Gland Pharma Ltd Q2 FY27 Earnings Call: Approves Rs. 1,000 Cr Brownfield Capex, PAT Surges 58% YoY

Broad-Based Beat: Revenue, EBITDA and PAT All Accelerate

• Q2 FY 2026-2027 revenue of Rs.18,336 million (+23% YoY) — driven by CDMO momentum, recent product launches, higher volumes from existing products, and continued customer demand in the US and Europe.
• Q2 EBITDA of Rs.4,804 million (26% margin vs ~21% in Q2 FY26) — adjusted EBITDA excluding Rs.226 million non-cash ESOP expense was Rs.5,030 million (27% margin).
• PAT of Rs.2,908 million (+58% YoY, ~16% margin) — H1 FY 2026-2027 PAT at Rs.6,077 million (+52% YoY vs Rs.3,992 million, 17% margin).
• H1 FY 2026-2027 revenue of Rs.36,339 million (+21.4% YoY) — adjusted EBITDA Rs.10,132 million (28% margin) vs Rs.7,092 million in H1 FY26.
• Gross margin at 63% in Q2 FY27 (64% in H1) — flat YoY, supported by productivity improvements, manufacturing optimization, alternate sourcing and yield enhancement; sequentially, gross margin declined to 63.5% from 65% in Q1 FY27 on lower Cenexi revenue, a comparison management said is distorted by a one-month Cenexi shutdown and advised benchmarking against Q2 FY 2025-2026 instead.
• Effective tax rate ~33% in Q2 FY27 (~30% in H1) — elevated because Cenexi shutdown losses are not eligible for current or deferred tax benefits; management expects ETR normalization as Cenexi turns profitable from Q3 FY27 onwards.
• Net cash of ~Rs.32,216 million as of September 30, 2026 — H1 operating cash flow Rs.6,027 million; working capital days improved to 158 on inventory optimization.

CDMO Now ~45% of Revenue; US Base Business Grew ~42%

• CDMO revenue of Rs.8,227 million in Q2 FY27 (+31% YoY, ~45% of total) — H1 at Rs.17,142 million (+25% YoY, ~47% of consolidated); secured manufacturing contracts for both microspheres and respiratory products during the quarter.
• Critical injectables revenue of Rs.10,109 million (+18% YoY) — H1 at Rs.19,197 million (+18% YoY); management highlighted CDMO's growing contribution to revenue quality, customer stickiness and long-term visibility.
• US revenue of Rs.11,795 million in Q2 (+42% YoY) — H1 at Rs.21,605 million (+37% YoY); 4 products launched in the US during the quarter; growth is almost the same whether Cenexi is included or excluded (Executive Chairman Srinivas Sadu).
• Europe and other regulated markets revenue of Rs.4,110 million (+23% YoY) — H1 at Rs.8,598 million (+17% YoY).
• Rest of world revenue of Rs.2,044 million — impacted by delay in announcement of the Nupco tender reserve from Saudi Arabia; India revenue Rs.387 million for the quarter.
• Cenexi Q2 revenue of EUR 41 million with EBITDA loss of ~EUR 6 million — primarily due to planned annual shutdowns; profitability expected to be restored from Q3 FY 2026-2027 onwards.
• CDM0 margins run ~5-10% better than own injectables — per management, because the own business includes lower-margin India and ROW revenues while CDMO serves mostly regulated markets; Cenexi revenue is recorded 100% within the CDMO segment.

Utilization at 92% Forces Accelerated Brownfield Build

• Newly approved Rs.1,000 crore brownfield investment (approval received Nov 6, 2026) — 3 additional isolator-based vial lines on top of the previously announced Rs.2,000 crore program over the next 4 years (through ~FY 2030-2031).
• Liquid vial capacity utilization already at 92% — only a further ~1-2% increase anticipated in FY 2027-2028, leaving insufficient capacity for recently signed contracts commercializing in 2 years (~FY 2028-2029).
• Total capex excluding greenfield of ~Rs.3,000 crore expected to add 300-400 million units — to the current 1.7 billion units; management affirmed an analyst's assessment of ~Rs.5,000 crore total capex over the next 4 years, including an assumed ~Rs.2,000 crore greenfield component.
• Vizag SEZ greenfield initiated (land acquired) — a 4-year program through ~FY 2030-2031; full capex not finalized, with board approval expected in Q3 FY 2026-2027; to be built in a phased manner.
• Capacity tightness is acute — the company is struggling for capacity in ophthalmics, bags and even liquid vials, and is deferring shutdowns on a couple of lines because there would be no capacity to fill; an analyst question on whether high utilization risks lost revenue growth was cut short by audio issues and went unanswered.
• Capex is contract-backed — for the Rs.3,000 crore (lines + brownfield), contracts or forecasts are in place; some CDMO contracts carry take-or-pay terms, and several involve products transferred from already-commercialized sites.
• On track with the Rs.2,000 crore expansion program — additional bag manufacturing capacity awaits USFDA inspection, post which products could be commercialized to debottleneck existing supply constraints.

Second China In-Licensed Long-Acting Injectable Targets a $2bn Market

• Second China in-licensed product addresses a $2 billion market — still under patent, with commercial timelines of 3 years; it will be manufactured entirely in China, with Gland Pharma conducting the clinicals and acting as the commercial partner while the partner does development and formulation development.
• Contrast with the first in-licensed product ($800 million market, referenced in Q1 FY 2026-2027) — that product will be transferred to India and manufactured by Gland Pharma; both are long-acting injectables under patent in different therapeutic areas, with the newly signed product addressing the larger market.
• GLP products: some revenue expected in FY27 from tech transfer projects — milestone income and tech transfer fees, including one more project signed recently with exhibit batches underway; product launches may begin in Q1 or Q2 of FY 2027-2028; management is not providing quantitative guidance for these products.
• Three royalty-based microsphere projects signed — exhibit batches taken for one with two more in line; the initial couple of years will skew toward tech-transfer revenue, with revenues expected post FY 2029-2030.
• India in-licensing strategy targets the Indian market — management intends to bring innovative products to India (where it has little presence) rather than generics, citing access to Fosun's subsidiaries and several other companies as sources.
• New China-based CIO with a global mandate — spanning acquisitions (management aims to acquire a US biologic asset) and licensing of complex products from China; the China senior team will comprise 2 people (one business development person and one CIO).
• Q2 FY 2026-2027 milestone income of ~Rs.95 crores and profit share of ~Rs.202 crores — with 11% and 5% percentages cited alongside.

Cenexi Guidance Reaffirmed; Clean Inspection Record

• Cenexi FY27 guidance reaffirmed — the Q1 FY 2026-2027 guidance of €200 million at a high single-digit margin implies H2 FY27 of ~€111 million at an 18-20% margin; management said the lower Q2 number was already planned and is working with the same guidance, updating only if there is any change.
• Cenexi grew 11% in Euro terms in FY 2025-2026 (analyst-cited), but H1 FY27 largely flat — management's stated focus is on making Cenexi more efficient and profitable rather than growing the top line, with only minimum revenue growth planned.
• Cenexi profitability levers are cost-side — management said gross margin is not the right lens as costs are very high; the plan is to reduce headcount and invest in faster lines, though transition/shutdown periods during new-line installation will keep revenue growth muted.
• USFDA: Vizag oncology facility completed with zero observations — the Dindigul facility inspection (October) concluded with 4 procedural observations, no data integrity or repeat observations.
• Post-Cenexi M&A discipline — Cenexi remains loss-making 3 years after acquisition; management indicated it would likely avoid a loss-making or very low-EBITDA asset even at a higher price, and, finding US plants easier to run than European ones, the focus is not to buy anything in Europe.

FY27 CC Guidance Held at 15%; R&D Stepped Up to 6% of Revenue

• FY 2026-2027 full-year revenue growth guidance maintained at 15% CC — CFO Ravi Mitra noted currency impact is difficult to predict and expects ROW markets to improve in H2 FY 2026-2027.
• US growth expected to sustain in H2 FY 2026-2027 — driven by new product launches and newer CDMO business, with no lumpiness or one-off revenues; methyl penicillin suspension (a generic of Pfizer's Medrol) approval was flagged as a large product, and a bunch of CDMO projects including GLP-1 projects are slated for launch.
• FY 2027-2028 growth drivers outlined — new launches will contribute ~6-7%, with the remainder from growth of existing products and new contracts signed in the US and other markets.
• Regular (non-CDMO) business grew ~18% in H1 FY 2026-2027 — management expects CDMO to continue outpacing the regular business going forward.
• R&D spend of Rs.1,077 million in Q2 FY27 (6% of revenue) vs Rs.772 million in Q1 — H1 cumulative Rs.1,849 million (5% of revenue), focused on complex injectables (suspensions, peptides, hormones, ophthalmic solutions); management expects a slight increase in R&D spend over time (period unspecified) but committed to keeping margin levels intact at current levels.
• FX quantification declined — management declined to quantify CC growth for Q2 or H1 FY 2026-2027, noting ~80% of revenue is exports invoiced at invoice-date exchange rates while imports are also largely dollar-denominated.
• Leadership additions — new CEO Deepak Sapra joins on November 16, 2026; Ajay Sahni joined as President of Cenexi Operations, alongside a new head of tech transfer, two senior project management hires, a head of strategy and innovative medicines in India, and a China-based business development head.