AUROPHARMA - Aurobindo Pharma Ltd. Share Price

In the earnings call held on August 5, 2025, management of Aurobindo Pharma provided an optimistic outlook for the upcoming fiscal year 2026, reflecting sustained growth momentum across key areas of the business. The consolidated revenues have projected a year-on-year growth of 4% to Rs.7,868 crores, driven by strong performances particularly in European and growth markets, with the U.S. formulation base business remaining stable.

Key forward-looking points highlighted by management include:

1. Revenue Growth: Management expects continued product launches and a stable pricing environment, particularly in the U.S. and Europe. They aim to achieve internal target margins of 20%-21% by FY26.

2. Biosimilars and New Facilities: The company has initiated operations at new manufacturing sites, including its biosimilars segment, with expected revenue contributions commencing between Q3 and Q4 FY26. For the new China facility, they anticipate generating revenues by Q3 FY26.

3. ARV Formulation Performance: For the ARV segment, a significant year-on-year revenue increase of 55% to Rs.355 crores is noted, driven by new tender wins, marking a solid outlook for this segment.

4. Cost Reduction and EBITDA: Management reported an EBITDA for Q1 FY26 at Rs.1,603 crores, with expectations of improvement as operations at manufacturing facilities ramp up.

5. Cash Position and Investment Focus: The company has improved its net cash position to $140 million, emphasizing a strategic focus on maintenance and capacity enhancements without further greenfield CapEx investments in the near to mid-term.

6. Strategic Acquisitions: The recent acquisition of Lannett is expected to enhance revenue streams and leverage synergies, further supporting growth in the medium term.

Overall, Aurobindo Pharma's management conveyed confidence in sustaining growth through operational efficiencies, strategic product launches, and a solid pipeline, with anticipated improvements in both financial performance and market positioning.

Major Questions and Answers from the Q&A Section of the Earnings Call Transcript

1. Question: "My first question is on gRevlimid. So, just to clarify, this Rs.150 crores less number and then Rs.550 crores less number versus Q4 is at the EBITDA level, right?"

   Answer: "This is at the topline level. You can calculate the EBITDA impact based on that. The pricing pressure has intensified, and we've largely exhausted our volume allotment, meaning we don't expect significant sales from gRevlimid moving forward."

2. Question: "If you can explain what has happened in the API and do you think it's a temporary phenomenon?"

   Answer: "The drop in API turnover is mainly due to pricing pressures. While it may not sustain long-term, I believe we will see a recovery in API performance over time as the market normalizes."

3. Question: "You are maintaining your EBITDA guidance for the year. What are the key drivers for this confidence?"

   Answer: "Despite the low gRevlimid impact, our Q1 FY26 results and consistent revenue streams from other segments have provided confidence in maintaining our EBITDA guidance."

4. Question: "With respect to operational losses for various plants, can you share that number for FY26?"

   Answer: "Losses last year were primarily from Pen-G and other segments. We're expecting improved EBITDA starting Q3, with a significant reduction in losses as production ramps up."

5. Question: "How much PLI income to consider for this year?"

   Answer: "We anticipate around 7,000-8,000 tonnes of production, leading to an expected PLI income of approximately Rs.150 crores, dependent on sustaining recent yield improvements."

6. Question: "What does the destocking impact in the U.S. business entail?"

   Answer: "The destocking was primarily driven by wholesalers preparing for anticipated tariffs, leading to a significant inventory buildup last quarter. We have not seen an overall decline in demand."

7. Question: "What is the latest update on the Pen-G plant's ramp-up post-resumption?"

   Answer: "Production yields are improving, and we expect significant progress in the next few months, aiming for strong performance in Q3."

8. Question: "Could you explain the recent performance and outlook for the European operations?"

   Answer: "Our European business continues strong, focusing on in-house production. We're optimistic about sustained growth and improving margins as we reduce reliance on external sources."

9. Question: "Can you provide clarity on the acquisition of Lannett and FTC approval expectations?"

   Answer: "We believe the FTC review will focus on a minimal list of overlapping products. We're confident because the primary products should remain intact, and we've prepared for possible divestments if necessary."

10. Question: "What are your thoughts on the increasing priority of U.S. domestic manufacturing for generics?"

Answer: "We're well-positioned to adapt. While manufacturing in the U.S. may raise pricing, it can also enhance our ability to compete, especially through our existing facilities."

These responses provide a detailed overview of the Q&A from the earnings call, including essential financial figures and strategic insights as of the first quarter of fiscal year 2026.