Piramal Pharma Ltd (PPLPHARMA) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to Piramal Pharma Limited Q2 FY '27 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 star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gagan Borana, Associate Vice President, Investor Relations and Enterprise Risk Management. Thank you, and over to you, sir.
Gagan Borana (Piramal Pharma Ltd): Thank you, Shaurya. Good morning, everyone. I welcome you all to our post-results earnings conference call to discuss our Q2 and H1 FY '27 results. Our results material have been uploaded on our website, and you may like to download and refer them during our discussion. The discussion today may include some forward-looking statements, and these must be viewed in conjunction with the risks that our business faces. On the call today, we have with us our Chairperson, Ms. Nandini
Gagan Borana (Piramal Pharma Ltd): CEO, Global Pharma, Mr. Peter DeYoung and our CFO, Mr. Vivek Valsaraj. With that, I would like to hand it over to Ms. Nandini Piramal to share her initial thoughts.
Nandini Piramal (Piramal Pharma Ltd): Good morning, everyone and thank you for joining us on our post-results earnings call. We delivered a strong performance in Q2 and H1 FY '27, with broad-based contributions from all three businesses with a significant improvement in profitability. In Q2, revenue grew by 28% year-on-year to 2,617 crores, while EBITDA increased 72% to 385 crores. For H1, revenue grew 23% to 4,887 crores, with EBITDA increasing 72% to 669 crores. In our CDMO business, performance was supported by demand across India and overseas sites, improved execution and a sustained build-up in RFPs and orders. Our Complex Hospital Generics business continued to perform well, supported by growth in inhalation anesthesia in the rest of world markets and the initial contribution from Kenalog. In Consumer Healthcare, power brands and e-commerce continue to perform well, supported by portfolio premiumization and expansion across channels. More importantly, the strong top-line growth translates into significant improvement in profitability. Better capacity utilization and operating leverage, supported by disciplined execution and continued focus on productivity and cost management, enabled us to expand EBITDA margin by more than 350 basis points in both Q2 and H1 FY '27. We achieved this performance while maintaining a rigorous focus on quality and regulatory compliance. On H1 FY '27, we successfully completed 12 regulatory inspections and 110 customer audits. Since FY 2012, we have successfully cleared 427 regulatory inspections, including 51 US FDA inspections with No Official Action Indicated classifications across our US FDA inspections. Moving on to business-specific highlights. Starting with our CDMO business, revenue grew 36% year-on-year to 1,424 crores in Q2 FY '27. For H1, revenue increased 28% to 2,611 crores, reflecting robust growth across the network sites. Profitability in the CDMO business also improved meaningfully during the period, driven driven by robust revenue growth, better capacity utilization, and operating leverage, particularly across our India and North America sites, along with disciplined execution and cost management. We continue to see an increase in RFP activities and order flows across network sites, helped by sustained recovery in biopharma funding and and enhanced commercial team. The sustained buildup in RFPs and orders provides greater visibility going forward. Supported by this order momentum, and with H2 typi- typically stronger than H1, we expect this growth momentum to continue throughout the year. During H1, we added 22 new customers and successfully cleared 110 customer audits. Further, during H1 we witnessed meaningful progress across multiple key metrics, which included: over 50% year-on-year growth in ADC revenues, 39% year-on-year growth in revenues from on-patent commercial manufacturing, contribution from innovation-related work moving to 49% compared to 46% in H1 FY '26, and an increase in Phase 3 molecules from 25 as of March 2026 to 28 as of September 2026. We are also strengthening our differentiated capabilities across the CDMO network. We acquired a controlling stake in Yapan Bio to expand our biologics platform, while capacity and capability expansions at Riverview for high potency APIs completed, and at Lexington for sterile fill finish progressing as per plan. Contributions from differentiated revenues to our CDMO business increased to 43% compared to 40% at the end of the last financial year. Moving on to our Complex Hospital Generics business, revenue grew 32% year-on-year to 849 crores in Q2 FY '27. For H1, revenue increased 24% to 1,592 crores, reflecting good traction across existing portfolio and initial contribution from Kenalog. In inhalation anesthesia, we maintained our leadership position in the US Sevoflurane market with a
Nandini Piramal (Piramal Pharma Ltd): 8% in value share. We also witnessed a healthy pickup in sevoflurane sales across the rest of world markets. In intrathecal therapy, we retained our number one position in intrathecal baclofen market. In injectable pain management, we're ensuring availability of our products with focused supplier collaboration. Kenalog sales contributed to thesis revenues during the quarter. Kenalog is a good fit for a complex hospital generics portfolio and will be an important growth catalyst for FY 27. We are currently working towards transitioning of the Kenalog manufacturing to a new CMO, and are accordingly actively advancing the associated regulatory approvals. Looking ahead, continued expansion in market share, inhalation anesthesia segment in the rest of the world markets and contributions from Kenalog are expected to support the business throughout the second half. We continue to invest in building a portfolio of differentiated and specialty products through 505(b)(2) opportunities, complex generic, branded products, in-licensing and co-development. These investments are aimed at strengthening the long-term growth profile of the business. Moving on to consumer healthcare business, revenue grew 13% year-on-year to 359 crores for Q2 FY27. For H1 FY27, revenue increased 14% to 706 crores, led by continued traction in our power brands and e-commerce channel. Our power brands grew 21% year-on-year during H1 and contributed to 53% of consumer healthcare sales. E-commerce delivered a 32% growth and accounted for 28% of sales, reflecting the increasing importance of digital channels in our portfolio. We are sharpening our innovation strategy by prioritizing fewer, larger, and high potential launches. Portfolio premiumization also remains a key focus with a richer mix of higher margin products. During the period, we introduced a visible range under Lacto Calamine to address the growing demand for premium skin care products. We continued to support our brands through focused investments in media and trade promotion across digital and traditional channels. During H1, these investments represented approximately 11% of consumer healthcare sales. We are also strengthening our multi-channel distribution network with a presence across 180,000 chemists and cosmetic outlets, over 13,000 modern trade outlets and more than 20 e-commerce platforms. Our focus remains on increasing reach across smaller towns, modern trade and non-chemist channels. The sales and distribution agreement with Bayer will expire naturally at the end of its term in December 2026. We are working jointly to ensure an orderly transition with minimal disruption. Given the low-margin nature of the arrangement and the continued growth of our brands, we do not expect expiry to have a material impact on our FY '27 outlook. Going forward, the continued scaling of our power brands and e-commerce, together with portfolio premiumization and channel expansion, is expected to support growth and margin improvement. Overall, our first-half performance and the progress across all three businesses has strengthened our con- confidence in the full-year trajectory. As has been the trend in prior years, we expect H2 to be stronger than H1. In CDMO, the sustained build-up in RFPs and orders provide greater visibility going forward. In complex hospital generics, existing portfolio, continued expansion in rest-of-the-world markets, and contribution from Kenalog are expected to support performance. In consumer healthcare, power brands, e-commerce, portfolio prem- premiumization, and channel expansion remain key growth drivers. Given this broad-based performance and the outlook for the second half, we are upgrading our FY 27 annual guidance. We had earlier guided to early-to-mid teens revenue growth with EBITDA to grow faster than revenue. We now expect an annual revenue growth of approximately 19% to 20% with a meaningful higher growth in profitability. We remain focused on executing against the opportunities across our businesses, improving capacity utilization, and mint- maintaining discipline around productivity, cost, investments, and quality. With this, I'd like to open the floor to Q&A. Thank you.
Moderator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headsets while asking a question.
Moderator: The first question is from the line of Sajal Kapoor from Antifragile Thinking Limited. Please go ahead.
Sajal Kapoor (Antifragile Thinking Limited): Yeah, hi. Thank you for the opportunity. And a better set of numbers, team. So, congratulations for that. Couple of questions. Peter, in Q1 earnings call last time around, you said big pharma isn't really showing a preference for nearshoring and that the RFP pick up was kind of broad-based. Add to that, we know that select India-centric CDMOs are actually winning and growing US customer relationships without a comparable western manufacturing footprint. So, what does the western manufacturing footprint whether it's UK or US you know that India many Indian companies haven't got, what it gives us today? And and if we were to sort of redeploy all of that capital fresh without any baggage of hindsight, will we be repeating the exact footprint that we have today or we would rather do something different? Thank you.
Peter DeYoung (Piramal Pharma Ltd): So, I think thank you for your question and your your positive remarks about our near-term performance and outlook. I think the perhaps the comment may have may have been miscommunicated or it may have been mis- interpreted. We were trying to say that we have a broad-based demand for our services across our network, and I was trying to give the fact that it was not a one-off in terms of one geography or one capability, and so the intention behind the comment was to say that we are getting interest in the North America, but and also our UK, and also our India, and we're getting interest across our differentiated offerings in in addition to ADC. So, it was an attempt to kind of say that it's not a single piston or engine firing, it's multiple pistons or engines, to use the analogy. So, I think that's the the first point. The second point, I would say is that the North America region in this period so far this year has been performing ahead of prior years and ahead of plan for us across all of the sites, and so we're seeing a uptick in that demand. And again, I want to make that the the the additional comment that it's not at the expense of the India region where we also have strength, for example. And so, what we're trying to give is a concept of balanced growth. And we are seeing significant client interest in considering North America offerings, and that's showing up through a few dimensions. The first would be RFP inflow, which is up. The second would be order booking, which is up. And the third would be in our revenue realization from those orders, which is also up. And so, we think that actually this is the a period where the multi-geography strategy is being validated because we have the assets in place with the track record, so that when customers are considering, whether they be large or biotech, on-shore offerings, we can provide them a credible alternative. And so, I think in fact, I would say that the on-shore offering is being validated by the current macroeconomic environment. And if we were to do it again, the only thing I would say our lesson is that fewer, larger sites in the US would have been a hindsight strategy that we are now applying to all future M&A, where we're going to try and look carefully about any site addition, that it needs to be above a minimum size, because when you do acquire smaller sites, you have a certain runway to get to the minimum scale. And if there's a macro downturn in that period, you can end up with a protracted time frame. And so, our big lesson would be not not US, it would be fewer, larger, if we were to do it, and I'm not saying we're committing to more M&A, I'm just saying that's the lessons we've learned from that experience.
Sajal Kapoor (Antifragile Thinking Limited): No, that's encouraging to hear, Peter, and thank you for that clarification. And second question is you know, setting aside what's already been invested, if you were deciding today whether to own Morpeth, given the UK losses and USFDA September observations and of course the exit exit costs there, I mean pension liabilities and whatnot. You know, what considering the cost of capital and return on capital from that perspective, what is the future for Morpeth from from here on?
Peter DeYoung (Piramal Pharma Ltd): So, we see in this increasingly global-local, I'm trying to use the right phrase, environment where people do want global capabilities, but they also want local capabilities, and in and in particular, for
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