Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Strides Pharma Science Limited (NSE: STAR) Q4 2026 Earnings Call dated May. 18, 2026
Corporate Participants:
Abhishek Singhal — Investor Relations
Badree Komandur — Managaing Director and group Chief Executive Officer
Mr. Vikesh Kumar — Group Chief Financial Officer
Analysts:
Sarvesh Gupta — Analyst
Unidentified Participant
Nitin Agarwal — Analyst
Presentation:
Operator
Ladies and Gentlemen, good day and welcome to the Stripes Pharma Science Limited Q4FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing then zero on your touchstone phone. I now hand the conference over to Mr. Abhishek. Thank you. And over to you sir.
Abhishek Singhal — Investor Relations
Thanks. Thank you. Rituja Very good evening and thank you for joining us today for Stride’s earnings call for the fourth quarter and financial year 2026. Today we have with us Badri, MD Group CEO Vikesh Group CFO to share the highlights of the business and financials of the quarter and the financial year. I hope you’ve gone through our results release and the quarterly investor presentation that have been uploaded on our website as well as stock exchange website. The transcript for this call will be available in a week’s time on the company’s website.
Please know that today’s discussion may be forward looking in nature and must be viewed in context of risk inherent in our business. After the end of this call in case you have any further questions, please feel free to reach out to the investoration team. I now hand over the call to Badri for his opening comments.
Badree Komandur — Managaing Director and group Chief Executive Officer
Thank you Abhishek hello all and thank you for joining us for the Strides Q4 and FY26 earnings call. Like in previous quarters, I will begin with an overall summary of the Q4 and full year performance focusing on growth metrics across revenue margins and operating performance. I’ll then take you through a detailed review of the geographies. After my section, Vikesh will walk you through the financials in more detail followed by Q and A. Before I get into the operating performance, let me capture the three years journey in perspective.
Over the last three years we have been very clear on our priorities, geographical diversification, profitability and balance sheet strength. These priorities were deliberate because we believe that sustainable growth can only be built through strong foundation of profitability and operational discipline. The results of this strategy are now visible. Over the last 10 to 12 quarters we have consistently delivered improvement across revenue, EBITDA PAT while reporting our highest ever EBITDA and operating PAT on a sustained basis.
Let me cover the first point. The geographical diversification which has been one of the critical pillars of our strategy. While US continues to remain the key market where we have long term aspiration ex, US markets have emerged as the most important highlight of our performance over the last few quarters we have been consistently talking about a calibrated strategy of growing these markets and I am pleased to say that this strategy is now delivering results faster than what we had actually initially anticipated.
If you look at the last three years, we have delivered consistent growth across key metrics with overall revenue growth at a CAGR of approximately 12% supported by 11% CAGR in US and 19% CAGR in ex US markets. More importantly, the mix of the business has shifted meaningfully. Ex US contribution has increased from 41% in FY24, approximately 40 to 46% in FY26 and on a Q4 basis it is now close to 50%. This marks a very important structural shift in our business model. It clearly indicates that we are moving away from a single market dependency to a more diversified, balanced and resilient portfolio.
Second, profitability the profitability has been the cornerstone of our transformation journey and we continue to see strong and consistent improvement. EBITDA has compounded at approximately 26% over the last three years driven by the EBITDA margins expansion of 400 basis points to close FY26 at 19%. This reflects improvements across our business, whether it is a better portfolio mix, conscious deprioritization of low margin institutional business, strong pricing discipline and overall operational efficiency.
Operating leverage is clearly visible at the bottom line. Operation pac has grown 18 times over the last three years and EPS has increased to 56 for FY26 which is the highest for us with a strong exit run rate of 14.7 per share in Q4. This shows that we are now operating with significantly stronger earnings engine where growth is translating into incremental profitability. The third pillar has been efficiency and particularly around cash generation and balance sheet strength. Our focus on working capital discipline and cost optimization and cash flow generation has led to a meaningful improvement in the financial metrics.
Cash flows are strengthened, cost structures have been streamlined and asset productivity has improved across the board. This is reflected in our return metrics as well with roce improving from 15.76%, roce improving to 15.76% for FY26 from single digits just two years back. More importantly, our continued focus on profitability and cash generation has enabled us to significantly reduce debt. Today we are operating with much stronger and more resilient balance sheet which gives us a flexibility to invest in growth while navigating the external volatility coming to the full year performance FY26 to be viewed in the context of a challenging external environment, particularly from a geopolitical standpoint, we reported a revenue of 48,587 million, I.e.
Rupees 48 billion rupees representing a growth of 6.4% year on year. This was impacted by a few specific factors, particularly in the US Business. The flu season did not materialize as expected in the second half this year which typically contributes meaningfully to our revenues. In addition, the overall growth was impacted by access markets which are currently facing donor funding challenges and remains tactical in nature. Adjusting for these access markets, our underlying revenue growth was much stronger at approximately 10%.
This growth was driven primarily by our ex US markets which delivered a robust 21% growth. Coming to US business, we delivered a revenue of 284 million for FY26 and 70 million in Q4. The performance during the year was impacted by a weaker flu season in the second half. Historically, the fourth quarter tends to be stronger for us given the seasonal flu demand in the US which unfortunately did not materialize as expected this year. Over the last couple of years we have been consciously reshaping our portfolio, transitioning from a smaller revenue products to a more meaningful product.
In line with this strategy, we launched six products during the year and some of our molecules have faced increased competition and accordingly we have rationalized our market share while maintaining our focus on the profitability. We exited nine products that did not meet our internal return thresholds and reinforcing our continued focus on portfolio quality and profitability. We launched the Control Substances from Chestnut Ridge Acquired ANDS portfolio. Given that we are a new entrant in controlled substances, allocations were lower than expected in FY26.
However, with a full year of operating track record now established, we believe that we are better positioned to secure additional allocations. This improved. This portfolio should add to our near term growth. Over the past year we have made targeted investments into global R and D programs. We have spent 2,500 million, approximately $30 million over the last 24 months towards IP purchase and partnered R and D programs focused on medium and long term growth. We expect the benefits of these investments starting in the second half of FY27.
In parallel, our strategic partnership in US are progressing well. The B2B business that should drive the incremental growth. Our pipeline continues to shift towards the more differential programs with a clear focus on nasal sprays, transdermal patches and films. We also filed our second nasal spray in May 26, further strengthening the portfolio. We continue to focus our aspiration of reaching 375 to 400 million in the US coming to the ex US markets this has been a very strong year for us and more importantly it reflects a structural transformation that has been underway over the last few years.
As I mentioned earlier, we have grown this business at a CAGR of around 19% over the last three years and we are now starting to see the benefits of the investments we have made across markets, partnerships and product portfolio. To put this growth in perspective, the ex US business has scaled from 40 million per quarter in Q1 of FY24 to about 70 million in Q4 of FY26, a 30 million growth in 12 quarters and this steady progression highlights not just the growth but the consistency and sustainability of the business model we have built in our other regulated markets.
We are seeing strong traction across key regions such as Europe, UK, Australia, Nordics. The last 12 quarters the ORM revenues have grown from about 31 million in Q1 of FY24 to 52 million and exit run rate in Q4 FY26 reflecting a consistent sequential improvement on strong execution on the ground. At the same time, Africa continues to be a key contributor within our growth markets where performance has been encouraging across regions. Our focus here is evolving beyond just scaling revenues to increasing the share of branded business, particularly in the markets such as Francophone Africa where we are already growing faster than the underlying market.
The focus towards branded business will drive both sustainability and margin resilience over the long term. We also announced the acquisition of certain products from Sandoz in February 25th which with addition of the Sandoz portfolio which is expected to start contributing from the second half of FY27, we will further strengthen our presence in Africa. The combined strength of our existing portfolio on the Sandoz branded business positions us well to become one of the leading pharmaceutical players in sub Saharan African region.
Over time our continued focus has been building on high quality sustainable business across EX US markets and these geographies are characterized by a relatively high entry barrier, stable pricing, stable pricing environment and strong partner relationship, all of which will contribute to the predictable and resilient revenues. Despite the strong growth in EX US markets our margins have remained robust. This clearly demonstrates that we are not compromising on our underlying business fundamentals and in fact margin profile between the US and non EX US business is now becoming increasingly similar.
This is an important milestone as it validates the EX US is not just a growth engine but also a strong and reliable earnings driver. What also gives us confidence is that the key growth drivers are now firmly in place whether it is present, whether it is presence in the right markets, strong partner relationships, a diversified and expanding product portfolio or a steady pipeline of regulatory approvals. Looking ahead, our filing momentum in ex US Markets remains strong and will continue to drive growth over the medium to long term.
Overall, we believe the US Markets will continue to grow faster than the company average and will remain a critical pillar of our strategy not only for growth but also for improving the resilience of overall business. On some of the qualitative matters, I just want to cover some few points. One is with respect to esg from a ESG standpoint, we are happy to report a five point improvement in our score and inclusion in the yearbook for the second time reflecting our commitment to responsible growth and governance.
I also want to make some few comments on the External Environment External environment remains challenging with cost pressures across raw materials, logistics, fuel and as well as foreign exchange. We are also closely monitoring these developments and remain focused on cost discipline. We remain committed to achieving our long term aspiration and we aim to reach EBITDA margin supports of 20% and gross margins in the 58 to 60% range, I repeat 58 to 60% range and continue to driving operating leverage to deliver strong EPS and PAT growth.
Lastly, the Board has recommended a dividend of Rupees five per share and before I close I am pleased to announce to share an important leadership update. We are delighted to announce the appointment of Ram Raju, our current Chief Operating Officer as an Executive Director. Sam has been with Stripes Group for more than 18 years and brings with him a deep experience across the pharmaceutical and healthcare sectors. As Executive Director, Sam Rajiv will be responsible for overseeing the global technical operations and strategic management of critical functions including manufacturing, supply chain and procurement.
With this, let me hand over to Vikesh for his comments.
Mr. Vikesh Kumar — Group Chief Financial Officer
Thank you Badri. Very good morning, good afternoon and good evening to all of you. FY26 has been another year of strong profitable growth which has been anchored in our pillars of profitability, efficiency and growth. At the core of this philosophy has been a disciplined approach towards profitability, led growth, very efficient capital allocation and a drive to achieve sustainable and resilient business model. We are very pleased with the sustained progress across all of these metrics of profitability, efficiency and growth over the past few years as we continue to build long term shareholder value.
Over the last 12 quarters we have significantly expanded on our profitability metrics, improved our cash flows and strengthened our balance sheet. Despite a challenging external environment in Q4 where we’ve seen additional cost pressures, we have continued to deliver consistent quarter on quarter growth in our absolute EBITDA and operational pack which truly reflects the resilience of our business. I will now take you through the numbers starting with the full year performance for FY26 we are reporting an EBITDA of 925 crores which is a healthy 15% growth year on year with EBITDA margins expanding by 140 basis points over FY25 to 19%.
On operational PAT we have grown even faster with a 50% year on year growth. We are reporting an operational pact of 518 crores crossing the 500 crore mark for the first time. This was supported by sustainable growth in our EBITDA and lower finance costs. Our EBITDA to operational PAT conversion ratio also significantly improved to 56% which underlines the structural strength and quality of our profitability. Operational eps also grew by 50% year on year with an EPS for the year at 56.2 rupees per share.
Our reported PAT for the year is at 575 crores which is up 40% with a reported EPS of 60.3 rupees per share. Our reported PAT is higher than operational pat on account of the sale of investment property that we had in Q3 of FY26. On the efficiency metrics our cash to cash cycle is at 124 days which is an increase of 7 days year on year and this increase is on account of higher inventory levels which have increased by 21 days year on year. So in addition to the superior growth that we’ve had in ex US markets which was supported by these inventory levels, we have also built resilience in our supply chain, adapting to the challenges that have been posed by the current environment and therefore stocked up adequately to take care of our business needs.
We had a corresponding increase in payable days in Q4 and we expect these to normalize over the coming days. After funding for this increase in cash to cash cycle, we’ve delivered an operating cash flow of 60703 crores for the year which translates to a 76% EBITDA to operating cash conversion. We also invested in growth capital spends. We invested 418 crores across both tangible and intangible assets. It includes 236 crores of tangible capex where in addition to the maintenance capex that we spend every year, we made very targeted growth investments in building our nasal spray capabilities, enhancing capacities to support our ex US business and acquisition of a new office space in UK to cater to the growing needs of our business.
We spend 182 crores towards intangible investments which included certain global rights global product rights which will drive our growth in the near future in both the US and the EX US markets. In the intangibles, the spends also include a very significant upgrade to our global ERP platform as we migrated to SAP. Hana While we made significant investments in growth this year, our superior profitability and cash flows have helped improve our net debt to ebitda ratio from 1.9x last year to 1.55x as we closed FY26.
This is despite a negative impact of the currency depreciation which impacted our net debt by about 112 crores for the year. Our reported net debt as of March 26th is at 1437 crores. In addition, our investments in one source valued at 337 crores adds further strength to our balance sheet in terms of debt reduction. Our net debt on a constant currency basis reduced by 197 crores which reflects the strong underlying cash generation and disciplined deleveraging in our operational business. While there may be near term headwinds due to our cash to cash cycle, we remain confident of improving our net debt to EBITDA ratio over the next few quarters.
Our ROCE continues to improve. It is at 15.8% for FY26 compared to 14.9% last year which reflects our improvement in operating performance. With the significant investments in growth during this year which are yet to play out, we see this metric to continue to improve in the near future. Overall operating expenses for the year were at approximately 40.6% of sales. Employee costs remained stable at 19% of revenues while other operating costs increased to 21.5% due to both business mix shift towards ex US markets and the elevated supply chain and manufacturing costs largely in Q4 due to the dynamic geopolitical environment.
Our net finance cost stood at 138 crores for the year which reflects a consistent reduction from FY25 levels which has been supported both by lower debt and improvement in our borrowing costs. Our effective tax rate for the year remained at sub 15% which is at the lower end of our expectations. Quickly Moving to the Q4 performance for the quarter, our EBITDA grew 10% year on year to 240 crores which reflects our continued growth in absolute profitability. Our EBITDA margin for the quarter was at 18.1%.
EBITDA margins were impacted on account of cost increases that were attributable to the escalations in logistics costs and air freights which were seen to be significantly higher than previous quarters. These costs were to the tune of 20 crores which would have otherwise added to our performance for the quarter. Despite these challenges, we are delighted to report growth in absolute numbers and we continue to remain focused on building a resilient and sustainable EBITDA profile. Our PAT and EPS continue to expand on a quarterly basis.
Operational PAT at 136 crores grew 20% year on year with an operational PAT margin of 10.3%. Operational EPS for the quarter at 14.7 rupees per share reflects our continued improvements in earnings quality. Our reported PAT for the quarter is at 129 crores with a reported EPS of 13.8 rupees per share which has grown by 54% year on year. Overall, FY26 has been another year of disciplined execution with strong growth in profitability, significant improvement in operational PAT and eps, improved ROCE balance sheet discipline.
While we continue to invest for future growth, the growth momentum in our ex US business along with our profitability orientation has enabled us to drive improvement in gross margins and EBITDA with a significant expansion in PAT and EPS over the last couple of years. We remain focused on building a structurally resilient business with sustainable growth, disciplined capital allocation and continued strengthening of our balance sheet. Thank you and we are now happy to take any questions that you may have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone selection. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Satik Kothari from Munich pms. Please go ahead.
Sarvesh Gupta
Good evening and thank you. So my first question on the US portfolio, I mean while we have reoriented and we are doing exceptionally well in our other regulated markets and the growth markets. One if you can touch upon what what is happening in the US markets in terms of. I mean because you’re seeing product discontinuations, even the product launches that we had anticipated or planned for then go through. So just one comment on us, what is happening there?
Badree Komandur
Yeah, sure. So Pratik, from a US perspective just want to give you some few things which did not happen in the last year. One is the seasonal aspect. Second is the we have been telling that the controlled substances will need a past history like we need a good stable year of controlled substances before the growth comes back into this because it depends on quota and then production and then the actual commercialization. And the third one is in terms of the portfolio, if you really see, we have got a lot of launches coming up from the second half of this year which will continue till about 28 and we just don’t want to lose profitability discipline as far as the US business business is concerned.
And that has been a stated policy. And if you really see post the one source that happened still our growth is quite good from 11% perspective over the last two to three years. And overall if you really see this is a conscious effort to maintain the profitability at the marketplace. And we believe they should all, you know, they should, all the growth should start from H2 onwards with a higher trajectory.
Sarvesh Gupta
Correct. And it’s a steep growth I believe because we still hold on to our target for next year. So this would be driven by combination of everything, your nasal sprays and your control substance. The new aspirationally
Badree Komandur
We have kept this 375 to 400 million and if you remember the 400 million was given in the context of some two years back. And we want to chase that for the simple reason that we have got, you know, we have got the drivers in place and we are also working on till the last dollars to make it happen. And that’s what we are focusing on and we should be able to get to that growth trajectory very soon
Sarvesh Gupta
Just double clicking on this. So to, to maintain this margins we have either not launched as many products or we have let go of a few. So this increased competition or pricing pressure is coming from this. Are these peer Indian players who are doing this?
Badree Komandur
There are a lot of peer players. It also, you know, we have explained it in the previous quarter also like there has been intense competition in few of the molecules. But the most important part, Pratik, you should know, is that we still have leading positions in 37 of the 70 products. Right. The market, the leading position, 37, 70, all of this, you know, plays out and I think we should be there. It’s, it’s not a very difficult situation. The only thing is we’ll have to focus on few things and we’ve got eight quarters to make it happen
Sarvesh Gupta
On. Sorry to interrupt you.
Operator
May we request you to please rejoin the queue, Mr. Kothari? We have other participants waiting for the turn. Thank you. The next question is from the line of Dhavalsha from Girig Capital. Please go ahead.
Sarvesh Gupta
Yeah, hi. Thank you for the opportunity, sir. Yeah, so my question is related to the, to the flu season. So our Sir, I’m slightly new to the company so my question could be a bit basic one. So this, our medicines are given more when the patient is in the hospital or at home. How is the prescription, how does the description work for it? Because I was just reading on the net that the influenza related hospitalization were third highest since 2010-11 flu season in US and while towards February, March, you know, the cases in fact started increasing a lot.
So what is exactly impacting our growth for this food related drugs? Yeah. Your thoughts on it?
Badree Komandur
Yeah, sure. So from your perspective, what is a very general thing from what we need to see is what is based on our portfolio, right? Our portfolio usually it adds quite well in the H2 and that has been the past trend for the last three years. And somehow this year, because of the better discipline with the wholesaler and all of these things and they are able to. The demand update did not happen. It’s not that it can come back next year also we don’t know. But what we can say is that definitely the uptick which happens between the H2 and H1, what we have seen in the last three to four years did not happen in the current year.
And that’s what usually if you really see the entire growth, the 100% is divided into 45% in the first quarter and the 55% in the second quarter. Whereas if you really see this year, it’s more or less, it’s 50, 50 from that standpoint.
Sarvesh Gupta
Yes. And sir, thank you for that. And so the second question is on the, on the controlled substances. Now, can you help me understand a bit about this product? Again, through my limited research I could understand, you know, it’s a difficult business to do and also at the same time has a very strong EBITDA margins. So can you throw some light? How should I look at this business? And from, from your plan for the next two, three years perspective, how do you plan to scale this up?
Badree Komandur
Yeah. So as far as the controlled substances is concerned, it is an in us for us strategy for us. And we have launched four products in controlled substances. And one of the important things you should know is that it’s a very, it has got a stringent regulatory process. First is you have to apply for quota. That’s the first step. Once you get a quota for getting a quota, you have to demonstrate your past history in the sense like if you have been selling controlled substances in the past, the quota will be restricted to the.
The way you said right For a company which is entering newly into the controlled substances it takes at least one to one and a half, two years to settle down and display that, you know, past history. Right. So last year was the first year where we had a full year of controlled substances. Then what we do is once we get the, once we demonstrate the same, we go back to the DEA again and apply for an additional quota. Because the government wants to be making sure that you are able to deliver what you take and based on which and if you are able to give that, they give that top what to say?
Assurance that you get more quota. That’s how it works. So and then you’ll have be allowed to get the API and then we allow to, you know, to produce. Then you go to the comma cell and then go back to the. So this is the entire process. So what the control substances started somewhere in the year of 24, 25, the second half of the third quarter. It’s almost about 18 months or 19 months we have sold controlled substances. And last year of the first year we had a full year and we will go back to DEA with request for additional quota and that should drive the future growth for us.
Sarvesh Gupta
Got it. And sir, on the profitability front, is it going to significantly influence our margin trajectory going forward? The 20%
Badree Komandur
Is more or less similar. Okay, depends on the product, but I don’t think so. The profitability is going to change dramatically because of controlled substances, that’s for sure.
Sarvesh Gupta
Got it. So in overall scheme of things we should look at strides as an operating leverage play going forward to improve the margin. Or it’s going to be a mix of product mix as well.
Badree Komandur
Yeah, I covered that in my speech. Like our long term aspiration is to get into ebitda upwards of 20% and also stay in 58 to 68 to 60% in a gross margin range. And that’s what been working internally and we have been working relentlessly on various line items to get there.
Operator
Sorry to interrupt. Thank you. The next question is from the line of Rudraksh Raheja from I thought financial Consulting. Please go ahead.
Sarvesh Gupta
The opportunity, sir. I hope I’m audible.
Mr. Vikesh Kumar
Yes,
Sarvesh Gupta
Thank you sir. In you mentioned that it’s a 600, 700 million dollar market opportunity wise and we are planning to launch three products this year. So how much of the of that market are we tapping in the first year?
Badree Komandur
I think means I did not refer anything on the 600 and 700 million. Where do you get this number from?
Sarvesh Gupta
I think in some previous calls or communicate
Badree Komandur
No I don’t think so. We are not communicating. We have stayed completely to the same theme in the last two, three quarters. I don’t think so. We have communicated in any forum, at least as far as I remember in the recent past.
Sarvesh Gupta
Okay. Sir, is it possible to disclose what kind of market size are we trying to target?
Badree Komandur
No, no. See we have given the overall guidance, the overall outlook how we are looking at the business for the next two years. Right, that’s. You have to stay with that.
Abhishek Singhal
Are you talking about specifically controlled substances? IT
Sarvesh Gupta
Yeah, nasal spray market, sir. Specifically.
Badree Komandur
We are not specifically. This is beyond the FY25 strategy for us. The market has to form. We have just filed the one product last year, we have filed one more this year and we are building a capability capabilities in our Chestnut Ridge plant. And at least it is another 12 months away from commercialization. And once we get a better clarity, we will come back to you.
Abhishek Singhal
So FY28 is when you’ll see the impact of this.
Badree Komandur
Yeah.
Sarvesh Gupta
Understood sir, Understood. Sir. Would it be possible to disclose capacity utilization across our different manufacturers plants?
Badree Komandur
Yes, the capacity utilization of. We have got enough capacities to, you know, to cover the next two years volumes. We have been driving operational efficiencies but it’s always good to have some spare capacity because to meet any emergencies and we have been operating at a fair level typical of any pharma company which will operate in this space. All I can say is that we don’t need additional too much capacities for us for the next one or two years excepting for the incremental capex which will give us incremental growth.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, we request you to please limit your question to two per participant. If you have a follow up question, you may rejoin the queue. The next question is from the line of Prolin Nandu from Edelweiss Public Alternatives. Please go ahead.
Unidentified Participant
Yeah, hi team, thank you for taking my question. So Badri, just wanted to understand little bit more on the US business, right. The you know, the $70 million run rate. Right. So I mean one of the things that I want to double click on was that you know, apart from the controlled substance launches which were delayed because of the reasons that you explained, were there any other launches which were also delayed and was competition the reason there or you know, because you mentioned, you know, you had some plans to launch but you did not.
So was that coming specifically for controlled substance or was it for outside the control substance as well, and a similar and a question related to that would be what are you expecting in next two quarters for you to, you know, you say that, you know, the recovery or growth will start happening in H2. Why would Q1, Q2 will still be, you know, on a weaker side. Right. What are the reasons that, you know, that you are seeing in the next two quarters for you to say that the growth will start happening only in, you know, H2 of FY27?
So that’s my first question.
Badree Komandur
Yeah. So what I want to say here is I want to correct you here. Like if you really see my comment was not limited to controlled substances. That is number one. And second thing is we also have 150 products in our portfolio. Right. And Stride’s policy has been to, you know, the launch when the market actually gives an opportunity. We are not in a hurry to launch. There are host of products which are there which are available for us to launch at any point of time. And that’s what we will do. We’ll wait for the market disruption to happen, be it our API or be it a new player coming, be it any player going out.
And that’s been a practice because that helps us to maintain the overall company level gross margins. As far as your next two quarters is concerned, I am only saying that the full potential of the growth you will start to see from H2 onwards, it’s not just that it’s muted or it’s not like that there will be definitely be a growth, but it’s all, see, we have to look at it from a long term perspective. Some things take at least 16 to 18 months or sorry, 18 to 24 months to solve for. Right. So while the quarter on quarter there will be growth, the full potential of the growth with more launches, you will see the impact of it more in the H2 on the.
Unidentified Participant
That’s clear. Valerie, thank you so much. The second question would be on the margins. Right. On the controlled substance. Right. You mentioned that they would be similar to our existing US business but one would have thought that, you know, because this is more specialized, the margins would be higher. Right. And so where is that, you know, understanding wrong? And in that context, while right now you are seeing the convergence of non US and US margin, but over the period of time one control substance and nasal spray and some of the new products becomes a decent part of our US revenue, don’t you think that US revenue are structurally, I mean, you know, pointing towards the higher than, you know, the company average or the non us?
Badree Komandur
Yeah. So as far as the controlled substances are concerned. I just want to say that it’s an in in us for US strategy. See the. You have to understand that we are a very new entrant to control substances still. Right? The we have just had one and a half years of experience. One and a half, last seven quarters. We have been launching, right, we have, we have been in the business of control substances. So we have to see how it pans out. Because at the end of the day our endeavour is to improve the margins.
And we all know that US margins are at a higher compared to the gross margins are much higher compared to the company level margins. And the good part is that once the history is established we should be able to, once we come to a reasonable size our ability to do many things in that business becomes much more stronger. So from a nascent spray perspective it’s just at least another one year away for us to launch. And our endeavour is to, you know, to see how much we can gain market share at the time of launch.
And if you really see the overall context, the US systems has to be understood. Understood because we are also equally investing in R and D. So that’s also very important factor you need to take into consideration. But overall I think your observation is right. But it takes the control substances will take its time to build the profitability and the operating leverage that we are looking for.
Unidentified Participant
That’s it. From my side. Thanks a lot and all the very best.
Badree Komandur
Thank you.
Operator
Thank you. The next question is from the line of service Gupta from Maximilian Capital Private Limited. Please go ahead.
Sarvesh Gupta
Yeah. Hi sir. And thank you for giving the opportunity. So sir, first question is on this. You know you described the tangible and intangible investments to the tune of around 350 crore plus. So you know, what is the broad run rate let’s say for the next two years in these two buckets.
Badree Komandur
Yeah. As far as the issue it will be around 300 crore is what I think because with the tangible portion it’s almost coming to an end. From a factor we need only the maintenance capex but there will also be some intangible global rights which we may acquire to, you know, fast track the growth. I think it should be about 300 crores what I think.
Sarvesh Gupta
Okay, understood. And secondly sir, just sorry to harp on this point again but the US guidance for FY28 of now earlier we were saying $400 million, now we are saying 375 to $400 million. But is it a exit run rate, sort of a guidance or is it what we want to achieve in FY28, number one. And secondly this translates broadly to you know, 15 to 20% CAGR from the current base. So does it look achievable in the context of the kind of growth we are seeing currently?
Badree Komandur
Yeah. So the. I just want to give you a perspective of this 400 million. This 400 million is there for the last two to three years. Right. And of course that we had a demerger of softgel business. That’s number one. But we did not change this 400 million because we want to chase an aspiration. And we believe that we can be between 375 to 400 million at this point of time. And we are working towards it. And what is more important is that while you hark on US business but there is also another regulated markets which is also growing at a very healthy rate.
And it is, it is growing much faster than, much faster than the US market. So from our perspective we look at the overall company and as a basket and together we should be able to give the economic long term result. That’s the way I look at it.
Sarvesh Gupta
But presently this is a target for a, for full year of FY28, right? Yes,
Badree Komandur
That is correct. We are not taken any, we are not taking any et cetera rate and all that. The reason why we are saying is that we have got another eight quarters to go. We want to try to reach as close to the 400 million as possible.
Sarvesh Gupta
Understood sir. Thank you and all the best.
Operator
Thank you. The next question is from the line of Sanjay Shah from Ask Securities. Please go ahead.
Unidentified Participant
Yeah. Good evening gentlemen. Thanks for opportunity. Badri, your opening remarks are really helpful to understand company and congrats to Mr. Ram Raju. So my question was regarding our top 37 products contribute around 75% of US revenue. How vulnerable are these products? Can you highlight upon it our pricing erosion, competition side and even customer concentration side?
Badree Komandur
Yeah. So one of the things I just want to highlight here is that. Sanjay, thanks for your question. And as far as the 37 products is concerned there is no, it’s widely spread across the, across the entire U.S. Revenue. That’s the first thing. There is no great customer concentration. So second, in terms of the pricing pressure, we have had marginal pricing pressures but it has been offset by most of the other measures. Like we have some cogs improvements and that’s the reason we are able to grow, keep a gross margin between that 58 to 60% range.
And in fact if you really see the last three years that disciplined approach has helped us to Improve gross margins by more than 300 basis points and as well as the EBITDA margins by almost 400 basis points. When we started post one source. When you adjust for one source 15% to almost about 19%. As far as the customer is concerned, I just want to speak that we have got a very wide customer base. In fact the big customers contribute almost the reasonable portion. But there are also a lot of many customers which contribute to give the portfolio great support because these are the customers where you don’t see price erosions much.
We are able to maintain it within a range and I think overall, to answer your question, the vulnerability is not there from a customer, product customer or a product perspective. Second thing is the objective has been to maintain the gross margins and that is what we have done consistently. You can see all the eight quarters we have demonstrated the gross margins between that 58 to 60 and we will continue to work on it to get to that range.
Unidentified Participant
So we are investing heavily on complex generics like nasal spray, transdermals and films. So what are the execution capabilities still need to be built internally and what timeline can we expect before meaningful commercialization of the S.
Badree Komandur
Yes. So as far as the nasal spray is concerned, this is one of the strategic acquisitions we made some many years back was from Hindu to a chestnut rich facility. Today that facility has got the capabilities to manufacture films, patches as well as. Sorry, as far as the nasal sprays and the not the patches and films can’t control substances. So I repeat again, the Chestnut Ridge has got a capacity to manufacture nasal sprays and controlled substances. As far as the R and D is concerned we have got a combination of the third party manufacturer as well as the in house manufacturer and these all should contribute meaningfully beyond 28, that is FY28 and beyond.
That’s what we are expecting. While one or two nasal products can be commercial much earlier which we believe we can if everything goes right. But you will see, you will see bulk of the revenues coming in 28 and FY 29 onwards.
Unidentified Participant
That’s great. Thank you very much. Very helpful and congratulations to the team.
Badree Komandur
Thank you Sanjay.
Operator
Thank you. The next question is from the line of Nitin Agarwal from Dan Capital. Please go ahead.
Nitin Agarwal
Thanks for taking the question. Two things. One is a. On the newer sort of growth engine you’re talking about, we’ve talked about nasal space. They’ll start to file a couple of them. They’ll begin to contribute. 29 There are some other modalities that you mentioned in the presentations. Can you Give us a little more color on what are the timelines for those modalities?
Badree Komandur
Yes, these are all again it is a 28 beyond. It’s not going to contribute anything much to, to 28. We already started all the programs, it’s all going in full swing. So we should start filing in next 18 months and then it will be beyond 28 for us.
Nitin Agarwal
And so in those apart from nasal space which is the second sort of second one modality to probably start to become meaning commercial for us.
Badree Komandur
Patches and thin films. These are the two areas of domains we have identified. We have already. The R and D is in full swing. We should be able to file for that in the next 12 months. 12 to 18 months and then commercialization data
Nitin Agarwal
And on the needle phrase. So apart from the 3 nasal control product nasal sprays that you guys mentioned earlier, what are the total pipeline that we probably are looking at say from a two, three year filing perspective?
Badree Komandur
There are few items we have added. In fact there are some third party programs. We have added at least another five or six of them. I don’t know the exact number but definitely there is a portfolio that’s being built on nasal spray domain because we are completely packet integrated in terms of Chestnut Bridge catering to those business.
Nitin Agarwal
This will be our control product. Nasal sprays.
Badree Komandur
Yeah, controlled as well as other nations place also. Right,
Nitin Agarwal
Okay. And with all of this going on, how do you visualize the R D spend going forward now?
Badree Komandur
Yes, so the R D spend will be. We said last year also that R and D spend is going to be higher. It will be upwards of 25 million. 20 to 25 million for sure in the coming to two years. And we believe that we have got enough growth engines to invest on the R and D and also the scale up of the business.
Nitin Agarwal
And lastly, second one on the growth markets, if you can just let us know about how should we think about the Sandoz transaction and the impact it makes for the growth markets and overall, any update on how the growth market businesses have been, I mean any positives to call out for the growth market growth for this year?
Badree Komandur
Yes. So as far as the Sandoz transaction is concerned, it is expected to fructify in the second half of FY27, that is between October and March the next year. It should contribute meaningfully to the growth. The third thing is in terms of, you know, overall the branded portfolio will definitely, you know, technically for us more than one and a half times as with this portfolio. And we think that over a long term we should be able to Build a good brands portfolio as a part of the overall revenue of the company and it’s growing quite well so far in the last few quarters we have grown faster than the market and our brand source of more related to the Francophone region wherein we have done quite well.
And with this Sandoz portfolio we get a much more broader presence in Africa and we think this will add very meaningfully to the margins because as you know, the brands have higher margins compared to generics.
Nitin Agarwal
Last, how should we think about this quarter’s HDN expense spending spike and should we look at an analyzed. Should be the base to analyze for the model next year?
Badree Komandur
Yes, it will be in that range but the. Because last quarter was sudden increase in the freight cost and we are watching the geopolitical situation very closely and I covered it in the recent in my opening speech also there has been increase in prices and we are working very closely with the customers how much to pass on and we are working on multiple strategies to maintain the gross margins within that 58 to 60% range. And if you’re able to do that, the operating leverage automatically plays out.
But having said that, the logistics costs have increased. Maybe you can put some discounting factor on the Q4 and then maybe you should take.
Nitin Agarwal
Thank you so much. Thank
Badree Komandur
You.
Operator
Thank you. The next question is from the line of Shilpa Sabu, an individual investor. Please go ahead.
Unidentified Participant
Hello, good evening. Good evening. Thanks for taking my question. I’ll be asking on the behalf of Shilpa Sabu for our first question on the control substances. So sir, because in previous phone call now we have a completed one year in control substances. So are we eligible for higher quota allocation for US market Then what is the revenue potential?
Badree Komandur
Yeah, so we don’t want to give a very specific revenue potential on controlled substances. All we can say is that this will be an engine of growth and we have completed a full year and because it’s very difficult to commit, you know, without getting the quota right. So it’s a chicken and egg story. But all we can say is that the last one year we have demonstrated whatever the quota we have received, we have been able to sell and we are able to demonstrate and we will go back to DEA and if there is anything additional quota it will anyway get reflected in the growth as we go along.
Unidentified Participant
Okay, and second question is on 505B2. So for 5005B2 we had around 8 to 9 product in pipelines. So will be 3 to 4 be commercialized this year and what will be their market size?
Badree Komandur
We have not had any 505 people as far as I don’t think so. It is there. Maybe verify it and come back.
Sarvesh Gupta
So what will be the like market size?
Badree Komandur
No, no, we don’t have.
Sarvesh Gupta
Don’t
Badree Komandur
Have at all.
Sarvesh Gupta
Okay, that’s it.
Badree Komandur
Thank you. Thank
Operator
You. The next question is on the line of Vedantes from mass investment. Please go ahead.
Unidentified Participant
But I wanted to confirm that you mentioned that there will be a Q on Q growth. So like last year when you guided at the start of fy. Right. Sequentially Q on Q there will be a growth. So this year also we can expect the same.
Badree Komandur
Yes, of course.
Unidentified Participant
Sequentially they will be growth. Right. Like from Q4 to Q1 last
Badree Komandur
Quarter. Right. In Q4 we have grown at 11%. If you adjust for institutional distance, we have grown at 14.
Unidentified Participant
Okay. Okay. And the margins will also reverse. Since you are seeing that I have
Badree Komandur
Clearly said that margins will be between that 80 to 20% range. The endeavor is to get to on a long term margins of upwards of 20%.
Unidentified Participant
Thanks. A control substances you mentioned last in last Q3 or some call that from Q1 also you will see some upticks. So are we online on that or. Still not decided. Until this quota is. We
Badree Komandur
Have got a past history to go back to the at this point of time. So once we go back and once we get an additional quota and then if it gets into a commercial revenue anyway, it gets into the growth. Right. So that’s what we are working on. And we are very happy with what we have done in the last one year with the quota, what we received. And we have gone back to DEA on that.
Unidentified Participant
We have already gone back. So it will be out in the. Out in this quarter or next.
Badree Komandur
Yeah, it will come anytime soon. There’s no specific timeline to this, but we have gone back.
Unidentified Participant
Thank you very much.
Badree Komandur
Thank you.
Operator
Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to management for closing comments.
Badree Komandur
Thank you very much for all your questions and should you require any more follow ups, we are there available. The investor relations team along with me and Vikesh will be able to clarify all the queries you have in the near future. Thank you.
Operator
Thank you. Thank you ladies and gentlemen, on behalf of strides Pharma Science Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.