Ladies and gentlemen, good day and welcome to Alkem Laboratories Limited Q1 FY 2027 earnings conference call, hosted by Motilal Oswal Financial Services Limited. 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 star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services Limited. Thank you and over to you, sir. Thanks, Yusuf, and sorry for the delay in the start of the call. Good evening, everyone, and warm welcome for first quarter FY 2027 earnings call of Alkem Laboratories. From management side, we have Mr. Sandeep Singh, Managing Director, Mr. Nitin Agrawal, CFO, and Ms. Purvi Shah, Head of Investor Relations. Over to you, Purvi. Thank you, Tushar. Good evening, everyone. On behalf of Alkem Laboratories, I welcome you all to our Quarter 1 FY 2027 earnings call. Earlier today, we announced our financial results along with the press release and investor presentation, all of which are filed with the stock exchanges and are also available on our website. We hope you have had an opportunity to review them. Before we begin, I would like to remind everyone that this call is being recorded and the audio recording and the transcript will be made available on the stock exchanges and our website shortly after the conclusion of the call. Please also note that today's discussion may include certain forward-looking statements, and these statements should be viewed in conjunction with the risks and uncertainties that are associated with our business and the environment in which we operate. With that, I now would like to hand over the call to our MD, Mr. Sandeep Singh, for his insights. Over to you, sir. Thank you, Purvi. Good evening, everyone. Thank you for joining our call. The period under review has been one of continued execution of our strategy. While the operating environment remains dynamic, we have stayed focused on the fundamentals, strengthening our core business, improving operational efficiency, and investing selectively in areas that can support a sustainable and profitable growth. We are encouraged by the progress we are making across these priorities. At the same time, we remain conscious of external challenges and are maintaining a disciplined approach to capital allocation, costs, and risk management. I will briefly walk you through the key developments and our outlook after which we will be happy to take questions and engage. The key highlights are that our revenue from operation was INR 3,740 crores with a year-on-year growth of close to 11%. India sales were INR 2,497 crores, and year-on-year growth was 10.3%. International sales was INR 1,222 crores with year-on-year growth of 16%. EBITDA margin was 20.5%. The growth was 3.7% year-on-year. R&D expenses was 4% of our total revenue. Profit before tax was more or less flattish, technically 1.8% of growth. The net profit, there was a degrowth of 21.7%. This is purely because of taxation reasons, and I am sure our CFO will deep dive into this later on. According to IQVIA data, the company registered a growth of 13.2% year-on-year versus the Indian pharmaceutical market, which grew by 12.2%. This is 100-basis point outperformance, just as we had guided you earlier. Acute segment reported a growth of 12.3% versus the IPM, which grew by 10.1%, which is a 220-basis point outperformance. Chronic segment reported a growth of 17.9% versus the IPM, which grew by 15.4%, 250-basis point outperformance. We have outperformed IPM in seven key focus therapies. Anti-infectives grew by 1.1 x of the market. Gastro grew by 1.2 x of the market. Vitamins and minerals grew by 1.4x, pain by 1.8 x, anti-diabetic 1.4x, and respiratory 1.6x. Last but not the least, derma 1.6x. During the quarter for the U.S. market, the company received five ANDAs approval. One of them was a tentative approval. Recently, our Daman facility has received an OAI status. We have already initiated comprehensive corrective and preventive actions and remain fully engaged with the regulator to address the observations. While this represents an important regulatory development, approved product supplies from the facility continue to the U.S. market without any interruption. With this, I open the floor for Q&A. Thank you. 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 their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Saion Mukherjee from Nomura. Please go ahead. Hi, good evening. Sandeep, you mentioned about growth in India higher than IQVIA market growth as per IQVIA. We have seen some improvement in growth rates, but at 10.3% is lower than most of the pharma companies who have reported so far. Can you throw some light around the dynamics here? What do you think is impacting the growth rate in India, and is there something that would ease to improve growth rate in the quarters ahead? Yeah. I think that India growth rate is kind of dragged down because of the trade generics. Trade generics growth was flattish to very mild growth. Trade generics now contribute reasonably to our domestic formulation. That drags it downside. Okay. Your branded- Yes. What was the branded growth this quarter? Branded generic. It was 12%. 12%. One, two. Okay. Nitin, on the costs have gone up. You had, I think, guided earlier, employee cost and other expenses are on the higher side. If you can indicate how much of the cost is on account of CDMO med tech, which might not be contributing at this point, or for that matter, if you can talk about the EBITDA loss from these businesses in this quarter. Sure, Saion. In terms of employee cost, yes, the growth is more than 16% in the quarter. There are two, three reasons. One is definitely the annual increment. The second is we have added around 1,200 MRs in last few quarters, so that also impacted the employee cost. The CDMO business in Enzene became operational from November 25. That was the third impact on manpower. In terms of other expenses, yes, there were expenses on account of ending CDMO business. Plus the conversion rate for dollar has increased, which has also benefited us in terms of top line, but the impact is also on other expenses, where all our foreign subsidiaries expenses got converted at a higher rate. It is almost 10% higher than the last year rate. These were the reasons. Med tech, yes, we have completed the acquisition of Occlutech, but that was in mid of July. So our quarter one numbers were not impacted because of Occlutech. Yes, the ortho business which we acquired, but I think it is small in scale. At consolidated level, the impact is not that high. Just to share the numbers, yeah, there was between, you can say if we exclude the due diligence cost and all of Occlutech there was a EBITDA loss of around INR 5 crores-INR 7 crores. Because we are also investing into this business. We are filing our products outside India. So definitely, this business will break even maybe in next 12 months, but the scale is small, like at yearly level, we will do around INR 50 crores of sales from the ortho business other than Occlutech. The U.S. CDMO operation within, how much is the drag from there? U.S., we incur around INR 60 crores of operational expense. It is a new business. We plan to break even in next, say, four to five quarters. For the quarter it was around INR 60 crores, something like this. Okay. Thank you. Thank you. Next question is from the line of Sandeep Kumar S. from Clindus. Please go ahead. Hi. Thank you for taking my question. The first question is on, what is the current status of denosumab biosimilar in the U.S.? Yes. denosumab biosimilar approval is a little bit off. We did not get the approval on the goal date. That is pushed off by at least a few months. Okay. My second question is on the EU region. On the following approval of Oysyl, are there any specific targets like region markets where the launch is being prioritized or is full EU-wide availability expected simultaneously? Okay. No. Sorry, I didn't get you properly. You're asking about denosumab Europe plan, right? Yeah. OSKEM. Yeah. Oysyl PROLIA biosimilar. Is there like only specific Of PROLIA? Yeah, PROLIA. Okay. Yeah, your usual suspect. We have a partnership with a company called Theramex. They are our partners. We are not doing it directly. As you know, it is very competitive. There are many players even in Europe just like U.S. It is not going to be a very meaningful ramp-up for any one of us for some time. It is not something very significant. Yeah. Okay. My last question is on the recent opinion on XGEVA biosimilar. When can we expect the launch of XGEVA biosimilar in Europe? We could be three months away. Three months away. Okay. Thank you for your insight. Thank you. Thank you. Thank you. Before we move to the next question, a reminder to the participants, to ask a question, you may press star and one. Next question is from the line of Amlan Jyoti Das from JP Morgan. Please go ahead. Hi, sir. Sir, my question is regarding the India biosimilar- Sorry to interrupt Amlan. There is a background noise coming from your end. Yeah. Is it all right now? Yes, please proceed. Sir, my question is regarding the India biosimilar front. You had some six to seven odd biosimilars in India launched through the India entity. How has this portfolio done since launch, and what has been its contribution to the India revenues per se? Nitin, you want to take that? You know the percentage better. We have already launched seven products, as you said, and we do around INR 150 crores of annual sales. I think we have done really well, and because of this backward integration, the margins have also improved for these products that comes already filled up. So sir, this revenue is a part of your India revenues, is it? Yes. Okay. Then next on Occlutech. Sir, since you have closed the deal in July this year, how do you see the growth for this business as a whole going forward, and how do you see the margins spanning up? I remember you guided to some reaching 10% margins in the near term. Does this guidance hold still? This year, see, the original plan was to complete the acquisition and start integration sometime in first quarter, but that got delayed. We just completed the acquisition in mid of July, and we have started the integration. This year, for around 8 and a half months, our target for Occlutech is around INR 400 crores of sales with break-even EBITDA. Okay. Because of delays happened in case of integration. Yeah, it will be a bit off from the guidance we gave last time. Okay. And sir, how should we see this margin going ahead, say in the next two to three years? Every year you will see a gradual improvement in margins. As we discussed during our investor meet, a lot of the integration with India operations will start kicking off from next quarter. Yes, you can see say 7% - 8% improvement in EBITDA year- on- year. We target to achieve our guidance over three to four years. Yes, but it will be a very healthy EBITDA business for us within, say three to four years. Okay, sir. Lastly, if I may squeeze in. From this OAI in the Daman unit, could you share the percentage of revenues from this unit to the U.S., if it is available? I think 45% of our U.S. revenue comes from this facility. And sir, all of these revenues or all of these products are still in supply? Yeah. Very much. Yes. Absolutely. Okay, sir. Thank you. Those are my questions. Thank you. Welcome. Thank you. Next question is from the line of Kunal Dhamesha from Macquarie. Please proceed. Hi. Thank you for the opportunity. Can you throw some color on why the trade generic business is not growing? Is it industry dynamics? Is it company specific dynamics? I think it is a combination of both. It has got very intensive, the competition. Four, five years back, you will remember that not many companies wanted to play in this segment, but now lot of big guys have entered. It is also internal because, law of large numbers always kicks in. We are maybe the number one or number two in this segment, and we also tightened the market practices slightly where we are little strict on the number of days outstanding. Therefore it is leading to this. Yeah. Nitin, go ahead. If you look at our numbers for January to June period, we did well in terms of growth. But yes, from April to June, there were some strategic calls taken on outstanding DSOs and all. Also we have a bit increased our prices because of increase in API prices. I think the inventory levels in market may have also gone down. In coming quarters, the primary sales or the sales from this business should recover. The lower growth which we saw in quarter 1, I think in the upcoming quarters, the growth should be higher than that. January to June, we did well in trade generic, if you look at six months numbers. And sir, well means double-digit growth? How to put that into some form of quantification? It was higher single -digit. High single -digit. Okay. Then we are saying April to June was flat on a year-on-year basis. Yes. So January to March would have been double- digit minimum. Yes, you can say that. Yes. Okay. Secondly, on this CDMO business drag of INR 60 crores. That number looks quite big. So basically, Sandeep, what the- Yes. This is annual or quarterly? This is quarterly. This is quarterly. This is expense for CDMO U.S. Yeah. Okay. So let's say for us to become breakeven in the next 12 months, what kind of revenue we need to generate? Then, in terms of the pipeline of projects, do we have that visibility now? No, good question. Next 12 months we will not break even, just to be very clear. For U.S., we will not break even. Okay. That is number one. The revenues, what we need perhaps will be close to $20 million to break even. Sir, I did not get your number, sorry. $12 million? No, I said $30 million. Sorry, I said $20 million, but actually it is $30 million. At $25 million-$30 million, we will break even over there. Per quarter? Yes. No, annualized. Annualized. Okay. Yes. Okay. For that, Sandeep, because CDMO is a pretty big spectrum, right? Which is the part that we are initially targeting, Sandeep? That would be helpful to know. Yeah. As you know, Enzene is into monoclonal antibodies, so precisely that. We are just into mAbs. Okay and we do the development to clinical trial supplies and hopefully commercials in the future. But right now, these are most of the time clinical trial batches and development batches. Sure. Yes. So let's say, for that INR 30 million run rate, how many projects do we need to be working on? No, so all that we know. Say, it depends. Some projects are pretty large, so it's not the number of projects. I think we've got a decent pipeline. A CDMO has a sales cycle very different from what we traditionally do as branded pharma. So I think we'll have to be patient over there. The cycle time is pretty large, and to work with these companies who could be innovators, not necessarily large pharma, even small biotech, they take their own time, and it is dependent on a lot of things, how well they get funded, how the clinical trial progresses. I think it is a mixed bag where patience would be rewarded. Just like I am sure you all track a lot of CDMO companies, you all know that. We cannot measure it with the same tape which we measure the traditional Alkem pharma or any pharma. We are positive, therefore, we have put the facility. Sure. Sir, lastly, what type of capacities do we have there? Is it currently more R&D related, and then eventually, would it require for us to put some kind of CapEx? Yes. We have reasonable capacity. We are not very big. We have small capacity, but our technology is a little different. If I tell you in KL, that will not really do justice to what we can produce over there. Second part, at some point of time, it will require CapEx to happen over there as we ramp up, because without it, we will not really get economies of scale, just like any API/CDMO or a biotech business. Sure. Yeah. That will not be this year. This facility is GMP compliant, like U.S. FDA approved? Yeah, of course. Okay. It is not U.S. FDA approved because that has to get triggered, but it is absolutely in U.S. and we are working with a lot of good companies, and will have to trigger the U.S. FDA. Okay. Which will happen with some of the client when they file, et cetera. Yeah. Absolutely, sir. Okay. Yes. Sandeep, last question on the U.S. plant. We said the revenue contribution is 45% of U.S. Of Daman. Daman, yes. What is the number of pending ANDAs, and what is the total pending ANDAs right now? Of Daman? We will come back. We do not have the exact number. We will come back to it. Okay. Yeah. Okay. With fully when we can come out. Okay. Yeah. Thank you and all the best. Thank you. Thank you. Participants, if you wish to join the question queue, you may press star and one. Next question is from the line of Kunal Randeria from Axis Capital. Please go ahead. Yeah, hello. Good afternoon. First question on the India business. Last year you made a foray in orthopedics by making a couple of small acquisitions. Will you still be kind of looking to expand this business or would you rather wait until maybe a new CEO has joined? Last year you had made a couple. In India? In India. Just trying to repeat my question. Okay. Sorry. Orthopedics, we have not acquired anything. This is the med tech you are talking about, medical tech. No. Medical devices. No, sir. You had acquired a couple of small companies, right? Bombay Ortho and No, Bombay Ortho is medical device, sir. It is not your prescription pharma. Okay, sorry. It is not pharmaceutical. My bad. Apologies. Would you be kind of still expanding into this, or will you be kind of waiting for maybe someone, a new CEO to join and then see how to expand? No, it depends. We are not looking to acquire anything in orthopedics or med tech right now. That's the first thing. Yes. There's no question of waiting or not waiting. I think it is very early. The ramp-up is happening, and there's no need to acquire anything over there right now. Yes. All right. Okay, sure. But any plans? Now we have INR 57 million gross cash. Any plans that you would like to share? No, nothing. Everything is the same like before. Nothing changed from last quarter. Okay, got it. And just one more. Will you be launching dolutegravir in the U.S., Tivicay, in the U.S. this quarter? Yes. Yes, sir, we would be. Okay, perfect sir. Thank you and all the best. Thank you. Thank you. Next question is from the line of Abdulkader Puranwala from ICICI Securities. Please proceed. Hi. Thank you for the opportunity. My first question is with regards to the trade generic business. I understand it had got impacted because of your receivable policies or your credit period. But the business has been growing at a slow rate for the last couple of quarters. Any timeline you would like to share with us by which you expect growth in this particular segment to bounce back? No. What does bounce back mean? How much do you think we should be doing? Say, at least in line with what your branded pharma business is growing. No, that's very hard. Okay. We don't want to see. Also, it's a matter of discipline. We'll have to reset it, and we'll have to figure things out. We'll see how the market also evolves. I think, personally, as the promoter MD, I'm happy with late single -digits. It's perfectly all right. We just need execution and discipline in that business more for the next one to two years. Because there is no CapEx requirement there. ROCE. Yeah, ROCE is good because, the CFO always reminds me that. We'll have to be careful on that. Yes. Sure, sir. Got it. And sir, my second question with regards to any thoughts on hiring a CEO. Yes. We told you last time, we are looking out. Thoughts are the same, and hopefully next time when we have the quarterly meeting, he will be there with you. We are looking out, sir. As you know, it is a critical hire, we cannot hurry up. But we are looking out, sir. It is very clear. Yeah. Got it, sir. Just a couple of bookkeeping questions. From the tax rate, I think last quarter we had guided for a 27%-28%. Are we still kind of maintaining that for the full year? See, that was for standalone, but at consolidated level, it will be in the range of around 30%-32% because few of the entities like our South Africa, India, U.S. and all, which are reporting losses, and currently we are not creating deferred tax asset on those entities, because of which our consolidated tax rate looks a bit higher as compared to standalone. So at consolidated level, it will be in the range of 30%-32%. Understood, sir. Thank you, and all the best. Thank you. Participants, if you want to join the question queue, you may press star and one. Next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead. Yeah. Thanks, Yusuf. Sir, just with respect to the India business, could you share price volume, new launches growth for the quarter? So in terms of price, the growth was around 6%. This, we are only talking about other than trade generic business. New launches was around 3%, and volume was around 2%. And sir, in general, the industry growth rate have sort of improved over last, I would say, few months. Any change you have seen or experienced, which is sort of driving this growth, and how sustainable you think these numbers are in terms of overall IPM growth, may it be chronic, may it be acute? No, according to us, I think there's nothing dramatically changed. I think the semaglutide has gone off patent. So those kind of things are driving chronic, I think, by and large. We think it's quite sustainable, whatever we are doing, at least. Got it. How much benefit you would have got from semaglutide for Alkem last quarter? It's very small right now, sir. 15%. Yeah, small. We are among the top three in generics. I can share that with you. Got it. Sir, just secondly, on U.S. CDMO, all these OpEx, how do you see these over FY 2027? Will INR 60 crores go first? Yeah, you can analyze that. OpEx will remain the same. We will have to get business, and that is how we can break even and eventually make money. We cannot cut OpEx too much because you know the complexities of a U.S. plant. Got it, sir. Some business opportunities got pushed, which is why the break-even is sort of really taking time, or this is the way it has been sort of tracking? Well, I think it's a combination of both. Sometimes reality comes and delays things. I think we knew that it's going to be expensive and business would take off, but it's taking more than, let's say, a couple of quarters to reach what numbers we were targeting. Also, CDMO is a lumpy business, as you know. So when it rains, it pours kind of thing. Whenever it comes, it will come big, we feel. Got it. The new contracts probably there, which is where the efforts are. So some gestation period to sort of get the fruits of that. Yes, absolutely. Thanks. Thank you a lot for answering my questions. Welcome. Thank you. Next question is from the line of Rashmi Shetty from Dolat Capital. Please go ahead. Yeah, thanks for the opportunity. Sir, just on the U.S. part, if we convert into the dollar business, in constant currency terms, we see some softness in the U.S. sales during the quarter. If you can specify the reasons for that, both on year-over-year and quarter-on-quarter, I am seeing that. And earlier we guided that for the entire year, U.S. will be in high single -digits. Now, after this quarter, what is your outlook? Also taking into consideration the Daman plant OAI. Yeah. I think the last thing I will answer first. I think Daman plant OAI is a concern, but we do not see it as impacting our business because nothing is stopping and production has kind of gone through, so we feel confident that this year will not be impacted. Also, we believe that we will come out of this in six to 12 months' time, hopefully. So Daman should not have an impact on business this year. And I think the Net Realizable Value erosion was just close to flattish. So price erosion has kind of bottomed out, we feel, for us, and maybe for the industry, I am not sure. U.S. is challenging. We really do not have volume growth. It is more because of currency, and that remains a reality. In new products. Yeah. You mean to say that you have not seen any major volume expansion in the products which you all have launched last 12-24 months? I would say so. That's a fair assumption. Yeah. Okay. Then what will be the outlook for the whole year? Still we maintain our guidance of around high single -digits? Yeah. Do you feel it will be flattish? I think it will be high single- digit to mid. Okay. Mid to high single- digit. Yeah. We will be helped by currency, for sure. Okay. This $30 million revenue, which we are expecting from the CDMO business, when can we anticipate that, in which year, by which year we can expect the revenue to kick in? FY 20 28. FY 2028? Yes. Okay. On the India business, put together trade generics business and the branded formulation business, what kind of growth can we expect for the entire year? Round about what we told it last time, but we could better that by say, 100 basis points. You feel that in the subsequent quarters we will be able to cover it, whatever growth we have lost in the trade generics business, and branded formulation will continue to perform. Is that a right assumption? Yeah. We could end up by to close to 12%. Yes. Okay. Thank you, sir. That is it from my side. Welcome. Thank you. Participants, to ask a question, you may press star and one. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touchtone telephone. Next follow-up question is from the line of Amlan Jyoti Das from JP Morgan. Please go ahead. Yeah. Thank you, sir, for the follow-up. I remember a couple of years ago you mentioned in your annual report that you were focusing exclusively on the non-U.S. markets and international business. Has there been any significant development in that to cancel this double-digit growth that we're seeing? How sustainable do you think this is? This is quite sustainable. More than sustainable. Yeah. We are seeing good double-digit growth. This will continue. That you would like to highlight? See, the thing is, U.S. is so big that everything else, even if they grow very high, it will not really move the needle for the next two years. There are some countries on a low base, they continue to grow in very healthy double digits. But they're on small base. Like Germany, grows by 35%-40%, but it's so small that I don't feel like talking too much about it. Might not be a good use of our time right now. Even in Chile and Australia, we did well. Yeah. Chile and Australia both are big markets for us, and they have been doing well. Okay, sir. Sir, my last question is on the gross margins. We see an improvement on the gross margins this quarter. Sir, any particular reason for this, and how do you see the margins sustaining in the near term, in FY 2027 and FY 2028? In quarter one, there were three, four reasons. One is that, as we discussed, our trade generic, the growth was lower, and our prescription business did really well. There was also impact on account of currency, because U.S. and other markets, even in Australia also, the currency supported us. Overall, the mix was better for us because of lower trade generic business and also support from the currency side helped us. For the full year, we maintain the same guidance because there may be some impact on account of API price increases, which we have already seen. But since we had inventories, old inventories at old rates, so the impact was not that high in the current quarter. But in subsequent quarters, there will be impact because of API prices. We maintain the same guidance of 66.5%-67% of gross margins for balance part of the year. Got you. Thank you, sir. Thank you very much. Yeah. Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for the closing comments. Thank you, Yusuf, and thank you everyone for joining today's call. Should you have any follow-up questions or require any clarification, please feel free to reach out to us. Thank you. Have a pleasant weekend as well. Thank you, ma'am. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.