you.
operator
Goodbye.