Gland Pharma Ltd
NSE:GLAND
Earnings Call Analysis
Q3-2024 Analysis
Gland Pharma Ltd
The company reported a 65% year-on-year increase in revenues for Q3 FY '24, with a total of INR 15,452 million, compared to INR 9,383 million in Q3 FY '23. The core market, which includes the largest market, the United States, generated 77% of the total revenue, signifying a considerable year-over-year increase from 71%. The U.S. market individually experienced significant growth with a 12% quarter-over-quarter and 41% year-over-year increase.
The company continued to innovate by introducing or reintroducing 9 molecules during the quarter, which led to robust volume momentum for key new products. The ANDA filings, a measure of the company's pipeline strength, stood at 10 with 3 approvals, indicating ongoing efforts to expand the product portfolio.
EBITDA came in at INR 3,557 million with margins stable at 23%. However, a negative EBITDA was reported for Cenexi, a recent acquisition, due to one-time expenses and lower productivity. The organization is set to focus on restructuring Cenexi, technological transfers, and approval of new programs, anticipating a medium-term incremental increase in revenue of EUR 30 million to EUR 40 million.
The company is focusing on the CDMO space, where a shift in revenue upwards is observed due to new product transfers from other companies. Accordingly, a mid-teens growth target is set for the next 2 to 3 years. This growth is expected to be driven by opportunities in Rest of the World (ROW) markets, U.S. complex generics, and contract manufacturing for big pharma.
For the fiscal year '25, a 10% EBITDA margin is considered reasonable, reflecting management's confidence in the company's upcoming fiscal performance. This outlook, paired with strategic investments, suggests positive prospects for the company's profitability and value proposition going forward.
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Ladies and gentlemen, good day, and welcome to Q3 FY '24 Earnings Conference Call of Gland Pharma Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Gupta. Thank you, and over to you, sir.
Thank you, Sagar. Good evening, everyone. We welcome you to Gland Pharma Earnings Conference Call for Q3 FY '24. My name is Ankit, and I drive the investments, M&A and corporate strategy for Gland. I have Mr. Srinivas Sadu, MD and CEO; and Mr. Ravi Mitra, CFO, to discuss business performance and financial highlights for the quarter. We will begin this call with the business highlights by Mr. Sadu, followed by a financial overview by Mr. Ravi. Before we proceed, please note the safe harbor statement that we have on the press release. Some of the statements that we make today will be forward-looking and will be based on the current estimates that management has. These statements must be viewed in conjunction with the risks that are involved in our business. The call is being recorded, and the playback will be made available on our website shortly. We will also have the transcript in a week's time. I will now hand over the call to Mr. Sadu for his opening remarks. Thank you. Over to you, Mr. Sadu.
Thank you, Ankit. Good evening, everyone. Welcome to Gland's Q3 FY '24 Earnings Call. I extend my well wishes for your family's health, happiness and prosperity. May all of you with this a continued upturn in 2024, and we look forward to a prosperous year ahead. As in previous quarters, we intend to provide a comprehensive update on the stand-alone performance of Gland and the group's overall performance, including financial data from Cenexi, the CDMO we acquired in Europe. We have maintained our momentum with robust revenue growth in the third quarter. We reported revenues of INR 15,452 million for Q3 FY '24, an increase of 13% quarter-on-quarter and 65% year-on-year compared to INR 13,734 million in Q2 FY '24 and INR 9,383 million in Q3 FY '23. The quarter-over-quarter growth has been propelled by our consistent performance, increased volumes shipped in a stable pricing and environment and the introduction of new products. Furthermore, we recorded the company quarter sales of Cenexi. The core market generated 77% of revenue, year-over-year increased from 71% in Q3 FY '22. The company's largest market, the United States, witnessed a 12% quarter-over-quarter and 41% year-over-year growth. The company introduced or reintroduced 9 molecules in this market during the quarter. We witnessed robust volume momentum for key new products, including levothyroxine, ropivacaine, ketamine, octreotide and zinc sulfate. The pricing for the products we shipped in the quarter remained relatively stable, and we saw increased demand for several of our previously launched products. The performance in the ex U.S. primary markets remain consistent. Despite the longer approval process, we continue to identify products from our U.S. basket that has the potential to enter these regions, specifically in Australia and Europe.
The Rest of the World markets contributed 18% of our revenue in Q3 FY '24 compared to 21% in Q3 FY '23. These markets reported a 7% quarter-on-quarter increase largely attributable to Cenexi volumes. The Indian market contributed 5% of our revenue in Q3 FY '24 and experienced a 7% decrease compared to the corresponding period in the previous fiscal year. While building the other markets, we remain focused on strategically important products in India and will explore avenues for value creation. Our manufacturing sites remain operational with efficiencies, and we're committed to delivering high-quality products at scale with competitive costs and all-time compliance. We're conducting a facility upgrade activity on one of the lyophilization lines at our Dundigal flagship facility in Hyderabad. Consequently, this lyophilization line will remain non-operational for 2 weeks in March. There will be temporary supply disruption from this line; however, all the facility's other lines will remain operational. On the R&D front, total R&D expenses for Q3 FY '24 were INR 530 million, or 5% of operating revenue. We filed 8 -- sorry, 10 ANDAs during the quarter and received approval for 3 ANDAs. As of December 31, 2023, Gland and its partners filed 346 ANDAs in the United States, of which 279 were approved and 67 pending approval. The company has 1659 product registrations worldwide. Discussing consolidated profitability and EBITDA margin, we reported an absolute EBITDA of INR 3,557 million and a net profit of INR 1,919 million for Q3 FY '24. This quarter, EBITDA margins remained similar at 23%, primarily impacted by negative EBITDA margins at Cenexi. For Q3 FY '24, Cenexi reported a revenue of INR 4,439 million with a gross contribution of 75% and a negative EBITDA of INR 170 million. However, the business achieved EBITDA break-even on an adjusted basis, excluding some one-time expenses. An organizational restructuring exercise and changes to the pension provisions resulted in an effect of around EUR 2 million in the quarter ended December '23. In addition, lower productivity led to reduced overhead absorption and inventory resulting in lower EBITDA during the quarter. Our post-merger integration review is now mostly complete, and we identified areas where Cenexi would need investments, improvements and leadership recruitment across critical functions. Regarding the company's business, a reasonable confidence in Cenexi's current clientele and the partner's commitment for the long term. As for expansion, we have a solid order book of new programs that have been signed and are currently in various stages of tech transfer and approval. With these programs, we anticipate a medium-term incremental increase of EUR 30 million to EUR 40 million on our existing annual revenue base. Despite our investment and capabilities to support this expansion, we continue to face issues with operational performance and the timely execution of our existing orders. These operational issues are causing delays in supplies and augmenting a backlog of orders. These issues have mostly affected our quarterly performance, leading us to rebalance our capacity and shift certain products to different lines, which will take time due to regulatory processes. In addition, we'll invest in building new high-speed lines to replace the existing ones, automating processes to make them more efficient and ensuring compliance. Selective plans to realize this acquisition thesis over the next 12 to 15 months. We're confident that we'll end the fiscal year '24 on a positive note and continue to be excited about the opportunities ahead of us. I now hand over the call to our CFO, Mr. Ravi Mitra, who will share more insights about our financial performance for the quarter. Thank you very much. Over to you, Mr. Mitra.
Thank you, Mr. Sadu. Good evening, everyone. Thank you very much for attending our third quarter earnings call. Let me begin by sharing the financial performance of the third quarter and 9 months of the financial year 2023, '24. Revenue from operations increased by 65% compared to INR 15,452 million in Q3 FY '24. The consolidation of the Cenexi business acquired during the current financial year, contributed significantly to the year-over-year expansion of revenue, increasing our footprint in Europe. Revenue from operations for the 9 months of FY '24 stood at INR 41,273 million, a year-on-year increase of 45%. Our base business, which is ex-Cenexi, also grew 17% in this quarter over previous year and 9% over Q2 FY '24, driven by our increased performance in the U.S. market. Other income for the third quarter of FY '24 was INR 374 million, which largely includes interest on fixed deposit and is lower than Q3 FY '23, which was INR 615 million on account of lower interest income and forex gain. For 9 months FY '24, the other income was INR 1,281 million, of which interest on fixed deposit was INR 1,063 million and foreign exchange gains and operations were INR 154 million. With the gross margin for Q3 FY '24 was 61%, an improvement from 54% in Q3 FY '23 due to Cenexi's high gross margin. On the positive side, our base business has also witnessed an improvement in the gross margin over the last year due to product mix. We have reported an EBITDA of INR 3,557 million in Q3 FY '24 compared to INR 2,896 million, an increase of 23% compared to last financial year. The EBITDA margin of Q3 FY '24 stood at 23% compared to 31% for the previous financial year. For the base business, ex-Cenexi, we have reported the EBITDA margin for Q3 FY '24 at 34%, up from 31% in the same period of the previous year. We, however, reported a negative INR 170 million of EBITDA at Cenexi, primarily due to certain one-time expenses. On our base business operation, we managed to rationalize the power cost and manpower expenses during this quarter as compared to the same period of previous year. The EBITDA for the 9 months ended December 2023 was INR 9,744 million compared to INR 8,563 million for the same period last year, an increase of 14%. We have reported the EBITDA margin for 9 months in FY '24 at 24% for the group and 33% for the base business. During the quarter, we finalized the purchase price allocation exercise of Cenexi acquisition. The additional impact on depreciation and amortization on account of fair valuation of net assets for purchase price allocation amounted to INR 294 million and INR 377 million for the quarter and 9 months ended December 31, 2023, respectively. On a go-forward basis, Cenexi was reported depreciation and amortization of approximately INR 90 million to INR 140 million per quarter on account of purchase price allocation. Our net profit for the third quarter decreased by 17%, stood at INR 1,919 million compared to Q3 FY '23, and decreased by 1% to the previous quarter of the current financial year due to the reasons mentioned earlier. During the quarter, we recorded a PAT margin of 12%. During the 9 months of the current financial year, our PAT was INR 5,800 million at a 14% margin. The total R&D expenses for the third quarter were INR 530 million compared to INR 512 million for the same period of the previous financial year and stood at 5% of the revenue from operations on an ex-Cenexi basis. Total R&D expense for the 9 months were INR 1,337 million, which is 4% of our revenue. On a stand-alone basis, our effective tax rate was 25.5% in the third quarter and 25.8% for the 9 months of the current financial year. As of December 31, 2023, on a group level, we had a total of INR 24,795 million in cash and equivalents, an increase of INR 2,168 million over the previous quarter of September 30, 2023. Due to loans on Cenexi's books to the tune of INR 4,058 million as of December 31, our net cash position was INR 20,704 million. Cash flow from operations during the 9 months was INR 6,228 million. Working capital was reduced and stood at INR 22,805 million as of December 31, 2023 as compared to INR 24,010 million as of March 31, 2023 due to decrease in inventory levels. The average cash conversion cycle improved and stood at 182 days for the 9 months ending December 2023 as compared to 240 days of the same period last financial year. CapEx spend during the quarter is INR 810 million. At Cenexi, the plan of new high-speed ampoule line and new equipments for enhancing of capacity and operational efficiencies is progressing well. With this, I would request the moderator to open the lines for questions. Thank you.
[Operator Instructions] The first question is from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one is on the U.S. market and the sustainability of the revenue run rate, right? So we have done about INR 8.2 billion for the quarter. So I just want to understand what's driving that? I think your commentary talks about stable pricing environment. So is it largely driven by volumes? And are we in a position to sustain this quarterly run rate?
Yes, the market looks actually positive. The growth came from volumes by 8% and another 3% came from the new launches, but also Enoxa came back, and we're seeing an uptick of volumes. We're looking at a forecast of INR 19 million. I think last call, we said about INR 16 million, INR 17 million. I think we're seeing a higher demand from that market. Like I said, we're a little aggressive on the pricing. Also, the material price have gone down. So we have revised the pricing and to go after the business. And also, the several molecules, where you might have seen -- oncology products got launched, which are higher value. So the momentum looks positive in terms of the U.S. business.
Sadu, are you -- any kind of guidance for how we should look at Q4 at this point of time? Or do we -- do you think we can sustain this over 8 billion odd number?
The growth -- steady growth will -- at least in the near term, we're seeing steady growth will continue.
Understood. You broke down the 14% Q-o-Q growth for the quarter as 8 of volume and 3 of new products, right? So that still leaves another 3 percentage points, which would be the enoxaparin, is that how you're breaking it down?
That's -- we also have the other income, right milestone and profit shares.
If you could quantify that, please, sorry, yes.
I think the rest 3% comes from those 2 components. I don't have break up of these 2, but that comes from those.
Okay. Understood. Just the second question is on Cenexi, and I'll pause after that. Is on -- we have looked at this asset for close to at least coming to a year now. And there is some restructuring that we have done, you're talking about additional investments. When we made this acquisition last year, it was a 10% EBITDA margin business. This quarter, even if I add back the EUR 2 million, that's an EBITDA breakeven. So what's the long-term outlook here? You made the changes to the purchase price as well. So if you can, from a consideration perspective, obviously, but I just want to understand the long-term outlook for Cenexi, do we have the ability to take it back up to historical margins or something has changed there cyclically?
No, the thesis still holds good. It's just a timing. If you see, one is, of course, the one-off expenses we incurred in the quarter, which will make it breakeven. And we also have a lower productivity. That's where we're talking about operational efficiencies would increase. Low productivity impacted the end of the quarter inventory. It's a 75% margin asset. Any inventory -- lowering of inventory actually is impacting a big time. So the downturn has impacted around [ EUR 3 ] million because of the lower inventory compared to the previous quarter inventory.
Yes. Sorry, what was your question on the purchase price?
No, no. I said we have made an adjustment -- we have got the right numbers that I believe so far we have made an estimate. This is the right number for -- because the DNA has changed, right? So I just want to understand from a long-term outlook, where are the margins likely to settle for Cenexi?
So one is, of course, the current business. At least, we're looking at 10%, like I said last time, we're still looking at 10% in the midterm. And then we have projects, which are getting tech transferred that will add revenue of EUR 30 million, EUR 40 million. Most of it should trickle down to the EBITDA level because we see a breakeven point for this asset around EUR 190 million, EUR 200 million. Anything above that should positively impact the profitability.
The next question is from the line of Neha Manpuria from Bank of America.
Sir, again, on the Cenexi piece, If I were to look at the revenue rate, it was obviously doing much better than...
Sorry to interrupt Ms. Manpuria, your line was cracking in between. So could you please repeat the question once again?
Is it better?
Yes.
Okay. Sorry about that. So I said, on Cenexi, if I were to look at the revenue run rate, obviously, it's doing much better than even part of the quarter that was there. Gross margins also aren't that different. I didn't quite understand the lower productivity comment because your revenue does not seem to be showing lower productivity or lower volumes. So even adjusted for one-offs, why did we just breakeven? I would have assumed that we would have gone back to the usual margins here. So what -- I didn't quite understand your comment.
Okay. So the top line number, yes, you're right, it has improved in this quarter. But the production has not to the tune of what we had expected. So while there was inventory, which was sold out, so it was sufficient to our expectation. Production was lower, which has led to lower absorption of overheads in inventory. And there were certain one-offs like related to employee and management restructuring, which has impacted one time. So that is the reason why this is EBITDA, INR 170 million negative this quarter.
And, Sadu sir, you also mentioned something about operational issues and executing order leading to delay in sort of realizing revenue. So does this mean the EUR 30 million to EUR 50 million incremental revenue that you talked about could come in much later. I mean when should we start assuming this incremental revenue flowing through? And what did you mean by operational issues? Is this the same thing that you're talking about that there was lower production?
Yes. So the EUR 30 million, EUR 40 million you'll see only in FY '25 -- sorry, FY '26, next year. What I'm saying operational efficiencies with the current -- one of the facilities are, I would say, capacity-wise, it's chockablock and we're not able to deliver because of the poor -- the lines are old, and we want to change those lines. Unless we substitute with a fast line, it's very difficult to get to those numbers what we talked about. And for that, we need to sometimes -- maybe next few months they got call off, taking a shutdown and then incrementing this because long term, this is what we want to do. That's why we said it's a near-term pain, but the business is very strong. The order book is very strong and the transfer projects for the handling are very strong. It's just the timing and how to streamline their operations is a challenge in the near term because any movement of products from one line to another require some regulatory approvals. And that's what we're doing now. We're moving some products from one side to other, one line to another. And getting approval to commercialize those will take some time. So there is a near-term pain in that regard.
Okay. Got it. And my second question is on the ROW business in the stand-alone piece. That seems to be coming off quarter after quarter. Is there some slowdown that we're seeing in particular market? Or is it inability to gain volumes, what's going on in the ROW? And when should we start seeing that market go back into growth mode?
There are some positives actually from -- you will see from April quarter. We did one again, the tender in Saudi for 15 products. The estimated sales for that is around $50 million, $55 million per annum. The previous year, Saudi was clocking around $25 million -- $25-odd million sales. So that is almost 15 products we want tender for. So that's a good uptick.
Then in South Africa, we got approvals of 4 products and launching 3 products. That will add about a few million dollars. So there are some positives coming up. And also other thing is the big what we had for Saudi entered in the last quarter. So the tapering of sales happened. The current quarter also, there are limited sales in Saudi, but the next bid, which we have won, the supplies will start from March, April. So again, the business will go back in ROW once you start supply and do that. So it's mostly the timing perspective, I would say.
Understood. And one last question. The lyophilization line shutdown. What could -- what kind of revenue impact can we see from the 2-week shutdown that you're talking about?
Unified, it will not be substantial because it's happening in March, and it's only 2 weeks of lyo. So it shouldn't be substantial. But just as I know -- because we have been asked last time that we should inform, so as a prudence we have informed that.
[Operator Instructions] The next question is from the line of Amey Chalke from JM Financial.
So I have a couple of questions. First is we're a clients company. So that we have been seeing that we will -- as a source of the products, we typically supply to multiple clients. But I have not seen a client addition happening in some of our key products. So if you can highlight on the same, are there any major client additions on the top 10 products which would either have already taken place over the last 1, 1.5 years? And how it will pan out over the next 1 year?
There are certain limited clients who invest in these products, right? And we're supplying products to most of the top injectable front-end companies. And this is a part of a business where some of the clients, they don't meet the market share requirements. It gets transferred to another customer if they're in really need of it because most of them might have already have this product. So it's an ongoing process. We did onboard a couple of new customers as well. But again, there are only so many front-end customers who can invest in these products.
Sure. So there is another question related to this. There are a lot of shortages, if you see the U.S. FDA shortage list. There are at least 2, 3 products, oncology products, we're already there in those products like cisplatin, or a couple of platins, which are there. Then there are 2 large products from our top 10 list like heparin and Ketorolac. So are we -- have you already benefited from these products? Is it there in the numbers, U.S. numbers? Or you expect going ahead, there could be a volume ramp up, which would happen in these products? Or is there any chance of client addition in these kind of products where there is a shortage where we have the capacity, but the another competitor may not be having it?
So Amey, to be product specific, like Ketorolac, it's always been under shortage. So we've been having a larger market share for these products for a long time. For cisplatin and carboplatin, we launched 2 quarters ago. And we have -- for carbo actives we have 55% of market share. And so we have a consistent supply for that. So on an annual basis, I think the sales have, I would say, started from the last 2 quarters. So it will be increased on the -- if you look at an annual basis. But it's -- we already started supplying. And I think most of the shortage are going at least for these products once we started -- once we have started supplying 2 quarters ago.
So you see any benefits coming in because of shortages in the coming year? Or you think it is already in the numbers?
Well, it's already like that, right? I mean in last 10, 15 years if we see already there's some products, which are always coming out -- coming in the shortage list because of regulatory issues. So that's part of the injectable business, and that's where so much importance in quality of sites is important, and we pay so much attention to it.
Sure. Sir, last question on the Cenexi. We acquired this asset also to the kind of technical capability it had. So is there any synergy we can generate for the U.S. business from this unit?
Yes, there's several, especially the oncology cases synergy what they have. They're already working on some products. Our R&D is trying to collaborate with that asset, where we didn't have earlier. So yes, we're working with them, but we have other issues to resolve first before putting more burden on that asset. So that streamline is happening in parallel, some development has started working with the clients as well in terms of business. The customer -- the clientele of Cenexi are in discussion with us to take more products from us for other markets as well.
The next question is from the line of Chintan Sheth from Girik Capital.
I hope I'm audible. A couple of questions, again, on Cenexi. If -- you elaborated that inventory related issue resulted into losses over there apart from the one-off part. But if you look at the gross margin profile sequentially, it has just contracted only 200 basis points from 77 to 75. Does that actually translate into such large under-absorption of profits or under-absorption of cost?
Yes. So what happens is that because it's a high-margin product and largely the overheads, which is our expenses and salary and power, et cetera, is loaded. So that is coming in the individual line items below gross margin, but not loaded on inventory. So that is what has happened. And it would have been higher in line with what the sale has happened, and which will -- in the next few quarters, it will come back. So then with the higher production, you have more overhead expenses, which is transferred from the expense to inventory.
Okay. But the production loss of this quarter will also have some impact or element of reduced revenue in the upcoming quarter in 4Q that will be the right assessment? The pain will continue for another quarters, you think so?
Yes. It all depends on how soon can we make it more efficient to produce more.
But this won't happen in the quarter, right?
Correct. Correct. So the pain will continue, but how much we can reduce, that's what we've to see. At least the one-off items will be gone. And maybe if you can increase certain inventory levels then it will be addition to positive EBITDA thing.
Okay. Got it. And in the India business, obviously, the revenue run rate or U.S. revenue is coming back pretty decently. And that is also helping us to improve our margin profile. You mentioned on the comment that the growth will sustain, given the current outlook or what we're seeing right now. Does it also have an element to further improve our gross margin profile, given the scale is coming back. And we will have some operating leverage, which -- the leverage, which we faced in the past year will start to recoup again once the scale up happens quicker than the previous quarter?
Correct. So once the volumes start increasing, that's what we're seeing from last few quarters, so we started selling more units, and absorption is more. So your margin is improving. So the idea is one is of how to reduce costs and how to improve profitability by making more volumes. That's been the -- that's where we're putting more efforts on. With Cenexi, the issue of revenue is not there. Now the whole focus is on how to reduce costs and be more competitive and also increase the margins.
And lastly, on the CapEx outlook for this year and next, especially for the Cenexi part, would be helpful.
Okay. So Cenexi, we're currently framing the CapEx plan for this year and next year. And overall, the allocation would be around EUR 30 million, both for changing the equipment as well as increasing the capacity level. And for Gland Pharma, the usual -- the programs, which we're running for increasing capacity like Suite 9 and for Combi-line and Pashamylaram are going to be Bag line. So all put together, we expect to spend about INR 300 crores in the next financial year.
[Operator Instructions] The next question is from the line of Ankush from Axis Securities.
Sir, my question is regarding to the key products like Ketorolac and this Enoxaparin. We're seeing the continuous fall in the prices. And the kind of -- what is the impact that we can see on the margin side due to the key products because excluding Cenexi, the margins are quite good in this quarter for the business?
So the -- both the products are not just surprising actually, the material -- the cost -- the raw material costs have gone down substantially, that's got translated into end market pricing. So that pricing got adjusted. So from a margin perspective, there won't be an impact. It's just that from top line, it has come down in terms of that. So there's not -- there's no issue with that. And Ketorolac, it's been a consistent product with the similar pricing for a long time for us.
Okay. Sir, second one is related to the Cenexi. So in the first quarter, we have a 10% of the margins. Any outlook sir for the sustainable margin for the Cenexi?
So as we mentioned that in the near term, there would be some challenges in terms of EBITDA margin, and we expect to break even in the next 12 to 15 months. After that, we will go back.
Sir, this is related to -- the last one is related to the India business. India business is sustained. I mean, it's a stable business now. So what kind of growth we can look in the India business?
Sorry, could you repeat that?
Sir, Indian business is almost stable, if we see on Q-on-Q basis. So the kind of growth we can look in the India business in upcoming quarters?
So India, honestly, we're in the hospital sales and most of the products, what we have is under DPCO. So it's not been a big focus market for us unlike branded products, right? So we're selling, which are, I would say, less competitive, but most of the injectables in India are under DPCO. So the focus is less and the percentage of revenue when compared to the total turnover for us is smaller.
The next question is from the line of Nitin Agarwal from DAM Capital.
Sir, 2 questions. One is, a, in the past, you used to talk about our clients to get into the biosimilar biologics manufacturing. Any updates on how you're thinking about the space now after the vaccine opportunity didn't takeoff?
Still, we're actually pursuing that, it's not that it's out of the window. I mean, we signed 1 plasma project, and it's actively -- we've started booking some revenue. We're estimating about INR 14 crores, INR 15 crores per year due to this project, it's is a 5-year contract. But there are also other biologics companies we're visiting. But as you know, the funding for a lot of small buyers have slowed down. So because of that, it kind of slowed down, but we're still pursuing that space as well.
Okay. And just secondly, when you look at your business ex of Cenexi, there is -- obviously U.S. has been -- has come back pretty strongly over the last couple of quarters. Other segments seem to have their own sort of struggle for now. When you sort of look at -- take a 3-, 5-year view of your business, so what is the cost -- steady rate at which the business can really grow at? Is it more like a mid-teens growth business, late-teen growth business when things stabilize? Or what kind of growth characteristic would you sort of be comfortable looking at for a 3- to 5-year view of our ex-Cenexi business?
The good thing is lot of complex products filings are happening. And while we've already filed 7, we have few approvals, we're going to file 4 more this year. So that -- those product launches will happen. And we're also seeing increase in the CDMO space where a lot of companies are transferring products to us. So if you see the CDMO revenue is also going up. So there's a shift in that. So overall basis, and also you have to consider the base at which you're operating now. So of course, as a company, on a consolidated basis, we have to see, but at this ex-Cenexi basis, probably mid-teens could be a target internally. But we have to see where we're going slow and how we're devaluating because of the several options we're looking at. But that's what we're looking at, at least in the next 2 to 3 years.
And sir, over this period where you're talking mid-teens target for the business. This would be what again driven by the U.S. or ROW, or is it going to be equally -- or you see any particular geography as being a primary driver for this growth?
See, there's a lot of opportunity in ROW also, like you said, so that growth will come from there. And U.S. complex generics are there. We have entered contracts with cartridges, pen products. So that will add some revenues. And also, we're looking at contract manufacturing for some of the big pharma as well. So it's a combination of these few things.
The next question is from the line of Neha Manpuria from Bank of America.
Just a clarification on the Cenexi margins. Did I hear correctly that Cenexi would continue to be loss-making for the next year also for fiscal '25? And the margin guidance that we had is only for FY '26?
Not at the EBITDA level. I think Ravi was mentioning at the PAT level because of the depreciation, amortization, but EBITDA level will be positive.
Okay. Okay. So the 10% guidance that you gave for EBITDA, is that number reasonable? I mean is this margin reasonable to assume in FY '25?
Yes, I think FY '25 that's reasonable, yes.
Got it. Okay. And Ravi, on the depreciation and amortization, in your opening remarks, you gave a number of INR 90 million to INR 140 million. It seems like a very wide range. So this is the number that you would see in Cenexi -- for Cenexi as an incremental DNA. I mean what's the DNA base that I should look at for the consolidated business?
Yes. So if you see Q2, consolidated business was about INR 80 crores. Now going forward, there would be around INR 10 crores addition to that, so INR 90 crores. Instead of this quarter, it is higher because we have made a catch-up depreciation here because PPI was finalized this quarter. But a going-forward basis, there would be around INR 90 crores on a consolidated basis.
Okay. So INR 90 crores is the number I should look at. So the -- okay, got it. Understood. That's clear.
The next question is from the line of Chintan Sheth from Girik Capital.
The question got answered.
[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to Mr. Ankit Gupta for closing comments.
Thank you, everyone, for joining us today. We appreciate your participation. If there are some questions with us still unanswered, you can reach out to us any time, and we'll be happy to address the same. Looking forward to connect with you the next quarter and also in case there are more questions. Thank you.
Thank you. On behalf of Gland Pharma Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.