Sun Pharmaceutical Industries Limited (SUNPHARMA) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Sun Pharma's Q4 FY26 Financial Results 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 this conference, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Dr. Abhishek Sharma, Vice President and Head of Investor Relations and Strategic Projects. Thank you, and over to you, sir.

Thank you. Good evening and a warm welcome to our fourth quarter and full year FY26 earnings call. I am Abhishek from the Sun Pharma Investor Relations team. We hope you have received the Q4 financials, the press release, and the earnings presentation that was sent out earlier in the day. These are also available on our website. We have with us today Mr. Dilip Shangvi, Chairman, Mr. Kirpi Ganotkar, Managing Director, Mr. Alok Shangvi, Chief Operating Officer, Ms. Jayashi Satagopan, CFO, and Mr. Richard Ashcroft, CEO, North America. Today, the team will provide an update on financial performance and business Thank you. Welcome to our exchange filings and discuss these in the recent investment policy. Since Organon remains a public-listed company, today we will not be taking any questions regarding Organon's business performance, including recent quarterly results. The discussion today might include certain forward-looking statements and these must be viewed in conjunction with the risk that our business faces. You are requested to ask two questions in the initial round. I also request all of you to kindly send in your questions that may remain unanswered today. I will now hand over the call to our CFO, Ms. Jayashree Satyapur.

Registering a growth of 13.6% vis-à-vis Q4 FI25. Gross margin was at 80.8% for the quarter, higher than the same period last year, largely on account of better product mix. EBITDA for the quarter was Rs. 39,542 million, an increase of 6.4% over Q4 last year. EBITDA margins came at 27.1%, lower both on year-on-year, which was 28.7%, and on a quarter-on-quarter, which was 31.9%. Forex gain for the quarter was Rs. 4,268 million, ex-forex, EBITDA margins were lower quarter-on-quarter due to several factors, including lower milestone income, some seasonality, reduced contribution from lenalidomide in Q4 versus Q3, and higher spend in certain geographies, including U.S. Some of these spends were elevated for the quarter, and we should see it normalizing in the subsequent quarters. Reported net profit after tax for Q4 FY26 was Rs. 27,140,000, while adjusted net profit for the quarter was Rs. 27,507,000. Earnings per share for the quarter was Rs. 11.31 per share. Effective tax rate for the quarter stood at 22.3% vis-a-vis 19.8% in Q4 of FI25 and 24.3% in Q3 of FI26. Balance sheet continues to be strong with a net cash of $3.2 billion at the consolidated level. Now, we will discuss the full-year FY26 performance. For the full-year FY26, sales were Rs. 582 million, a growth of 11.9%. Gross margin was at 80.2% for the full-year FY26. EBITDA came in at Rs. 177,314,000, a growth of 16.1% with a resulting EBITDA margin of 30.3%. Adjusted net profit for the full year was Rs. 124,015,000. The Board has approved a final dividend of Rs.5 per share for the year FY26. This is in addition to the interim dividend of Rs.11 per share, taking the total dividend for the year to Rs.16 per share. This is same as prior year FY25. I will now hand it over to Keith T, who will share the performance of our global innovative medicines, business, and the India business.

Medicine. In Q4 FY26, our innovative medicine sales were up to 4 million. Medicine sales for the full year FY26 were 1,400. This business accounted for the performance of this business in unit continues to be driven by growth across India and other products. The formula is $26 million, having growth of 16.7% for the year. This does not include in-market sales of our alliance. India formulations were $59 million for the quarter, recording a growth of 14.8%. The inflation sales for the full year were Rs. 192,904 million, recording a growth of India. The sales accounted for 33.2% of total glutein injection. The term is ranked number 2450 billion. For the previous this year, we have seen the highest gain in market share. For the quarter ending March 26, we grew higher than IPM, which is the key growth factor. The SMSRC November-February 26 report, we continue to be the number one company.

Let me now take you through our R&D initiatives. We continue to invest in building a R&D pipeline for both the global generics and the innovative medicines business. Consolidated investments towards R&D for FY26 stands at 9,757 million or 6.7% of sales. Innovative R&D accounted for 36.9% of our total R&D spent. We expect high single-digit consolidated top-line growth for FY27 based on our current understanding of the regulatory and macro environment. We expect our FY27 R&D spend to be 6% to 7% of the sales for the next year. Acquisition, we have set up an integration management office and have initiated activities for day one preparedness. The regulatory filings in various markets, we expect the acquisition to be completed in Q4 FY27.

That's the end of our prepared remarks. Operator, if you can.

Certainly. 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 touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Kunal Damesha with Macquarie. Please go ahead.

Hi, good evening, and thank you for the opportunity. First question for Richard. If you could share some initial print on Unlock Citron's, you know, how has been the doctor's experience with the product, and where is the product making it smart, you know, on efficacy, safety side? And a related question on that, within the competitive landscape, do you expect one of the competitors to kind of vacate the Part B channel eventually, given their new dosage form? That's the first question.

Good question. Thank you. Yeah, the receptivity attributes of online provides balance.

Thank you for that update. Second one for QT, sir, on the semaglutide nuance in India. I think the data agency, which is primarily tried the secondary sales data, where our market share, at this point in time, are not in the top three, where we are in anti-diabetic, we are in top three, right? But in terms of prescriptions here, how is that market planning for us, and where do you see, you know, we be in that market, let's say, from a one-year-down-the-line perspective? And sir, any clarity on will we be there in the oral semi-glutine market anytime soon?

For oral, we have completed the clinical study, and once we get approval...

Sure, sir. Thank you and all the rest.

Thank you. Our next question is from the line of Surya Patra with Philip Capital. Please go ahead.

Thank you for this opportunity, sir. My first question is on the sequential drop in the margin. Ma'am, in the opening remarks that you mentioned about a couple of first elements... Am I audible? Sorry.

Yeah, yeah, yeah.

So, a sequential drop in the margin, that was my question. So, and how much of this drop is because of, let's say, RebLimid driven and hence can continue going ahead?

So, the impact of RebLimid in this is relatively small.

Okay. And any one-off cost component that is sitting in the other expenses map, and can you quantify that, which may not be recurring?

No, there are multiple small items that have together come up to this level. That is why I was also mentioning you should see some amount of normalization as we go forward.

Okay, okay. Second question is about, although we are not discussing organ and acquisition-related aspects, and I'm not asking anything about that, but in what way, see, I think both are equal-sized businesses. So, if you can give some sense that in what way the base business of Sun Pharma can be complemented, for example, like the cross-selling opportunity, that would be a kind of a common thing. But apart from that, what other factors or what other complementing aspects that we can see for Sun Pharma's base business because of that integration?

I think we have done a presentation on Organon where in detail I have discussed about how the business complement each other. But I think there are four parts of business where biosimilar is a new addition. And the established brand, which is not growing, but which is the 50% of Organon, complements with the branded generic business what we have. And the women's health is an innovative business, which will also add to our innovative business, and our innovative business contribution, both combined together, goes to 26-27%. So, in my opinion, it's a complementary, because we don't have even product overlaps, very negligible product overlap is there, and biosimilar is a new addition. So, what gets added is a women's technology, and some parts.

Sure, sir. Just last one question, if I may ask. So, we have obviously seen a kind of good progress in Illumia outside of the U.S., and that is what we have seen the trend also for the global sales business. So, can you provide some incremental outlook for the global sales business or global innovative business outside of the U.S.? And which other products possibly can see commercial launches outside of the U.S. from the innovative basket?

If you remember a couple of quarterbacks, I said like Illumia, we launched in 35 countries, now it has gone to 40 countries, and it is helping us to grow. At the same time, even the other non-Illumia portfolio is also continuing to grow, and we see that they are adding to the overall growth of the market ex-US. Say the innovative medicine part of the business, either you look at US or ex-US, it is helping us to grow further.

Thank you.

Thank you.

Ladies and gentlemen, to ask a question, you may please press star and one. Our next question is from the line of Neha from Bank of America. Please go ahead.

Yeah, thanks for taking my question. Dick, a quick question on the U.S. speciality business. Would it be fair to assume that the, you know, growth that you are seeing in speciality in the U.S. so far, or let's say in FI26, is largely driven by Illumia? And my second part to the question is, as we think about 27, 28, you know, do you think that, you know, the Illumia growth, given the base sort of slows, And, you know, you see a much larger growth from newer launches, particularly Lexelvy and Unloxit. A portfolio excluding Lexelvy, let's say, you know, WinLevy particularly, you know, we changed our strategy there. The prescription data seems to be showing a very good traction. You know, how much more room do you think that has, you know, with this change in strategy? This is just the beginning, and, you know, we think there could be a much steeper improvement in WinLevy as we go through the next two years.

We continue to see growth based on the model that we've adopted, and we also continue to see good growth of CEQA, a product that you didn't mention, where we think that will continue for the next years as well.

Okay. And last on Lex LV, you know, how are you thinking about, I mean, based on your conversation with formulary partners, you know, is it, you know, is market formation becoming a little more easier? You know, how do you think we should think about this product, you know, ramp up of this product, given what we are seeing on the competitive landscape, you know, with one of our competitors sort of slowing down on promotion, a likely new competitor coming in?

Yeah, I think there are a couple things in that question. You know, first of all, we have continued to improve our access position. So as of April 1st, we have a majority of access. Now, petition is a good thing for patients to have. The best products are still patients that don't respond.

So that's very helpful. One other question, if I may. If I look at the emerging market business, you know, obviously there's currency tailwind there, but, you know, do you think SEMA could be a big driver for emerging market growth for, you know, Sun Farmer in 27-28? We haven't talked about, you know, too much information there, but just, you know, qualitatively, do you think that could be a big driver either this year or next year? Understood. Thank you so much.

Thank you. Participants who wish to ask questions may press star and 1. Our next question comes from the line of Girish Bakhru with OrbiMed. Please go ahead.

Yeah, hi. Thanks for taking my question. Just some commentary on biosimilar Stellara impact. I know it's in a different channel, but discounts are very heavy, almost going to 90%. And there have been significant formulary exclusion of branded Stellara. Has that changed anything for you, for Illumia, in terms of formulary positioning and general commentary on the market share, Richard, but there is no cross-referencing of pricing, let's say. Does it not change gross to net for you in case a cheaper option is available in the other channel? Would PARP B not negotiate on that front?

It does not. PARP B drugs are not negotiated under that regimen.

Understood. And second one on Unlocksit, I know it's still early, but can you share how many accounts have you got on boarded, given this is an IB product? Understanding its positioning will be very different from how Excel will be marketed.

It is continuing to work with the, not just infusion centers, but the academic centers, as well as the integrated health delivery systems. We're not providing guidance on specifically what number of accounts have or haven't signed contracts, but we are seeing good uptake, particularly with cancer centers, and we are seeing repeat purchases from those centers as well.

Just a ballpark, would you be able to tell how many key priority accounts are there, and how many would you target? Because last call, you mentioned you will only look for new patients. So is it something that you would go only with a limited distribution, or would you actually compare it with other peers?

No, it's not. We don't have a limited distribution model because this product is largely used in institutions.

Thank you. Our next question comes from the line of Abdul Qadir Puranwala with ICICI Securities. Please go ahead.

Yeah, hi, sir. Thank you for the opportunity. So my first question is with regards to your specialty products under development and specifically to MM2. So, we're now planning for, you know, a partnership. So, exactly, you know, if you could highlight, you know, which markets are we looking for this partnership and, you know, in terms of the front end, you know, what is the kind of field force which would be required for this particular, you know, with the partner or in select markets like U.S. and Europe?

No, I think we have stated this, for US market, we are looking for a partner for developing MM2 further.

Okay, and so would it be fair to assume that the same would happen for the type 2 diabetes drug as well, once you complete the phase 2?

Yeah, I think the idea is that in larger market where we will require a large field force to promote, we would look for a partner. In some of the emerging markets and in other geographies, we would look at marketing the product ourselves.

Got it. Thank you.

The next question is from the line of Dushar Manudhane with Motilalo Swal Financial Services. Please go ahead.

Thanks for the opportunity. Dilip sir, I would like to ask you on this generics business, while there is a great franchisee that has built on the innovative medicine portfolio and the R&D scope has been pretty strong, but somewhere generics business sort of have sort of struggled to grow. Just would like to understand, you know, what has been the major reason for this, is it the The compliance, because the R&D has been pretty strong, and that could have also led to a generic pipeline, while allocating whatever money for the innovative medicine. So, if you could just highlight, you know, what's happening with the generic business?

No, I think part of the question you answered yourself is that because of the compliance issue, we haven't been getting approval. And as all of your, let's say, business rising pressure will mean an investment.

Is there any thinking in terms of, you know, while maybe the existing sites, compliance issue might be probably taking some more time or longer time. So we sort of built new facilities with the, let's say, the latest equipment so that the compliance issues are behind and hence we have a renewed look at the generics business. So, are we in the process of setting up greenfield for U.S. Gendrix in Pacific is what I was trying to ask.

So, Shad, we are referring to the Madhya Pradesh plant that is coming up.

Yeah, yeah, I mean, just conceptually, so, I'm just trying to think through that while the compliance issue has sort of impacted our business for a pretty long period of time. But I just wanted to understand that is the Gendrix outlook promising enough that we can, you know, look for a newer facility so that we have a compliance in place. And hence, the growth prospects remains, you know, strong, or are we sort of questioning it, generates industry prospects.

LNG, I mean, I think it's a facility being set up for...

Just one more, if I may. So, this facility, sorry for my ignorance, so this will have what kind of dosages in terms of overall quality, the indicables.

Thank you. The next question is from the line of Kunal Damesha with Macquarie. Please go ahead.

Hi, thank you for the follow-up. One for Dilipai. On the R&D front, we are guided for 67% as percentage of revenue. So, in terms of the broader split between the innovation and the general spending, should we assume it in line with the historical track record of 40-60?

So, I think you must have seen that both the last quarter overall, also the overall... I think we have an active life cycle management approach with residual IP rights.

Sure. Thank you for that. And one for Jayshree, ma'am. On the intangible asset increase, I think, is it related to the commercialization of the two molecules and hence asset increase? So how to think about that? Or is there some milestone payment which we have capitalized?

You are right. This is relating to the commercialization of these two molecules.

So, let's say work in progress intangible has been classified as the intangible asset. Is it correct to understand?

For Lexelby, yes. For checkpoint, it was never understood.

Sure. Thank you and all the rest.

Thank you. The next question is from the line of Vishal Manchanda with Systematics Group. Please go ahead.

Yeah. Hi. Good evening, everyone. In FI27, I think we don't have a large specialty launch. So, is it fair to expect that the operating cost growth will moderate in the current year and we should see operating leverage kicking in?

We'll be investing in Luxorby and Unloxet.

Lines with respect to how should we see these launches happening in Europe and other markets, Unloxet and Luxorby?

I think we're not factoring any sales out of this product in any geographies other than the U.S. this year. If there is, we will guide both for filing as well as up to work.

So, is it markets are not large enough or will we need to do additional trials here and we are probably thinking about it?

No, I think sometimes you have to, the filing itself requires a certain time because you have to recognize that these are products that we license from somebody. So if the, and they only wanted to put in the US data to recalibrate from pitting products, they do quite well in other geographies.

Understood. And just on the generic business, do we expect any re-inspections, maybe at Basca or Halol this year? One more question on Vinlevy, the innovator company has done a trial on androgenic alopecia, and they have got positive data. Does, would San have any right of first refusal here?

Since this is a pipeline question, we won't be able to answer it.

Thank you. The next question is from the line of Shashank Krishnakumar from MK Global. Please go ahead.

Hi, thanks for taking my question. I just wanted to check on Lexel. I think one of our competitors is likely to get an approval in Europe for adolescents. I just wanted to check where we are in terms of targeting that patient group. If I'm not wrong, I think we're still in phase three for adolescents. Just wanted to check. And a related question is on Levulon. I think there, again, I think one of our competitors has filed for the SBCC indication. Are there any plans to sort of also try and target that indication with Levulon?

Yeah, we do have an active phase 3 trial underway for Lexelvi in adolescence. You're correct. And, yes, along with the rest of the portfolio, we let Levulon. We're actively looking at a number of different potential LCM opportunities.

That's helpful. And just one clarification. I think in our opening remarks, we mentioned that this quarter was higher spending in the U.S., which would sort of normalize. So, was this largely launch-related spend in the U.S.?

Let me clarify. The higher spend was on account of several factors in various geographies, including the U.S. So, it is not only in the U.S.

Thank you. The next question is from the line of Sayon Mukherjee with Nomira. Please go ahead.

Thanks for taking my question. I think last year we guided around 100 million spend on new product launches for initial promotional spend. So have you spent that amount? Was it more or less? How much was the spend last year? And how should we think about that going forward? I think the question is related to, you know, tariffs. I think in April, after Section 232 investigation, there was an announcement of tariffs on branded innovation drugs. So, have you made an assessment on whether it impacts Sun in any way, if you would like to quantify or get some color around it?

Yeah, the President did announce in April the resolution of the 232 investigation laid out of time.

Any negative impact on the call sometimes? This is the 27th.

Fortunal impact.

Thank you. Participants to ask a question, you may press star and 1. Our next question is from the line of Damayan Dikirai with HSBC. Please go ahead.

Hi. Thank you for the opportunity. My question is regarding your EBITDA margin trajectory. So, you mentioned you will continue to invest in the new launches of AlexaV and AlexaV in the U.S., etc., and you have given R&D guidance. So, moving from, say, fourth quarter base, how should we assume EBITDA margins to move ahead, directly?

So, as you know, we do not guide on the margins. However, the expenses relating to UnlockSit and Lixilbi has been factored in the plan for the year.

So, that could be ongoing expense for you?

Yeah. Just to clarify, Damayanthi, we are not guiding whether they will be lower, same, or higher versus last year. I'm trying to say that last year we provided an explicit guidance, this year we are not providing.

Sure. And can you indicate your effective tax rate for next year and beyond?

Yeah, we expect the effective tax rate to be in the range of 25%.

25%. Okay. Thank you.

Thank you. Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to the management for closing comments.

Ladies and gentlemen, questions that have remained unanswered today, you can reach out to the Investor Relations team. Happy weekend to all of you.

Thank you. On behalf of Sun Pharma, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.