Gland Pharma Limited (NSE: GLAND) Q2 2025 Earnings Call dated Nov. 04, 2024
Corporate Participants:
Ankit Gupta — Head, Investments, Strategy & Investor Relations
Srinivas Sadu — Executive Chairman and Chief Executive Officer
Alain Kirchmeyer — Chief Executive Officer, Cenexi
Ravi Shekhar Mitra — Chief Financial Officer
Analysts:
Tushar Manudhane — Analyst
Neha Manpuria — Analyst
Bino Pathiparampil — Analyst
Jinesh Shah — Analyst
Saion Mukherjee — Analyst
Vivek Agrawal — Analyst
Anubhav Agarwal — Analyst
Aditya Pal — Analyst
Amlan Das — Analyst
Shyam Srinivasan — Analyst
Sunil Khatri — Individual Investor
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Q2 FY ’25 Earnings Conference Call of Gland Pharma Limited. [Operator Instructions]
I now hand the conference over to Mr. Ankit Gupta. Thank you, and over to you, sir.
Ankit Gupta — Head, Investments, Strategy & Investor Relations
Thank you, Sagar. Good evening, everyone. We welcome you to Gland Pharma earnings conference call for Q2 of FY ’25. My name is Ankit, and I head Investments, M&A and Corporate Strategy at Gland. In India office today, we have Mr. Srinivas Sadu, our Executive Chairperson and CEO; Mr. Ravi Mitra, our CFO. We also have Mr. Alain, the CEO of Cenexi, who is connected virtually from France. We’ll begin the call with business highlights from Mr. Sadu, followed by an overview of Cenexi from Mr. Alain, and lastly, the group financial overview by Mr. Ravi.
Before we proceed, I’d like to remind everyone that some of the statements made today will be forward-looking and are based on management’s current estimates. These statements should be considered in light of the risk associated for our business. The call is being recorded, and the playback and script will be available on our website shortly.
With that, I hand over the call to Mr. Sadu for his opening remarks. Over to you, Mr. Sadu.
Srinivas Sadu — Executive Chairman and Chief Executive Officer
Thank you, Ankit. On behalf of Gland Pharma, I extend a warm welcome to our Q2 FY ’25 earnings conference call. As this will be the final call before the end of CY 2024, we wish you and your families good health and prosperity throughout the upcoming season. Today, we will review our financial results and operational developments for both the stand-alone entity and the group, which includes Cenexi, our European CDMO business.
At a group level, we reported revenue of INR14,058 [Phonetic] million in Q2 FY ’25 compared to INR13,734 [Phonetic] million in Q2 FY ’24, representing moderate growth of 2% [Phonetic]. This performance is in line with our expectations, given the slower uptake in the rest of the world markets for our base business and the impact of the extended annual shutdown at our Cenexi facilities due to the planned installation of a new ampoule line.
Let’s take a closer look at our base business performance for the quarter, excluding Cenexi. We achieved INR10,659 million in revenue, a 5% increase compared to the same period last year. This demonstrates the continued resilience of our operations in a competitive environment. Our base business EBITDA margins were steady at 34%, similar to Q2 FY ’24.
On a consolidated basis, our EBITDA margins for the quarter were 21%, impacted mainly by Cenexi, as previously mentioned. We continue to see healthy performance in our core markets of the United States, Europe, Canada, Australia and New Zealand. These key regions contributed 75% of our revenue in Q2 FY ’25, up from 74% in the same period last year.
In the US, our largest market, sales increased by 3% year-over-year. This growth was fueled by both on — an uptick in existing products and the successful introduction of new products. During the quarter, we launched six molecules across three — across these key markets, including four in the US alone. Notably, products like Cetrorelix Acetate, Ephedrine Sulfate, Tranexamic Acid and Diazepam are gaining traction with our partners, and we are very optimistic about the future growth potential.
Now, turning our attention to the rest of the world markets, we see that these regions contributed 19% of our revenue in Q2 FY ’25, which is similar to Q2 FY ’24. While we experienced a slight delay in order pickup from Saudi Arabia, we anticipate this will pick up in the second half of the fiscal year. We remain confident in the long-term growth potential of this important market and are actively working to strengthen our presence there. The Indian market recorded INR874 million in revenue, and this segment contributed 6% of our total revenue.
In Q2 FY ’25, our total R&D expenditure was INR493 million, representing 4.6% of our base business revenue. During the quarter, we filed seven ANDAs and importantly received approval for eight ANDAs. This brings our total ANDA filings in the United States to 363 with 304 approvals and 59 pending. Globally, we now hold 1,726 product registrations, demonstrating our commitment to expanding our product portfolio and reaching patients worldwide.
Turning to our complex product portfolio, to date, we have nine filings completed in a targeted portfolio of 19 products. Six of these complex products have already been approved and launched with three more expected to be approved soon. Our complex products target an IQVIA market opportunity of $7.3 billion, reflecting the significant potential of this segment to drive future growth. In the Chinese market, we are adapting our development strategy to address the evolving market dynamics. Four of the nine products in the plan for China market are currently under development and five have received approvals.
On the biologics CDMO business from India, while we await further developments on the previously announced potential collaboration during the quarter, Gland entered into a binding term sheet with Dr. Reddy’s Laboratories to establish a strategic biologic CDMO collaboration. This partnership will leverage our state-of-the-art biologics manufacturing facility at Genome Valley in Hyderabad. We are very optimistic about the potential of these partnerships to create value for both organizations, and we expect to sign a definitive agreement soon.
Lastly, on Cenexi, the business recorded INR3,399 million, which is EUR37 million in revenue this quarter with a gross contribution of 69%. As anticipated, the annual shutdown impacted our performance, and we reported an EBITDA of negative INR685 million, which is negative EUR7.5 million for the quarter. However, our strategic progress at Cenexi is proceeding as planned. We also have Alain on the call with us today to provide a more in-depth update on recent developments and critical initiatives at Cenexi.
In closing, Gland has had a good first half of FY ’25 and is optimistic about delivering strong financial results for the entire year. We are executing our strategic priorities, expanding into new markets and building a solid foundation for the future. As you may have already read, we are excited to welcome Mr. Shyamakant Giri as our new CEO in January. Shyama is a highly accomplished leader with over 25 years of experience in driving growth and success across diverse organizations. This leadership transition is a key step in our long-term strategy, ensuring continued strong leadership and execution.
With that, I would like to hand it over to Alain for a closer look at Cenexi’s performance. Thank you. Alain, over to you.
Alain Kirchmeyer — Chief Executive Officer, Cenexi
Thank you, Sadu, and good evening, everyone. Cenexi’s performance this quarter is in line with what we communicated during our last call. The performance was impacted by the summer shutdown, during which we invested in new capacity and performed annual maintenance.
From a site standpoint, first, in Fontenay, we successfully installed the new high capacity ampoule line, which is scheduled to start commercial production in January 2025. Due to our strong oversight, the project progressed well and remains on track with our original plan both in terms of investment and implementation schedule. This new line will significantly increase our ampoule manufacturing capacity, improve customer service and generate additional revenue starting in 2025. Secondly, in Herouville, validation batches for a new inactivated vaccine and an ophthalmic gel are progressing well, and commercial production is expected to begin before the end of the year. The site is still operating at low volumes. However, we continue to see new business traction.
In Braine-l’Alleud, Belgium, we experienced a temporary setback caused by lyophilizer breakdown at the site. We are currently operating at full capacity with our remaining lyophilizers. The issue will be fully resolved during the quarter and a new backup unit will be installed in the first half of 2025 to prevent future disruptions. While we are making good progress and our course correction plan is gaining momentum, I want to highlight that these temporary headwinds at the Braine-l’Alleud site will impact our quarterly performance.
That being said, we continue to strive for achieving our short-term goals, a positive EBITDA for Q4 of full-year 2025. We also maintain our medium-term goal of a positive EBITDA for the next fiscal year, driven by an increase in revenue above the EUR200 million threshold.
Thank you. I will now turn the call over to Ravi to discuss financial performance. Ravi, please proceed.
Ravi Shekhar Mitra — Chief Financial Officer
Thank you, Alain. Good evening, everyone. We appreciate you taking the time to join us today. Let’s review our financial performance for the quarter and first half of the fiscal year 2025.
In Q2 FY ’25, our consolidated revenue from operations was INR14,058 million, a 2% increase year-over-year, driven by a modest growth in our base business in US. At Cenexi, the revenue for this quarter was lower by 5% year-on-year due to the extended shutdown for installation of the new ampoule line at Fontenay. Base business revenue increased by 5% year-on-year. For the first half of FY ’25, revenue reached INR28,075 million, marking a 9% year-over-year increase.
Our other income for the second quarter reached INR596 million. This includes INR542 million from interest on fixed deposits and INR45 million in foreign exchange gains. For the first half of the fiscal year, other income totaled INR1,111 million, INR1,023 million from interest income and INR45 million from foreign exchange gains.
The gross margin for Q2 FY ’25 was 59% compared to 62% in Q2 FY ’24, primarily impacted by lower gross margin at Cenexi. Gross margin of our base business remained stable at 56%. For H1 FY ’25, the gross margin were at 59% versus 62% in H1 FY ’24.
Our Q2 FY ’25 consolidated EBITDA was INR2,961 million with a 21% margin. This compares to 3,205 million and a 23% margin in the same period last year. The decrease is primarily attributed to losses at Cenexi. Importantly, our base business delivered a strong 34% EBITDA margin, which is similar to the prior year.
Operating expenses at our base business remained in line with previous quarters.
The EBITDA for first half of FY ’25 increased by 5% year-over-year, reaching INR3,645 million. This translates to a 21% EBITDA margin for the group, with our base business achieving a 34% margin.
Our net profit for Q2 FY ’25 stood at INR1,635 million, a 16% decrease compared to the same period last year. For the first half of the fiscal year, our net profit reached INR3,073 million with an 11% profit margin.
In the second quarter, our total R&D expense were INR493 million, representing 4.6% of revenue from operations, excluding Cenexi. This is up from INR351 million in the same period last year, reflecting our ongoing commitment to adding new products. For the first half of the year, R&D expense totaled INR982 million or 4.7% of revenue. Our effective tax rate remained consistent at 26% for both the second quarter and first half of the fiscal year.
We continue to invest in our future growth. This quarter, we incurred INR1,037 million in capital expenditures, primarily for the modular [Phonetic] expansion of our Pashamylaram plant and Cenexi. This includes, at Cenexi, we invested an additional EUR7.19 million, primarily towards new capacity and debottlenecking.
Our strong operational performance generated INR6,436 million in cash flow from operations during the first half of the year. We ended the quarter with INR28,201 million in cash and cash equivalents. After accounting for Cenexi’s debt, our net cash position was INR25,413 million. We have also made significant progress in optimizing our working capital, which now stands at INR20,453 million. Our cash conversion cycle has improved to 149 days, down from 196 days in the same period last year.
With that, we will now open the floor for questions.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] Our first question comes from Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Tushar Manudhane
Thanks for the opportunity. Am I audible?
Srinivas Sadu
Yes, Tushar, go ahead.
Tushar Manudhane
Yes. So first, to start with the bookkeeping question in terms of this milestone income and the profit share this quarter, if you could share.
Ravi Shekhar Mitra
The profit share for this quarter is 8% of revenue at Cenexi.
Tushar Manudhane
Okay. And the milestone income?
Ravi Shekhar Mitra
It is 7%.
Tushar Manudhane
Okay. Sir, on the core market sales in terms of the sales has been stable for two quarters now, while there has been two launches as well. So when do we see the pickup in this segment — meaningful pickup in this segment?
Srinivas Sadu
On a year-on-year basis, still — US is still growing. Now, if you see a couple of things which happened, ROW has de-grown. The tender off-take did happen last quarter, which we were expecting in Saudi. That will happen this [Technical Issues]. That’s one aspect. And one bid what we got in [Technical Issues] that also will go this quarter. So, that will be a jump on the US business and the ROW business. But basically, it’s a steady growth, which is happening. We are losing some products. Whatever we launched [Technical Issues] last few quarters, of course, the — if you see last quarter, we launched eight products. This quarter, we will launch six. And always, when you launch products, that quarter will have a higher off-take, and then it kind of reduces to a normalized numbers. So that’s what will happen. But I think some products will go and there’ll be lesser off-take and some will grow. But overall, I think if you take year-on-year, it’s about 9% growth.
Tushar Manudhane
So let’s say, compared to, say, INR50 crores to INR60 crores of core market sales in FY ’24. And the first half, we have achieved INR16 crores. So likewise, considering these so many launches, what kind of growth can be expected in the second half for markets?
Ravi Shekhar Mitra
Are you asking what kind of growth we expect in the second half for the new products launch?
Tushar Manudhane
For the core markets overall, sir?
Ravi Shekhar Mitra
Okay. So first year, we grew by 9%. And considering the factors we just discussed about ROW and US [Indecipherable] timing, we should be — on a full year basis should be around what we earlier told you about, single- digit — low double-digit kind of growth we are expecting this [Indecipherable].
Tushar Manudhane
Got you, sir. And with respect to this biologics agreement, so this is, first of all, for which set of markets in first place as in US, Europe, ROW?
Srinivas Sadu
We can’t really comment on that. It’s basically some of the biologic products [Indecipherable] is going to develop. So that’s a collaboration we have done, and for now, I think that’s what we could be…
Tushar Manudhane
Okay. And tentative timeline to see the meaningful benefit of the commercial benefit from these agreements?
Srinivas Sadu
The initial financial benefits will get from first quarter of next year. And then, depending on the timing of the products and the development, then it will pick up.
Tushar Manudhane
All right, sir. I have more questions. I’ll join back the queue. Thank you.
Operator
Thank you. The next question comes from Neha Manpuria from Bank of America. Please go ahead.
Neha Manpuria
Yes. Thanks for taking my question. Just extending the question from the previous participant. If I look at the US revenue and strip out the profit share and milestone, it’s remained at the $70-odd million for three quarters now despite the fact that we have launched the number of products that we have. I didn’t quite catch your comment on why you think the US should pick up. And how that low double-digit growth for the entire stand-alone business would come through? Given if I look at the ROW businesses also, we have been declining in the first half. So just trying to tie in your low double-digit guidance with the fact that US has remained flat for three quarters.
Srinivas Sadu
Sir, the milestone income and the launches, actually, they’re not that much related. Maybe a portion of that will come from the launches. But mostly, it’s new contracts that you signed in the quarter. The milestones are also related to that and also some of the CDMO or CMO contracts what we signed, we also get milestones from that. But It’s not directly…
Neha Manpuria
No, sir. Sorry, my question is, if I strip out the milestone and the profit share, the US revenue for the last three quarters has been about $70 million. I’m not asking about the milestone and the profit share. And I think you did mention in the previous comment that your US business should step up from next quarter. Why do you think — given that we’ve already seen so many launches and we haven’t really seen an improvement in the US, what gives you the confidence in improvement in the US business, ex milestone and profit share? And given that we’ve been flat in the US, how do we plan to achieve that low double-digit revenue that you’re talking about?
Srinivas Sadu
Yes. So, one is, of course, the new launches, it will happen every quarter. That’s one. Second, as I mentioned, [Indecipherable] the new contract, what we’ve signed, it’s not dispatched yet. That will happen this quarter. [Indecipherable] contract, which our partners signed up, and the Saudi business [Technical Issues] and that has not gone. So that will start again from this quarter. So these are substantial amounts. If you see the ROW business has de-grown primarily because a lot of chunk of business comes from [Technical Issues]. So, that will keep up. Yes.
Neha Manpuria
Understood. Okay. And my second question is on Cenexi. It seemed while the summer shutdown was well articulated and we understand that. But I did see a very sharp decline in gross margins in this quarter. Usually, we do like a 77% gross margin that seems to have come off fairly sharply. If you could explain that? And what we should expect from a gross margin perspective? Is there any one-off in this number from gross margin that you’ve reported this quarter?
Ravi Shekhar Mitra
Yes. So, gross margin this quarter, reduction is largely because of the mix of products where, in the Belgium side, there has been lower uptake as compared to last last year. And our other sites were more or less in line with Q1. But the mix of the sites will depend on — we’ll give the gross margin overall basis. So mix is one of the reasons for reduction to 69%.
Neha Manpuria
And this should normalize based on the opening comment that we have resolved the issues?
Ravi Shekhar Mitra
Yes, it should go back to their earlier gross margin level.
Neha Manpuria
Okay. And sir, on Cenexi, is it fair to assume that as we go back to the EUR50 million per quarter run rate, in the third quarter, we should be able to achieve breakeven in the December quarter? Would that be a fair assumption?
Ravi Shekhar Mitra
So, third quarter, we will not be able to comment, but we are targeting after the new line to be up and running from January, that should definitely achieve.
Neha Manpuria
Okay. Understood. And my last question, on the CMO that you signed with Dr. Reddy’s, are there any more talks with any other partner on this? Or you think the tie-up with Reddy’s would be enough for us to fully utilize the capacity that we have?
Srinivas Sadu
No. So, this is an open contract, so we can still get other CDMO businesses. Likewise, they can also look for other businesses. So it’s not that it’s fully dedicated to just Dr. Reddy’s.
Neha Manpuria
Understood. And sir, what would be the peak revenue potential from this CMO opportunity with Reddy’s, if you to just put a number? I’m not asking for a timeline, but what could be the peak revenue in your view?
Srinivas Sadu
It’s too early to comment, Neha.
Neha Manpuria
Understood. Okay, thank you. Thank you so much, sir.
Operator
Thank you. The next question comes from Bino Pathiparampil from Elara Capital. Please go ahead.
Bino Pathiparampil
Hi, good evening. Starting with this Dr. Reddy’s contract, is it for the entire API formulation, etc.? Or is it — will it be just a formulation?
Srinivas Sadu
It’s mostly a drug substance.
Bino Pathiparampil
API?
Srinivas Sadu
Yes.
Bino Pathiparampil
Okay. And would it be for the semi-regulated markets or regulated markets?
Ankit Gupta
Hi, Bino. This is Ankit. So [Technical Issues] doesn’t specifically mention as to what market it would cover. They are developing products for the global markets and our site is also designed to service all kinds of markets. So at some point in time, it will be a combination of both semi-reg markets and reg markets. But let the fine print come, and we’ll be able to discuss more specifics then.
Bino Pathiparampil
Okay. Got it. Second, I didn’t quite understand what’s the issue with Saudi business. Could you please explain what exactly happened?
Srinivas Sadu
So, we did win a tender in Saudi. Some of the products off-take has happened. Enoxa, the offtake has not happened. The quantities from the previous supplies, that we made with the previous tender, that were still there. The stocks were there. So that will — off-take will start happening from end of this quarter.
Bino Pathiparampil
Okay. It’s just that didn’t sell in the earlier quarter. There was no specific incident per se.
Srinivas Sadu
It’s just the timing, yes.
Bino Pathiparampil
Okay. And one last question. You have a tentative approval for Latanoprostene eyedrops in the US. Is that a product likely in the next 12 to 24 months? Or is it far out?
Srinivas Sadu
It’s under — it’s a [Indecipherable], so I can’t comment too much on it.
Bino Pathiparampil
Okay. Thank you.
Operator
Thank you. The next question comes from Jinesh Shah from RSPN Ventures. Please go ahead.
Jinesh Shah
Yes, okay. So thanks for the opportunity. So my first question was with respect to the next business as you mentioned, that we’ll be able to do the breakeven for the EBITDA probably by quarter 4. So I would just like to know about the outlook for the EBITDA margins with respect to the fine business that how we are like looking for the next year and onwards with expect EBITDA margins. What is our vision in that?
Ravi Shekhar Mitra
So see, the — we expect after the new line and some of the additional capex to be done, we’ll — next year, we’ll end up at EBITDA neutral or low single-digit. A year after that, when all the capacity is on stream and we get all the pipeline projects in — commercially on, then we’ll end up at the old 10% EBITDA level.
Jinesh Shah
Okay. Then my other question would be with respect to the maintenance shutdown thing, like is it like the annual thing that we will expect next year in FY ’26, too, that will impact one of the quarter with respect to revenue in the business or something like that? It’s like the annual thing, or it’s like the periodic phase that we come into the maintenance shutdown?
Srinivas Sadu
It’s annual maintenance. Every year, this will have, just a few days here and there, but more or less, it will be three to four weeks. But I think first couple of years, we’ll try to use that time to install maximum capacity.
Jinesh Shah
So, we are expecting in quarter two of FY ’26 as well, right?
Srinivas Sadu
Sorry?
Jinesh Shah
So, we are expecting another maintenance shutdown in FY ’26 quarter two approximately, if I can assume?
Srinivas Sadu
No, it will be in August of every year.
Jinesh Shah
Okay. Fair enough. And my last question would be with respect to the tax rate that — I would just like to know the reason that though Cenexi is in like a loss-making company at the moment and standard tax rate is around 25%, and how can we like charge more tax, which is approximately 34% in overall consolidated business?
Ravi Shekhar Mitra
Yes. Because of the Cenexi’s negative PBT, there is no tax being created for deferred tax assets. That is why you’re unconsolidated, because you are saying it’s a higher tax rate. Once Cenexi comes back to profitability, then we’ll go back to our corporate rate.
Jinesh Shah
Okay, fair enough. Okay, thanks a lot. That’s it from my side.
Operator
Thank you. The next question comes from Saion Mukherjee from Nomura. Please go ahead.
Saion Mukherjee
Yes. Hi. Thank you [Technical Issues]. You recently announced appointment of Shyamakant Giri. So, can you take us through the thought process of separating your role and that of CEO? And what were the thoughts of hiring someone like Shyamakant to sort of run as a CEO here? And should we read something more strategic here? What are you expecting going forward for the new to sort of focus on?
Srinivas Sadu
Yes, I think it’s more to strengthen the senior leadership to grow the business. And I’ll be taking the role of more strategic and long-term — mid-to-long-term initiatives, and also has a bit more time at probably Cenexi because it needs a little bit more focus. And the new CEO will focus on the rest of the business, and also he brings in more experience in ROW and other markets also. So that also adds to our strategy of growing business in different markets, while we continue to have that solid business in the US market. That’s the basis.
Saion Mukherjee
Yes. So, given Mr. Giri’s experience of running content, especially in ROW emerging market, is that something you are aggressively looking at going forward because we had earlier mentioned about putting up content?
Srinivas Sadu
Yes, we are evaluating that option, the pros and cons for that. So, that’s actively in evaluation.
Saion Mukherjee
Okay. And secondly, on the bio contracts, so if you can — I think you mentioned about Dr. Reddy’s. So how have the discussions evolved? If you can give us a sense now what kind of traction we should expect, let’s say, from a two, three-year perspective, what are the next milestones that we should watch out for?
Srinivas Sadu
I would say this is very important what we just announced because it also gives us the experience and learning what is required in this business. And normally, a lot of companies look at what you’ve been doing because it’s a new area we’re entering. While we’re doing this, we’re also having some tangible discussions with some of the other players. This will only probably expedite those kind of discussions what we are having. So probably we can’t put a number to it, but it’s definitely a — won both from — while it may not add up huge numbers in the near term, but it’s a — I would say, it’s a foundation which you’re laying for the future with smaller revenues in the beginning, but it all depends on how much your business we can pay just moving forward.
Saion Mukherjee
Sure. Thank you.
Srinivas Sadu
Thank you.
Operator
Thank you. The next question comes from Vivek Agrawal from Citigroup. Please go ahead.
Vivek Agrawal
Hi. Thanks for the opportunity. My question is related to US business. So in first half, is it possible for you to quantify the contribution of new products in the US revenue? Basically, how many — you might have launched around 10-plus [Phonetic] products, right? So what is the current contribution in the 1H revenue?
Srinivas Sadu
The total contribution for the first half, I think, is around — about INR60 crores.
Vivek Agrawal
Okay. So, new product contribution is INR60 crores. Okay. And the second question is how the volumes have grown as far as the rest of the products in the US, right, or the base product — baseline products in the US?
Srinivas Sadu
From quantity perspective, it’s about 5% growth in the US. Compared to the [Speech Overlap] — compared to the Q1.
Vivek Agrawal
Volume growth, compared to the Q1. Okay. And YoY, what kind of the volume growth is there?
Srinivas Sadu
YoY, it’s about similar 5%.
Vivek Agrawal
Okay, sir. Thank you. Thanks so much.
Srinivas Sadu
Yes.
Operator
Thank you. The next question comes from Anubhav Agarwal from UBS. Please go ahead.
Anubhav Agarwal
Hi, guys. Good evening to all. One, I’m just trying to understand your R&D. So, annually, your R&D is about INR200 crore. And I understand from past calls that when you report R&D, part of the R&D is spent by the partners also. So can you just help, if you are spending INR200 crore a year, what would be the gross R&D spend of partner plus you put together roughly?
Srinivas Sadu
Anubhav, just give a second. Vivek, just correct. I think year-on-year, the growth based on the volume is about 13%. 5% is quarter-on-quarter, but year-on-year, it’s 13%, quantity increase.
Anubhav Agarwal
Do you want me to repeat the question?
Srinivas Sadu
Anubhav, can you repeat now?
Anubhav Agarwal
Yes, absolutely. So my question was on R&D. So, planned R&D annually is about INR200 crores. And my understanding was, and you can correct it that when for any ANDA that you submit on an average, part of the R&D is reported by you, part of the R&D is spent by your partner. So on a gross basis, the R&D is higher. So I’m just trying to understand when annually your R&D is about INR200 crore, your partner and you put together, on an average, what would be the gross number?
Srinivas Sadu
No. So, our partner won’t put anything into our R&D. It’s 100% our R&D.
Anubhav Agarwal
So, I’m just trying to understand, so you filing about what 20, 30 products annually and you’re spending about $25 million on R&D?
Srinivas Sadu
That’s correct.
Anubhav Agarwal
So, how are you — I mean, you’re effectively spending $1 million per product, per ANDA, give and take, right? And that — that’s a huge payback period. So why are you only filing — I mean, given your cash book, etc., why are you not filing two times the product or three times the product? Opportunity is not small. So just trying to understand, first, versus all other companies that we track, $1 million per ANDA is the lowest I think that we see in Gland. And then, I cannot understand why are you not filing two times or three times of the product that you are filing today with that efficiency?
Srinivas Sadu
Give me a second. So one is, of course, what is the pipeline left, right? We already filed 360 products. That’s not much pipeline left. That’s one. Second, a lot also is going into complex products. That takes larger number of people compared to this. And we also — we have to balance between your fixed costs and your — and also the investments what you make. So, while a lot of products also have to look at what capabilities our R&D has, so whether they can actually make some of these products, so we have to increase number of people to double if you have to file more. And we have to look at — and this is not like you can hire today and then remove off [Indecipherable] US side. So, we have to manage. We have to balance between the filings and how we want to grow this business and then the return on those products also.
Anubhav Agarwal
Sir, can I ask you one more question on this? But effectively, if you’re spending only $1 million per product, I mean I think you’ll be easily able to recover that. There is no question about you’re having to fire people after two, three years, even if there is a miss on few products. I’m not able to understand that if you’re spending $1 million per hour, $2 million as a capex per product. But in the injectable field, with that margin that you have, you’re not able — even be able to recoup the investment. So where does the doubt come in from?
Ankit Gupta
Anubhav, I’ll answer this question. See, basically, if you see today, we are a pure injectable company. And as far as the generic product is concerned, we are by and large, covering most of the opportunities that we can do from our R&D in India. We can’t do a certain set of therapeutic categories because of contamination or whatever issues. But outside of that, whatever is the addressable market for us, we are doing it from the R&D capabilities in-house. The way we want to fund the future growth is also to look at outsourcing models and maybe co-development models wherein we can partner with somebody who is more specialized in doing those developments and sort of a fortunate for budgets and capital investment to that side rather than building it only on the organic R&D side. One, it will speed up the overall process of getting approvals. And second, it will also improve the overall value chain of the products that are going to come on stream for us in the future.
Anubhav Agarwal
Sure, guys. I’ll take this a little offline as well. Just one more clarity on Genome Valley. What is the capacity over there?
Ankit Gupta
So it’s about 8,000 liters of [Indecipherable] capacity. And we have only used 30% of the site. So capacity can actually go up very significantly. It has quite a lot of unused land. But today, the installed capacity is about 8,000 liters, and it is a [Indecipherable] capacity single-use battery [Indecipherable].
Anubhav Agarwal
And for this 8,000 liter, what will be equivalent gross block [Phonetic] here? What kind of investment would have gone in to create this capacity?
Ankit Gupta
We have invested close to INR300 crores on the site.
Anubhav Agarwal
Okay, sure. Thank you, guys.
Ankit Gupta
Okay.
Operator
Thank you. The next question comes from Aditya Pal [Phonetic] from MSA Capital Partners. Please go ahead.
Aditya Pal
Hello. Thank you so much for the opportunity. Sir, a couple of questions on Cenexi. So we’re just seeing, in Q2, the overheads in Cenexi, P&L has come down. Anything that the management has undertaken, any strategy, downsizing, anything that you can highlight on that? Hello?
Srinivas Sadu
Give me a second.
Ankit Gupta
So, Aditya, the overhead reduction is purely a function of the site running for two months instead of three. And what happens is, while we have a fixed cost structure, which will not be impacted by a month of shutdown, but there are certain other additional costs which come into play when the site is up and running, say, the contract labor and multiple light costs, that would not form part of the P&L because the site was not running for let’s say three to four weeks.
Aditya Pal
Okay. So, this will again go up once we start — once we start operating at the — in the normal periods?
Ankit Gupta
Yes. Probably for that, we should look at the Q1 numbers. Q1 kind of expense base is what we would have in future as well. But obviously, the revenues would go up because our month-on-month run rate is now picking up significantly. In fact, September and July were very decent in terms of the monthly run rates we had from the site.
Aditya Pal
Understood. And just to double-click on the previous participant’s question, there was a question about Cenexi breakeven period and once the EBITDA starts to mature, that is in year two, FY ’26, FY ’27. And you had said that this particular company will be generating anywhere between low-double digits EBITDA margin. So, just wanted to understand the management’s thought process when we acquired this business. Even though this is a gross margin accretive business, it is being a big drag on the EBITDA margin. So if you can just — it’s a bit philosophical question, if you can just highlight that what is it that we are looking to get from Cenexi?
Srinivas Sadu
Of course, one is the European branded generics business, and we didn’t have any presence in Europe. That’s one. Second, it’s a solid CDMO business. In spite of the problems and issues in the business, it’s very intact with long-term contracts. And this also helps in — and also, some of the technologies, what this business has, we don’t have. So we can use those technologies to file some of our products as well. And also, they have — they also manufacture control substances for US and Japan market. That opens up some of the portfolio for Gland also. So there are several areas what we looked at when we acquired this business, but we always knew that it will be EBITDA negative for us in terms of dilutive to Gland. But we also looked at how we can make it more efficient in a duration of time. But it took longer than what we anticipated because of the issues, what we have there. But in the long run, I think the business is solid, and we also are looking at a lot of long-term opportunities coming because of this European asset because most of the time, the big pharma in Europe they want to take the products from the European manufacturing side. This will open up those opportunities. So I would say this was a long-term plan what we looked at. And also entering European market with our own products is more competitive and pretty difficult to take from India. So it was like a combination strategy of CDMO and our own portfolio how to increase in certain areas where we can’t enter like the control substance, we can’t take it from India to US, but there’s an opportunity where we can take [Technical Issues].
Aditya Pal
Also another question that I had that we — currently, we have a gross block of somewhere around INR4,500 crores. How fast — how quickly can you see that we come back to a normal asset turnovers of 2 times, 2.5 times that we used to do two years back? And if you can give me a split between Cenexi business and Gland business, ex Cenexi, at peak revenues that I’m assuming will be 2.5 times gross block.
Ankit Gupta
Yes. So on the Gland side, the new capex which we have put up in Pashamylaram site will go upstream from next year, which is bag line and the microsphere dry powder line and a few carbon suspension line also will come from next year. So, that will bring us back to our old Gland asset turn rate which is 2, 2.5 [Phonetic]. On the Cenexi, this year, we would be like 161 — EUR165 million. But next year, we expect to reach EUR200 million, which is almost like 0.8 times. And once we start commercializing the new capacity which we are putting like one is PFS line, the new ampoule line and a few other lines also which we are currently planning, then we should have much higher between 1 time to 2 times asset turn at Cenexi as well. But that will take in a mid-term basis and not next year.
Aditya Pal
Understood. Just the last couple of questions, sir. Sir, in Cenexi, so what I was — what I could understand is that the Normandy site is the one that is causing the overhead to shoot up and our asset turns to be low. Is that a fair understanding?
Ravi Shekhar Mitra
Yes, that’s correct.
Aditya Pal
Understood. And sir, a bookkeeping question. So goodwill has gone up in September quarter — in H2 in the balance sheet. What has led to that because we haven’t done any acquisition in this H1, correct?
Ravi Shekhar Mitra
Sir, your voice is breaking. Can you repeat that question?
Aditya Pal
So my question, goodwill has gone up from March to September in the balance sheet. So…
Ravi Shekhar Mitra
It’s just an exchange difference.
Aditya Pal
Okay, understood. That’s it from my side. Wishing you all the very best.
Operator
Thank you. The next question comes from Amlan Das from Nomura. Please go ahead.
Amlan Das
Hi, sir. Am I audible?
Operator
Yes, sir. Please go ahead.
Amlan Das
Hi, sir. My question is regarding the ROW markets. Except the Saudi Arabia market, how has been the performance in the other ROW markets like LatAM and what is your outlook regarding this markets? Hello?
Srinivas Sadu
Hi, give me a minute. So the APAC business has gone up and also several approvals in South Africa, they started exporting. Mexico business has started in there. If you actually remove Saudi and see the rest of the business has gone, but once this comes back, then I think overall ROW business will be back on track a little bit.
Amlan Das
Sorry, sir. I dropped in between. I couldn’t hear. Could you just repeat once? I’m sorry.
Srinivas Sadu
Are you dropped off?
Amlan Das
Yes, your voice dropped in between. I couldn’t hear. Could you just repeat once?
Srinivas Sadu
No. What I said is APAC business has grown, and we also launched a new product from South Africa and also Mexico. The business started last quarter. So, this will start picking up. If you actually remove Saudi and see the rest of the business, it has grown up, it has gone up. So, once we start shipping out some of the key products to the Saudi, then I think overall business will be back on growth track.
Amlan Das
Okay, sir. So how is your performance in markets like Brazil and Argentina where you were [Indecipherable]?
Srinivas Sadu
I think that is a steady business we’re having in Brazil. Yes.
Amlan Das
Okay, sir. Okay, thanks. That’s all.
Operator
Thank you. The next question comes from Shyam Srinivasan from Goldman Sachs. Please go ahead.
Shyam Srinivasan
Yes. Good evening, and thank you for taking my question. Just the first one on the stand-alone or core costs, right? If I look at gross margins, I think, are down like 50 basis points, 60 basis points. So what is explaining just the core gross margins coming off? Is it mixed?
Ravi Shekhar Mitra
So, as compared to Q2 of last year, it has come down by 1%. And that is largely a factor of mix, which you rightly said and also the profit share and element on that.
Shyam Srinivasan
Got it, sir. This is, say, something like Enoxa or any of those products which are higher in contribution today versus last year, Heparin?
Ravi Shekhar Mitra
Yes. But as compared to Q1, our gross margin has gone up actually [Speech Overlap]
Srinivas Sadu
Correct.
Shyam Srinivasan
Yes. So what is driving that QoQ improvement?
Ravi Shekhar Mitra
So, that’s a mix actually.
Shyam Srinivasan
Okay. So versus last year, the mix is inferior, but versus quarter one, it’s better?
Ravi Shekhar Mitra
Yes.
Shyam Srinivasan
Got it. And if I look at core margins have remained flat YoY, so — and R&D has gone up 40% [Phonetic]. So other expenses, excluding R&D, is actually down quite a bit. Even quarter — QoQ is down 20%. So is that sustainable? Or is there any one-off there in terms of the lower cost — lower other expenses?
Ravi Shekhar Mitra
So, power and fuel has gone down at India.
Shyam Srinivasan
No. In the way you report your power fuel employee, you have other expenses about [Phonetic] EBITDA. So, other expenses, I’m excluding R&D, which is up 40%. So that leaves the other expenses is actually down 25% or something YoY.
Ravi Shekhar Mitra
So YoY, other expenses are actually same, but quarter, it has come down, right?
Shyam Srinivasan
Yes. In other expenses — sir, I’m just removing R&D cost. That’s an okay assumption, right? That’s where you book R&D, no?
Ravi Shekhar Mitra
It’s largely this quarter is the rate you can consider because the last year — previous year, there would have been some consulting expense for acquisition and other strategic advisory you were taking.
Shyam Srinivasan
Got it. And my last question, just on guidance, sorry, I missed it. So, we earlier had a mid-teen growth guidance for US, right? So you are now seeing is low double-digit, is it? Sorry, I missed this.
Ankit Gupta
That’s right, Shyam. We are seeing low double-digit as the top line growth expected.
Shyam Srinivasan
Yes, Ankit. And what’s driving it is like volume growth seems to be strong. So I’m assuming is it like because of pricing pressure? Or what explains that or slower like new product launches?
Ankit Gupta
Yes. So it’s going to be a combination of new launches, which are slated to be done in H2 of this year. And then at the ROW level, we did talk about the Saudi Arabia business, which is going to get back to normal. There were certain sales to Q3 and Q4, which would pick up. A combination of new launches, a steadiness in base business and the pickup in ROW would drive this growth.
Shyam Srinivasan
Understood. Thank you, and all the best.
Operator
Thank you. The next follow-up question comes from Neha Manpuria from Bank of America. Please go ahead.
Neha Manpuria
Yes. Just a follow-up question on the CMO biosimilar business. What is the cost that we are booking per quarter in terms of the burn from this capacity? And once the contribution from Dr. Reddy’s starts coming through, is it fair to assume that we’ll be able to achieve breakeven on the cost starting FY ’25 [Phonetic]?
Ravi Shekhar Mitra
So, the biologics you’re asking on?
Neha Manpuria
Yes.
Ravi Shekhar Mitra
So, current cost is about INR3 crores to INR4 crores per quarter. And on the revenue side, as we mentioned earlier, it’s too early to comment on that.
Neha Manpuria
INR3crores to INR4 crores per quarter. That’s all the costs for the CMO business?
Ravi Shekhar Mitra
That’s the current running cost we are incurring.
Neha Manpuria
Okay. So depend — this is — as and when that Reddy’s you know supply comes — coming through, this cost go up, I’m assuming.
Srinivas Sadu
Yes. This might go up a bit, but the business should cover all those costs.
Neha Manpuria
Yes. Fair enough. Okay. And my second question is, do we have any GLP products in our pipeline or have our partners reached out to us for any GLP products given we have a requisite capacity for that even if it’s for fill-finish?
Srinivas Sadu
Yes, we do. We have already signed a few GLP-1 contracts on the CDMO side, yes.
Neha Manpuria
This is for the regulated market, sir?
Srinivas Sadu
Yes.
Neha Manpuria
And supplies would start when?
Srinivas Sadu
Well, there are all — all patent — patents are on the trial, so.
Neha Manpuria
Sorry, sir.
Srinivas Sadu
So, it should be around — we can’t really tell the dates because it all clients products, so it’s — yes, but we have signed with, I think three, different customers on GLP.
Neha Manpuria
Got it. Thank you so much, sir.
Operator
Thank you. The next question comes from Sunil Khatri [Phonetic] who is an individual investor. Please go ahead.
Sunil Khatri
Yes. Good evening, sir.
Srinivas Sadu
Good evening.
Sunil Khatri
My question is that when is likely to be like breakeven for the Cenexi business?
Srinivas Sadu
Sorry, we lost you.
Sunil Khatri
It is likely like now for Cenexi business, we are not doing any profit, we are incurring losses. So when it’s likely to be like breakeven for the Cenexi business and whatever the capital expenditure you are incurring for this development? So when is likely to be completed and the production like plant will give the 100% utilization?
Ravi Shekhar Mitra
So, at Cenexi, EBITDA level breakeven will happen in Q4 and the capex cycle would complete in next one to two years’ time.
Srinivas Sadu
Two years’ time?
Ravi Shekhar Mitra
One to two years. More than one, less than…
Sunil Khatri
Your India operations are good. Actually, they are making — the Cenexi is making a drag on the balance sheet.
Ravi Shekhar Mitra
Yes. So as Mr. Sadu mentioned that this is a — business is very solid there and we need to invest and improve our capability and then the performance will surely follow.
Sunil Khatri
So, you mean to say that it will take another 1.5 years to 2 years to grow the plant on stream or 100% utilization for the next?
Srinivas Sadu
No. Currently, some of the plants are already well utilized. There are two plants which are not 100% utilized. So the — there are several technology transfers that are happening. So by the time those gets commercialized, it will take a year or so. So what we’re saying is while we want to invest for the new capabilities there, of course, just now somebody is mentioning about GLP capabilities also. There’s also demand for that in European markets. We’re also looking at investing in those new capabilities for future growth of Cenexi business. But for the current capacities, a couple of plants are already fully utilized and couple of plants there are projects which are getting transferred. So by the time those get commercialized, it will take for a year. And that’s why we’re saying by next year first quarter, we’ll be EBITDA neutral.
Sunil Khatri
Okay, sir. Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, we would take that as our last question for today. I now hand the conference over to Mr. Ankit Gupta for closing comments.
Ankit Gupta
Thank you, everyone, for joining us today. We appreciate your participation and the questions during the call. If you have any follow-on questions today, please feel free to reach out to us. Looking forward to interact with you in the next quarter now. Thank you.
Operator
[Operator Closing Remarks]