Aurobindo Pharma Limited (NSE: AUROPHARMA) Q2 2025 Earnings Call dated Nov. 11, 2024
Corporate Participants:
Shriniwas Dange — Head, Investor Relations
Santhanam Subramanian — Chief Financial Officer
Swami Iyer — Chief Executive Officer, North America
Yugandhar Puvvala — Chief Executive Officer, Eugia Pharma Specialities Limited
Satakarni Makkapati — Non-Executive Director & Chief Executive Officer, Biologics, Vaccines and Peptides
Venugopalan Muralidharan — Chief Executive Officer, Europe Formulations Business
Analysts:
Kunal Dhamesha — Analyst
Shyam Srinivasan — Analyst
Damayanti Kerai — Analyst
Unidentified Participant
Neha Manpuria — Analyst
Jigar Walia — Analyst
Tarang Agarwal — Analyst
Nitin Agarwal — Analyst
Ankush Mahajan — Analyst
Amey Chalke — Analyst
Presentation:
Operator
Welcome to Aurobindo Pharma Q2 FY ’25 Earnings Call. [Operator Instructions]
I now hand the conference over to management for opening remarks. Thank you, and over to you, sir.
Shriniwas Dange — Head, Investor Relations
Thank you, Vandit. Good morning and a warm welcome to our second quarter FY ’25 earnings call. I’m Shriniwas Dange from the Investor Relations team. We hope you have received the Q2 FY ’25 financials and the press release that was sent out on Saturday. These are also available on our website.
I would now like to introduce my senior management team on the call with us today, represented by Dr. Satakarni Makkapati, CEO of Aurobindo Biosimilars, Vaccines and Peptide businesses and Director, Aurobindo Pharma Limited; Mr. Yugandhar Puvvala, CEO of Eugia Pharma Specialities Limited; Mr. Swami Iyer, CEO, Aurobindo Pharma USA; Mr. V. Muralidharan, CEO, Europe Formulations Business; and Mr. S. Subramanian, CFO. We will begin the call with the summary highlights from the management, followed by an interactive Q&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 our future business, business development and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors may cause actual 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 hand over the call to Mr. S. Subramanian for the highlights. Over to you, sir.
Santhanam Subramanian — Chief Financial Officer
Thank you, Shriniwas. Good morning, all, and a warm welcome to our Q2 FY ’25 earnings call.
I am delighted to share with you that we have continued our growth trajectory during Q2 FY ’25. Our Company recorded revenues of INR7,796 crores, reflecting a year-on-year growth of 8% and quarter-on-quarter growth of 3%. The growth was led by strong base product sales in the U.S., continued growth trajectory in Europe and growth markets. During the quarter, we witnessed volume expansion, product launches and stable pricing.
Our EBITDA stood at INR1,566 crores with a margin of 20.1% after absorbing higher R&D cost. EBITDA before R&D was 25.1% and stood at INR1,954 crores versus INR1,936 crores in Q1 FY ’25. Our net profit for the quarter increased by 8.6% year-on-year to INR817 crores. During the quarter, we also completed our first ever buyback with an outlay of $111 million.
Now, let me take you through the business-wise highlights for the quarter. In terms of the business breakdown, formulation business in Q2 FY ’25 witnessed a growth of 11% year-on-year to INR6,640 crores and contributed around 85% of the total revenue. API business remained flat at year-on-year at INR1,156 crores, contributing around 15% of the total revenue. The price erosion in the API business was offset by the volume gains and the improved asset utilization.
USA. During the quarter, U.S. formulation recorded revenues of $421 million, with a growth of 3% year-on-year and declined 1% quarter-on-quarter. The price erosion on an overall basis remained neutral driven by our well-diversified portfolio. Revlimid for oral generics — I mean, revenue from oral generic products in USA increased by 9% year-on-year to $289 million, driven by volume gains and new product launches. Revenue from the injectables and specialty business in the U.S. decreased by 11% year-on-year to $81 million, mainly due to supply chain challenges. The business is picking-up as production is being streamlined. The total injectables and specialty sales globally stood at $121 million. We have a total of 227 specialty and injectables ANDA filings as on 30 September, 2024, of which 170 have final approval and remaining 57 are awaiting final approval. During the quarter, we filed 10 ANDAs, received final approval of eight ANDAs and launched 14 products. The Company as on 30 September has 848 ANDAs filed with the USFDA on a cumulative basis, out of which 676 have final approval and 26 have tentative approval and 146 ANDAs are under review.
Europe. For the quarter, Europe formulation clocked a revenue of INR2,105 crores, an increase of 19% year-on-year. In constant currency terms, the Europe revenue was EUR229 million against EUR197 million in Q2 FY ’24. The strong performance was witnessed across all key geographies within Europe.
Key growth markets. For the quarter, growth market revenue increased by 44% year-on-year to INR812 crores. In U.S. dollar terms, revenue grew to $97 million in Q2 FY ’25. The increase was mainly driven by sales across markets and expansion into new geographies.
ARV. For the quarter, ARV formulation business decreased by 23% year-on-year to INR193 crores or $23 million. This was mainly impacted by cut-off sales and spill-over to next quarter.
From the above, quarter consolidated numbers need to be seen in context with a low special product on a transient sale during the quarter. The base business excluding the transient sale, grew by 7% quarter-on-quarter and is expected to continue that trajectory. During the quarter, the base business was impacted by higher R&D costs, higher freight costs, etc. Our long-term business Penicillin-G products, which are focused on backward integration and capacity expansion, are ramping-up the production. Presently, we are incurring operational cost towards the above to the tune of around INR90 crores — INR80 crores in Q2 FY ’25. Post the significant ramp-up, these businesses are expected to contribute meaningfully. Excluding the transient under long business — long-term business-related impact, the base business margin stood at comfortable levels of around 21%, reflecting a 200 bps increase from Q1 FY ’25 to — Q1 FY ’25, and absolute EBITDA grew by high-teen percentage quarter-on-quarter. This reflects the strength and resilience of our diversified base business. As we progress into H2 FY ’25, we aim to achieve breakeven and streamline our long-term businesses and are confident of achieving our internally targeted EBITDA margins of 21% to 22% for FY ’25.
On other highlights, the raw material costs continue to be at benign levels and are in-line with the previous quarter, supporting our gross margin, which stood at 58.8% against 55.2% of the previous year. In absolute terms, gross contribution was INR4,586 crores. Net capex for the quarter is around $80 million. The business has a net cash outflow of $235 million during the quarter, mainly due to buyback and increased working capital. As a result of the net debt position after investments at the end of September ’24 stood at $133 million. The increased working capital is expected to get released before the end of the year, leading to improvement in the net cash position. Average finance cost for the quarter was 5.8%. The average USD-INR exchange rate is INR83.8 in Q2 FY ’25 against INR83.41 in Q1 FY ’25.
Outlook. So, we remain confident in maintaining our growth momentum, supported by increased volumes, new product launches and stable pricing dynamic. We expect the current pricing environment in U.S. market to persist, providing a stable foundation for the performance. Europe and growth markets are anticipated to continue their positive growth. We are actively ramping-up the capacities in Penicillin-G, 6-APA, Granulation and China, which will drive further operational efficiencies and support our growth objectives in the coming quarters. We expect to achieve breakeven in the Penicillin-G product facility by Q4 FY ’25 and start contributing positively from FY ’26 onwards. Our commitment to R&D remains strong with focused investments in developing a robust product pipeline that will fuel long-term and sustainable growth. We are on-track to achieve our internal target of 21% to 22% for the full-year, which means effectively the second-half should be better compared to the first-half. We anticipate a normalization of our net debt position over the course of the year, further strengthening our balance sheet. This outlook reflects our confidence in the business and our ability to deliver strong performance in the coming quarters. This is all from my end.
Now, our business leaders will give more clarity on any specific aspects in our Q&A session. We are happy to take your [Phonetic] questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
The first question is from Kunal Dhamesha.
Kunal Dhamesha
Can you hear me?
Santhanam Subramanian
Yes.
Operator
Yes.
Kunal Dhamesha
Yeah. Thank you for taking my question and thank you for providing details, Subbu, sir. One question on the Penicillin-G front. Where are we in terms of — what progress are we making in terms of taking commercial batches and on the yield front? You have suggested that you would provide some updates in quarter three call.
Santhanam Subramanian
Yeah. So, we are now taking the commercial batches. We have taken around nearly 35 batches in the Q2. Now, we have accelerated the entire thing, and we should be doing not less than 35 to 40 batches for the current month alone and we will be accelerating this and that is the reason we see — while we have taken care of everything and the headwinds which we have been facing is on account of the environment prevailing in the Indian climatic conditions, which we have understood very well and we have sorted-out. And this will help us to accelerate the production ramping-up in the coming quarters. That is the reason we said we are estimating to achieve a breakeven in the Q4 and, probably, we may achieve half of it in the current quarter.
Kunal Dhamesha
Sure. And sir, whatever we are producing currently are also being used within our products, or we are still to use those?
Santhanam Subramanian
No, whatever we have produced so far, the — we have been converting into 6-APA comfortably without any hiccups.
Kunal Dhamesha
Okay. And then, it is going into our products?
Santhanam Subramanian
Yeah, it’s going into our products. We are also given sample to third-parties and which we have been taking their feedback and then doing the various related tests relating to the products.
Kunal Dhamesha
Okay. Perfect. Thank you, sir. And one more on the U.S. business, while you have suggested that the core business has kind of done well and the pricing remains kind of neutral. On the volume growth that we are seeing, can you maybe quantify what type of volume growth is it, like, in low-single-digit range or mid-single-digit range on volume growth? And are there any particular pockets of therapies, etc., where we are seeing this growth, or it’s more broad-based? Any particular channel that has opened up to us, which was not there earlier?
Santhanam Subramanian
Swami?
Swami Iyer
Yeah. I’ll take this question, Subbu. Thanks, Kunal, for this question. U.S. business has grown in terms of volume. We have touched certain good milestones this quarter and there has been growth quarter-to-quarter and, of course, on an annual basis. So, the major reason for the volume increase is due to the introduction of newer launches. And, of course, in our base business also, we are seeing some traction. So, these are two major factors.
Kunal Dhamesha
Sure, sir. But this is because some players are moving out. What are you seeing on the ground as of now? Is it some players moving out, creating the vacuum, or are we moving to new channels?
Swami Iyer
Yeah. So, now, primarily, we — I don’t see players going out as being the reason, because that’s been there. It’s been there even one year, 1.5 years back, some major companies had started moving out. And later, some more companies also moved out few products. We have been seeing it. But it’s nothing dramatic. The major reason, of course, we mentioned earlier, maybe, what, four or five earnings call prior to this, that we are going to — we had planned to launch 40 products. We were bang on 40 products, we launched, and those are all getting converted now into volumes and sales, that’s one.
Some of our existing business, we have been able to get little more business because of reliability of supply, thanks to our deep manufacturing ability and supply chain and, of course, the U.S. team has done very well in terms of converting these to orders. So, these are the primary reasons.
And in terms of different forms that — you see, if we talk about the tablets, we don’t talk about the liquids or anything else, in terms of tablets, not so much. We just take that as one unit. So, that’s — there is no change due to that, different form of presentation.
Kunal Dhamesha
Sure. And if I may, one last one. The specialty-injectables sales, which has kind of declined 11% roughly from $102 million to $81 million. I think, Subbu sir alluded that there was a special product which kind of did not do well in this quarter. So, one, what are our expectation from quarter three? And also, you alluded to the supply chain issues. So, is it related to a rebooting of Eugia 3, or there is something else which is going on here? And when can we expect the supply chain issues to resolve?
Swami Iyer
So, that — see, as far as the injectable is concerned, Yugandhar will answer. I was not sure that you’re referring to the branded…
Santhanam Subramanian
He’s talking about Eugia.
Swami Iyer
Eugia, okay. So, Yugandhar will…
Santhanam Subramanian
Yugandhar will answer.
Yugandhar Puvvala
Yeah, Kunal. I think you asked the question, you also answered it. So, it is, you’re right. We are scaling up Eugia 3 back to the normal levels and it’s already coming to the stabilization phase. Quarter one and quarter two, both quarters, we were actually taking lot of corrective actions. That’s why the supplies were a bit lower than the normal levels. That’s why we had to have this bit of a degrowth. It’s mainly related to the supply chain issues from Eugia 3.
Kunal Dhamesha
Okay. So, this $102 million falling to $81 million, is it a factor of just supply chain issue or there is also the issue of the lumpy product or the special product?
Yugandhar Puvvala
No, it is combination of both, because, obviously, the — we cannot really, like, do quarter-to-quarter management of that lumpy product. So, we — Q2 and Q3 is expected to be lower for the special product, whereas half of it is mainly related to Eugia 3 supply issues.
Kunal Dhamesha
Okay. Great. Yeah.
Operator
Thank you, Kunal.
Kunal Dhamesha
Yeah. Thank you.
Operator
[Operator Instructions] The next question is from Shyam Srinivasan.
Shyam Srinivasan
Hi, good morning. Thank you for taking my question. Just two quick ones. First is on the R&D cost, INR410 crores, it’s kind of jumped up like 80 basis points to 100 basis points. Just wanted to understand what is driving the higher R&D? And if you could also split us out maybe based on the different segments on where is this incremental spend going to? That’s question one.
And just question two is on — so, just the ETR for the quarter was kind of high. So, is there something that’s happening there that we need to be aware of? If you could give us a full-year ETR guidance as well. Thank you.
Santhanam Subramanian
Yeah. First question will be answered by Yugandhar and I’ll address the tax later. Not Yugandhar, I’m sorry. Dr. Satakarni.
Satakarni Makkapati
So, hi, Shyam. With respect to the escalation of the R&D costs that you guys witnessed in our quarterly update, a majority of these costs are a result of the Phase 3 clinical trial expenditure for four of our biosimilar products. As you know, we have denosumab, a biosimilar to Prolia, which is in Phase 3 clinical trials across multiple countries in Europe. We have omalizumab, a biosimilar to Xolair, which is also going through an active Phase 3 clinical trial recruitment in chronic urticaria patients. So, that’s a critical spend for us.
Then, we have an oncology product biosimilar to Avastin, which is closing on the recruitment milestone. I think we just have about another 70 subjects out of 650-odd subjects that we have to recruit. And then, we have an ophthalmic product, which is also in Phase 3 clinical trial across India, Europe and CAS countries. So, when the programs are reaching their logical end in terms of the clinical trial recruitment, that’s when based on the milestone payments that we decide with the clinical CROs, you tend to spend more. And we are in that phase. And the guidance on this pattern of spending will continue for about at least four quarters before the clinical study reports and the filings would happen in the regulated markets. So, you will see this spend, this pattern of spend at least for the four quarters, Shyam. Does that answer your question?
Shyam Srinivasan
Yeah. Thank you. Okay, sir.
Satakarni Makkapati
Thank you.
Shyam Srinivasan
So, sir, on the ETR?
Santhanam Subramanian
On the ETR front, Shyam, see, as Satakarni explained detail on the R&D cost, increased R&D cost, the R&D costs are being incurred in a company called CuraTeQ, which is a 100% subsidiary of Aurobindo Pharma. We are not taking the deferred tax asset on the expenditures as on date being a little bit conservative and that is the reason you can see the effective tax rate has gone up. The impact of it alone is around 4% for the quarter. And we believe over a period of year this year, will be — effective tax rate will be around 30% type. That is what we are thinking.
Shyam Srinivasan
So, those are 4 percentage points you mean, like…
Santhanam Subramanian
4 percentage points, yes.
Shyam Srinivasan
Understood. Okay. Helpful, sir. Thank you. All the best.
Operator
Thank you. The next question is from Damayanti Kerai.
Damayanti Kerai
Good morning. I hope I’m audible.
Satakarni Makkapati
Yes, please.
Damayanti Kerai
Okay. Good morning. So, my first question is again on generic injectables in the U.S. So, you mentioned in first and second quarter, already corrective steps are taken and now things are broadly stabilizing. So, in terms of numbers, if you can say how much recovery we have seen compared to pre-disruption level? And should we assume it to normalize, say, by fourth quarter? And do you maintain your guidance for global Eugia sales for this year?
Yugandhar Puvvala
[Technical Issues] Damayanti, yeah, we have taken the hit in Q1, Q2. And in fact, if you see it, we have increased our sales from Q1 to Q2, and expect Q3 and Q4 to be even better from a pure generic injectable basis. So, we are bang on in terms of Q4 is expected to be the best quarter, that is our expectation at this point of time. And the worst is over with respect to Eugia 3 is concerned. So, we expect that the production level should come back to — and also we have completed all our remediation actions. So, we expect the production levels to come back to normalcy by Q4.
Damayanti Kerai
Sure. And just want to understand, do you need another inspection by the FDA, or it’s, like, broadly from your end remediations are done and then things can go back to normal level?
Yugandhar Puvvala
So, from a perspective of continuing to supply existing products, it’s the — it’s over, right, in terms of — we don’t expect any further thing required from Eugia management, and we already had a detailed discussion with FDA on this. So, existing products will continue to be supplied without any disruptions going forward as well. And we never had issues, which is — it was our voluntary decision to slow-down production, but FDA never asked us to do anything.
And for the approval of new products, we feel a new inspection is required. And so, FDA has asked us. As and when we are ready, we can invite them for a reinspection.
Damayanti Kerai
Okay. So, very broadly, when do you plan to invite FDA?
Yugandhar Puvvala
Probably, next year, around Q3 levels?
Damayanti Kerai
3Q level — 3Q of this fiscal, by December?
Yugandhar Puvvala
Q — not — Q3 of FY ’26.
Damayanti Kerai
Okay, 3Q of FY ’26. Okay. And my second and last question is for Mr. Swami Iyer. Just want to understand what are your expectation on U.S. business after the presidency election in the U.S.? So, very broadly, like, what are you hearing and how do you think like company like Aurobindo can see more business, because focus is again on the affordable healthcare medicines?
Swami Iyer
Sure. We are — we feel, at this point, maybe it’s a little early to say what’s going to happen. But we do not see any issues as far as any change in policy is concerned. For example, we have very good manufacturing base in India and we are able to meet the requirement, be one of the low-cost manufacturers. So, that way, we have the ability to grow our business in case there are any cost considerations.
Now, as far as the manufacturing in U.S. is concerned, if that becomes a requirement for some kind of products or if there is any norm that comes up from the government, we are ready to meet that too, because we have a facility in the Dayton, which is scalable, and then we also, as you know, a facility in Puerto Rico, that can be quickly brought online, and then we can start commercial production. So, we do not foresee a problem, but it will be better not to speculate and wait for the next two, three months to get a better understanding.
Damayanti Kerai
Sure. Thank you. I’ll get back in the queue.
Operator
Thank you. The next question is from Yash Dharak [Phonetic]. Hi, Yash, requesting you to unmute.
Unidentified Participant
Am I audible?
Operator
Yes.
Unidentified Participant
Yeah. So, thank you for the opportunity. Just a few questions. As far as the employee expenses, the other expenses are concerned, there has been a huge increase in other expenses. So, can you see this as a normal run rate of expenditure or it may go down?
Santhanam Subramanian
Yash, can you repeat, because the…
Yugandhar Puvvala
He’s asking about employee expenses, Subbu, I think.
Santhanam Subramanian
No, employee expenses is normal, because, Yash, if you really see the European currency has moved up and when we translate the existing things, it appears to be more, but it is normal only. It’s in-line with our plans.
Unidentified Participant
And sir, the other expenses?
Santhanam Subramanian
Your line is not clear.
Unidentified Participant
Hello? Am I audible?
Santhanam Subramanian
Yeah, you’re audible, but somehow, it is not very — it’s very husky, yeah.
Operator
Yes, can you repeat the question? It’s not audible.
Unidentified Participant
Other expenses. Are other expenses…
Santhanam Subramanian
Other expenses, we talked about it in the call itself, we have talked about it. One is, R&D expenses were higher to the tune of around INR70 crores. We have an increased carriage outwards to the tune of INR30 crores on account of the Red Sea-related issues. So, we need to move quickly to avoid any penalties, etc. We have to move the material through air. And overall — because of the overall climate — I mean, overall environment prevailed in the Red Sea, the entire cost has gone up, which we think it will come down now between this quarter and next quarter, it will come down. That’s a main thing.
Unidentified Participant
So, we do expect it to reduce during the year [Phonetic].
Santhanam Subramanian
Yeah, as Dr. Satakarni has said, no, R&D cost likely to continue for another three, four quarters. In terms of the freight cost, it is expected to slow-down in this quarter or the next quarter, right? But let’s see. I mean, if there is a change in overall approach, let’s wait and see what’s going to happen.
Unidentified Participant
Okay, sir. Another question with respect to the other income. So, the other income in June was around INR221 crores, which is now reduced to somewhere around INR126 crores [Phonetic]. Is this a normal run rate of other income, or…
Santhanam Subramanian
No, you take the normal run-rate around — I think if I’m right, this quarter, we incurred around INR1,900 crores. You can take anywhere between INR1,850 crores to INR1,900 crores. In terms of the other income, that is also around INR120 crores, INR125 crores will be there. But it will go down slightly, because if you really — the interest rates have been coming down. So, both our interest expenditure will come down and the other income also will come down, because the other income predominantly represented by the deposits — interest income or the deposits we make in U.S. and Europe type.
Unidentified Participant
Thank you, sir. And just maybe the Pen-G plant, is it completely operational or will it be by…
Santhanam Subramanian
It is already operational. We are doing a ramping-up in a phased manner, which is expected to accelerate this quarter and next quarter.
Unidentified Participant
Okay, sir. Thank you. Thank you so much.
Operator
Thank you. The next question is from Neha Manpuria.
Neha Manpuria
Yeah, thanks for taking my question. Subbu, sir, on the Pen-G plant, now that we accelerate the ramp-up, is it fair to assume that the captive consumption and the gross margin improvement should be meaningfully higher in the second-half, or would that be visible probably mostly in fiscal ’26?
Santhanam Subramanian
See, Neha, as we — as I explained in my original speech, we have incurred around INR80 crores loss, which is expected to come down partly in the coming quarter and should be fully breakeven by March quarter. So, you can start seeing the contribution from this plant from next year onwards.
Neha Manpuria
And external sales would be even later, or…
Santhanam Subramanian
Yeah. External — see, if you really see, external sale is predominantly converting the Pen-G into 6-APA and selling it in the market. And Penicillin-G sales also, we have affected and we are given the batches to various two, three companies. I mean, I don’t know how many number of companies. We have given it to outside company, external party. They will be giving the feedback. Based on that, the ramping-up will take place for the external sales directly at Pen-G.
Neha Manpuria
Okay. So, you are planning to sell Pen-G directly also, because I thought the original idea was to sell only 6-APA?
Santhanam Subramanian
Yeah. We will sell it as Pen-G. We will as 6-APA. We will sell it as amoxicillin trihydrate, and other products also.
Neha Manpuria
Okay. And you’re saying, both of these, the captive consumption and external sales will be fiscal ’26?
Santhanam Subramanian
Yeah. Yes. No, captive consumption already taking place.
Neha Manpuria
Okay. Got it. Okay.
Santhanam Subramanian
Captive consumption, already taking place.
Neha Manpuria
Okay. Got it. And my second question is on the European business. Murali sir, we are already clocking close to the EUR900 million mark that you mentioned last quarter. Last quarter and third quarter, we had seen a claw-back tax. So, should we factor in something like that in this quarter also? So — and from this EUR900 million base, if I think about fiscal ’26 and ’27, what do you think are the growth drivers that I should build in for the European business scaling up from the current level?
Venugopalan Muralidharan
[Technical Issues] Neha, Good morning to you and good morning to everyone and thank you for raising this question. Yes, we are — our run-rate at percent, as you are able to see, we are well on course for the EUR900 million for the current FY. And also, the growth drivers for the subsequent two financial years are going to be more launches, some of them are pay tax, day one launches, we are gearing up for three to four products there minimum. Some of them are risk-based, still we are assessing, but this is going to contribute, plus the standard set of new launches, new to that country at the same time, which will add to the portfolio.
In addition, of course, the Eugia launches, which are substantial in the year two, and also we are keenly looking forward to the CuraTeQ tech launches coming up. So, this will be the main growth drivers. At the same time, we are already — we are pushing $1 billion [Phonetic] mark and we will be going well past that in the coming years.
Neha Manpuria
So, the $1 billion next year itself or should I take that as a little…
Venugopalan Muralidharan
Yeah, I meant $1 billion. We are already at EUR900 million, which is almost at the doorstep of $1 billion [Phonetic].
Neha Manpuria
Okay. And so, in terms of the growth rate, this next year would be similar to the growth that we have seen this quarter, or usual the 5%-ish that we see for a European business?
Venugopalan Muralidharan
Yeah. See, the European business growth is rather muted, just in the flat, or low-single-digit, whereas we’ll be always tracking towards high-single-digit or double-digit marks. We are confident of that.
Neha Manpuria
Understood. And is there a claw-back impact, sir, in the third quarter this year?
Venugopalan Muralidharan
There is no exceptional claw-back. We are already provisioning it. The main claw-back is arising from France. If more details, Subbu can explain. But we are provisioning it and we are fully prepared. At the same time, our two litigations are going on for the previous years, still decision not arrived it. So, only on the positive side, we may get some claim back.
Neha Manpuria
All right. Got it. This is helpful, sir. Thank you so much.
Venugopalan Muralidharan
Thank you.
Operator
The next question is from Jigar Walia.
Jigar Walia
Yeah. Thanks for the opportunity. Sir, with the Revlimid revenues, we expect — back in H2, we expect to meet the old run rate $600 million overall for injectables?
Yugandhar Puvvala
Yeah, Revlimid, including, yes, we planned around $600 million. But based on Q1, Q2 slowdown of production, there can be a plus or minus to that $600 million, 5% here or there, okay. But largely, we are in the ballpark.
Jigar Walia
Got it. And any overall guidance for the second-half for sales, EBITDA?
Yugandhar Puvvala
Sales and EBITDA are expected to be much better than the first-half than the second-half.
Jigar Walia
Got it. One question if I can take for Mr. Satakarni. So, in case of total capex, which is now been done in JV [Phonetic] right now. And if at all, there is something around in terms of an EBITDA margin or a value type of perspective from a slightly longer-term perspective, if you can provide. Yeah.
Satakarni Makkapati
Hello, Jigar. I don’t know if I understood your question well. But with respect to the capex in the TheraNym Biologics, our CMO arm, we alluded to around INR1,000 crore as guidance before and that remains the guidance with the current capacities that we are projecting with 2×15 KL mammalian cell culture bioreactor lines and associated purification line. But there is also a thought process that we would like to maximize our capacity footprint in that site by addition of two more 15 KL bioreactor lines. So, that decision is yet to be taken. If that decision is taken, then it would add to the current capital expenditure guidance by another $40 million to $50 million.
With respect to the revenues and the margins and EBITs, I — as I told before, I hate to give guidance, which is about three years to four years from now. But we see the first set of stockpiling effort for the customer coming in from late 2027, which means the revenues will start to trickle in and we expect the consistent flow of revenues to happen from 2028 calendar year onwards. And right now, what I expect is this CMO business would not be less than a 50% margin business. I would like to leave it there and not speculate too much, Jigar, if that is okay with you.
Jigar Walia
Understood. Thank you so much. I’ll come back in queue. Thanks.
Satakarni Makkapati
Thank you.
Operator
Thank you. The next question is from Tarang Agarwal.
Tarang Agarwal
Hi, good morning. Just a couple of questions on Eugia. On Eugia, two questions. I mean, first, sir, if we look at Eugia last quarter, which is Q1 of FY ’25 and Q4 of FY ’24, we were impacted by anywhere by about $15 million to $20 million on a quarterly basis, because of Eugia 3. It was widely anticipated that this quarter, much of that impact will be averted. So, has that been averted to a large extent?
Yugandhar Puvvala
Yeah, in fact, Q2, we continue to have similar issues like Q4 and Q1, Tarang. So — but now we are back to the original levels, but Q2 also, I have taken the impact of supplies.
Tarang Agarwal
Okay. Sure. So, would it therefore be safe to presume that the $15 million to $20 million continues up till Q2 and then from Q3 onwards, hopefully, things should be all right?
Yugandhar Puvvala
That’s right.
Tarang Agarwal
Second, on Vizag, how should we look at the ramp-up of the Vizag plant? I mean, are we waiting for more approvals to kick through? How should we build that in?
Yugandhar Puvvala
So, I think, you should look at in, it’s actually three different buckets, Tarang. One is, what the terminally sterilized lines, what are the aseptic lines, what are the special lines what we are putting up. So, we have the approval of all the terminal sterilized lines from USFDA and Europe approval also for all lines. Whereas aseptic products, we have filed it and we expect inspection for aseptic lines going forward. After that, we have all the GLP-1 products, like, semaglutide, liraglutide and all that cartridge line, PFS line and we are putting some ophthalmic lines, that will be the third phase. So, the Vizag is in three phases in terms of the overall capacity build-up at Vizag. We expect decent revenues in FY ’26, but the actual ramp-up will happen from FY ’27 onwards.
Tarang Agarwal
Got it. That’s helpful. Thank you, sir. On Europe, sir, fantastic execution, almost 12% constant currency growth for H1. What is driving this? I mean, are there any one-offs? Specifically, say, if I look at Q2, 16% constant currency growth has not been seen in this part of the world or for you also. So, any specific drivers or is it — is there a one-off that’s at play? How would you look at it?
Yugandhar Puvvala
Tarang, I will only talk about injectables and I will leave it Murali to for the overall guidance. Europe, we have seen a significant growth. In fact — let’s put it as, if I see from H1 of last year to H1 of this year, it’s almost we had 20% plus growth in injectables. I think it’s driven by various factors with respect to supplies from other suppliers. It’s nothing to do — there’s no one-off in Europe for injectable business.
Murali, would you like to guide on the other things?
Venugopalan Muralidharan
On the oral solids front — first of all, thank you, Tarang, for raising this and for your appreciated words. Yes, on the oral solids front, it is — I would attribute it to the very careful management of the inventories, right products at the right time and looking at the opportunities and making full use of it. And in the process, Malta has also been very supportive in timely release of the products to the destination countries. So, it’s a combination of some of these. The commercial teams have been working in tandem to identify the opportunities and service the market. So, definitely, we are bullish and confident.
Yugandhar Puvvala
The overall guidance is simple. It is — there is no one-off for this growth. I think we will leave it there.
Venugopalan Muralidharan
Yeah.
Tarang Agarwal
Sure. And last question on the U.S. business. Swami sir, what would be in your view a good base for the oral solids business in the U.S.? And some commentary on the OTC business, because that seems to be flat at a $25 million run-rate on a quarter?
Swami Iyer
Yeah. So, I think we are already at a fairly high-level of dollar value and even volume. We are at 2 billion tablets a month, a little over 2 billion actually a month. And we are number one, the next — in terms of prescriptions, the next competitor is probably 33% lower if I see the — in terms of prescription. This is not even considering the private labels. The reason why I’m telling you this is, we have a fairly large base and adding substantially to this base requires newer products, new for — newer form of presentation. We are working on it.
So, I wouldn’t want to speculate, but I think we are moving towards a future with much more diversified portfolio. We have a global manufacturing infrastructure. And then, the strength of our overall portfolio, including some of the newer presentation that we brought about, these would help us track — on-track to achieve better growth. And I would say that the — we will establish the base as we go along, but today, we are on a fairly high base.
Tarang Agarwal
Okay. And there’s no one-off so to say driving this business also, right? I mean, it’s all a function of the portfolio.
Swami Iyer
There is no one-off which is anything significant. The — you always have these marginal ones, you have some OTBs, you have some stuff, but there’s nothing significant, which is one-off.
Tarang Agarwal
Okay. And the OTC business?
Swami Iyer
Okay. I’m sorry. Yeah, OTC business, we have been for monitoring the OTC business very closely, because that is one area where the growth has been very flattish. But I’m happy to say that this has been a decent quarter for OTC and we have, I think, laid the foundation for OTC business in terms of awards and in terms of creating the infrastructure. We believe we would see tangible results starting from Q3 in OTC. And I also think there’ll be no looking back for OTC from here.
Tarang Agarwal
Sure. Thank you, sir. All the best.
Swami Iyer
Thank you.
Operator
Thank you. The next question is from Nitin Agarwal.
Nitin Agarwal
[Technical Issues] Good morning. Thanks for taking my question. Sir, on the [Technical Issues] peptide business, I think, you’ve given some comments in the presentation. If you can just probably give us some more color on your thought process, how you…
Swami Iyer
We can’t hear anything. I don’t think we can hear you.
Operator
Yes. Nitin, you are…
Nitin Agarwal
Can you hear me now?
Swami Iyer
Yes.
Nitin Agarwal
So, sir, I’m asking on the peptide business, you’ve given some color on that in your presentation. Can you just give us some thoughts on how — what opportunities do you see in this business going forward?
Yugandhar Puvvala
Are you talking about the API business or formulation business, Nitin?
Nitin Agarwal
Sir, both if you can in terms of you’ve talked about 14 DMFs, there is mention of GLP additional capacities. So, what kind of opportunity do we see here for both the segments?
Santhanam Subramanian
Dr. Satakarni, please? Yeah.
Satakarni Makkapati
So, Nitin, good morning. In peptides, as you know, for over a decade at Aurobindo, we have carefully nurtured capabilities in both solid state and liquid phase peptide synthesis. We have filed about 14 DMFs, out of which, I think, five of them have translated into successful ANDAs in the U.S. We continue to streamline our portfolio with more focus on oncology and primarily the diabetes market. Right now, our pipeline has three glucagon-like peptide-1 receptor agonist with us now investing in expanding our manufacturing capacity footprint. Right now, we have about five manufacturing lines which can do a gram quantities to a kg quantity of the product.
But considering the anticipated demand for the GLP-1 products, we have initiated constructing or commissioning a Phase 1 of the new GLP facility, which I believe would be ready by the end of next year and this would catapult us into a minimum of 100 kg capacities with the scope to expand it in Phase 2 and Phase 3 to another 400 kilograms of GLP-1 APIs that we can produce.
Likewise, we are also starting to make some foray into the domestic market with peptides. We have received an approval for a first-in-class of linaclotide peptide, which is used in irritable syndrome. So, we are going to do that to Indian patients very soon through a partner. So, you will see some traction in peptides, a change — a paradigm change in how we look at emerging markets, primarily the domestic market and also an investment in the API manufacturing capacity footprint side of things. Hope this answers your question, Nitin.
Nitin Agarwal
Thanks, sir. Can I just take a little forward, sir? With the — from your ability to then participate in the emerging market opportunity, which is going to — for semaglutide and for lira, which is going to open a little quickly. How are you placed in terms of — would you be in the first wave of launches for liraglutide globally and for semaglutide?
Satakarni Makkapati
For the emerging markets, we are we are still firming up our strategy in — especially in markets like India. For regulated markets, I would let Yugandhar and others take the call. But we still have a window of opportunity in the emerging markets for semaglutide and we also are very keen to bring in liraglutide into India.
Nitin Agarwal
And sir, secondly, on the biosimilar business, you talked about the various trials which are going on global Phase 3 trials. But in terms of commercial, meaningful commercial impact of these projects, by when do you start seeing that happening?
Satakarni Makkapati
So, with respect to our biosimilars initiative, as I told that we have four products in the global Phase 3 clinical trials. We are on-track to complete our denosumab Phase 3 clinical study in women with post-menopausal osteoporosis by May or June 2025. In fact, we completed the recruiting — recruitment of all 436 patients across Europe. So, I think denosumab would be commercial in the calendar year 2026 in Europe. And in India, it will — we strive to make it commercial to the Indian and make it available to the Indian patients in the next year itself.
Likewise, with our biosimilar to Xolair, which is omalizumab, I must admit that our recruitment has been slower by three months to four months than anticipated. This is expected in the dermatology setting sometimes depending on how the sites operate in Europe, but we are confident of completing the recruitment of all patients by February, March 2025. This means based on my earlier guidance, we can still have a chance of filing this product by the end of next year with EMA and also with the FDA. This product, as you know, Nitin, will be a very interesting opportunity for us considering its use in chronic urticaria, respiratory asthma and accidental food allergies. So, as I told in one of the earnings call before, I’m looking at a market opportunity in both Europe and FDA where I would be one of the three or four players for omalizumab. Again, the commercial impact of this product will be felt starting 2026. In India, we plan to launch it next year, but in Europe, it will be 2026.
The three other biosimilars that we have already filed in Europe, I’m expecting them to be commercialized if there are no other regulatory hiccups. I’m expecting them to be commercialized in the next six months to seven months’ time in Europe. So, you will see a commercial impact of our first set of biosimilars starting 2025. And from 2026, you will see the key products, which is the denosumab, the omalizumab, etc., coming into the market. ’26, ’27 would be the years that I think the supply chain would get stabilized and you will start to see how this impacts the overall numbers of the Company.
Nitin Agarwal
Sir, if I can just push that little forward. So, from whatever that you’ve discussed, it is fair to say that most of our opportunity in the initial years is going to be around India and Europe? U.S. will probably begin to contribute a little later in a meaningful way?
Satakarni Makkapati
I think that is a fair assessment of the business. The initial opportunities will come from India, Europe and rest of the world. U.S., I’m expecting my first filing. In fact, I told you that the first filing will be done in this quarter, which I think we are still on-track to filing our first product, which is a trastuzumab biosimilar this quarter in the U.S. And if that gets approved and you know how things happen with the U.S., it takes its own sweet time, then you can see even commercial impact from the U.S. kicking-in from late 2025 calendar year or ’26. But I would be — I would exercise some caution with how the USFDA reviews and — of the GMP facilities and the dossier goes in.
So, towing in the line that you have stated, the initial opportunity would essentially come from Europe and India and rest of the world, with U.S. taking a backseat, but U.S. would also kick-in, that’s where the business is, hopefully, in ’26, ’27.
Nitin Agarwal
Sir, if I can, one last one, sir, on the CMO business, what is the thought process for adding additional capacities and what will drive the decision for you to go ahead and not go ahead with it?
Satakarni Makkapati
So, we would like to add additional capacities in that facility, Nitin, to essentially give us more flexibility so that, in case, there is a ramping-up requirement from the customer, then we are not caught up napping and because it takes about two years, 2.5 years to build a capacities of this scale in mammalian cell culture. And as I told before, this will be the largest capacity that will be available in India. No one had done anything over 10,000 liters mammalian in the country. So, we thought instead of reacting to a requirement maybe two years, three years down the line, why not add capacities as we build the Block 1 of this facility that we are already building and hence be ready for any opportunities that come our way starting 2028. So, that’s the reason why we are thinking about adding capacities there, Nitin.
Nitin Agarwal
Okay, sir. Thank you so much.
Satakarni Makkapati
Thank you.
Operator
Thank you. The next question is from Ankush Mahajan.
Ankush Mahajan
Hello?
Operator
Yes, Ankush.
Ankush Mahajan
Sir, my question is related to the Eugia 2, what kind of a price erosion was in the existing products? And sir, what is the strategy for the new launches from the Eugia 2 now?
Yugandhar Puvvala
Is this the question on Eugia business, Ankush?
Ankush Mahajan
Yes, sir. So, what is the price erosion in the existing products and what is the strategy for the new launches from the Eugia 2?
Yugandhar Puvvala
Yeah, it is — price erosion is in low-single-digits, that’s been the trend for the last few quarters. And launches are a bit low this year, but we expect things to ramp-up from H2 onwards. But there are no meaningful launches in next six months or next one year. So, it is more about supplying from our existing molecules and see how things pan-out in next six months.
Ankush Mahajan
Thank you, sir.
Operator
Thank you. The next question is from Amey Chalke.
Amey Chalke
Hello, am I audible?
Operator
Yes, Amey.
Amey Chalke
Yeah. Thank you so much. Most of my questions are answered. Just one thing on the branded specialty U.S. business. If management can highlight plans here or any milestones in the near-term for this business and what growth should we assume? Yeah.
Swami Iyer
Thank you. I’ll take that question. You’re talking about the branded business?
Amey Chalke
Thank you. I’ll take that question. You’re talking about the branded business? Yes, the Spectrum portfolio, which we have acquired…
Swami Iyer
Yeah, right. So, the — we had given — we have given an indication earlier that Acrotech is steady in the range of $25 million, $30 million kind of range that we are talking about and we don’t see any immediate change to it. We also indicated the strategy behind this, we are not going for any big-bang investments now in terms of brands. So, that’s where we are. We will be steadily maintaining this business or there could be some minor improvements, but nothing significant that we are looking at immediately in the short-term.
Amey Chalke
Sure. The second question I have is on margins, I might have — this might be repeated, I was not there in the opening remarks. But, like, margin — we have seen impact of higher R&D, the PNG [Phonetic] losses and also the Revlimid or the specialty product lower sales. Despite that, our margins have been a bit healthy around 20%. Is there anything which management wants to highlight, or Subbu sir, you want to highlight or should we consider this 20% as a base going ahead?
Santhanam Subramanian
No, I think I explained it very well at the beginning itself. Even though the YTD — first-half, here, margin is around 20.7%, we are still maintaining our guidance of around 21% to 22%, right? We expect the second-half will be better than the first-half, including all businesses. As Yugandhar rightly explained on the Eugia and Penicillin-G, it’s expected to move forward with the better operations, this one — different contribution. Like that, with all these things, we still maintain the 21%, 22%.
Amey Chalke
Sure. And sir, on the working capital, it might have gone up on account of maybe a some opportunity in the U.S. also, the buybacks, etc., the debt level as well. So, we expect going ahead working capital to normalize and the debt also to normalize in coming quarters?
Santhanam Subramanian
Yeah, that is what we expect. Yeah, that’s what we exactly expect. By end of the year, we’ll see an improvement, because good sales have happened in both the U.S. and Europe this quarter, coupled with the fact we had certain reimbursements to be obtained from the government which all expected to happen this quarter next quarter.
Amey Chalke
Sure. Thank you. I will join in queue.
Santhanam Subramanian
Yeah.
Operator
Thank you. [Technical Issues]
Santhanam Subramanian
Hello?
Operator
Yes, sir. As this was our last question, I would request management to give their closing remarks and close the call.
Shriniwas Dange
Thank you all for joining us on the call today. If you have any of your questions unanswered, please feel free to keep in touch with the Investor Relations team. The transcript of this call will be uploaded on our website, www.aurobindo.com, in due course. Thank you and have a great day.
Operator
[Operator Closing Remarks]