Aurobindo Pharma Posts Strong Q3 FY26, Eyes Profitability Ahead
Aurobindo Pharma Limited has reported a solid financial performance for the third quarter of fiscal year 2026 (ended December 31, 2025), with consolidated revenue rising by 8.4% year-on-year to ₹8,646 crores. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also saw a healthy 9% jump to ₹1,773 crores, reflecting a stable EBITDA margin of 20.5%. The net profit stood at ₹910 crores, though this figure was impacted by a one-time cost of ₹65 crores related to a labour code amendment.
Financial Deep Dive
The company's revenue growth was primarily fueled by its robust Formulation Business, which contributed ₹7,683 crores, marking a 10% year-on-year increase and accounting for approximately 89% of the total consolidated revenue. The API (Active Pharmaceutical Ingredient) Business added ₹963 crores, representing 11% of the overall revenue.
Geographically, the U.S. Formulation business generated USD 420 million (excluding gRevlimid sales), with a notable 17% year-on-year growth in U.S. injectable sales. The company also successfully launched 9 new products and secured 7 approvals during the quarter in this key market.
Europe emerged as a significant growth driver, with the company's European business delivering a strong 27% year-on-year revenue growth, amounting to ₹2,703 crores (or €261 million). Aurobindo is on track to surpass €1 billion in annual European revenue by the close of FY26.
Growth Markets revenue remained flat at ₹865 crores (USD 97 million), while the ARV (Antiretroviral) Formulation business posted a healthy 22% year-on-year growth, reaching ₹376 crores (USD 42 million).
The company maintained a strong Gross Margin of 59.7%. Research and Development (R&D) expenditure was ₹409 crores, representing 5% of total revenues, underscoring its commitment to innovation. Net capital expenditure (CapEx) for the quarter stood at USD 79 million, focused on manufacturing enhancements. Crucially, Aurobindo generated a net cash inflow of USD 118 million, leading to an improved net cash position.
Guidance & Strategy
Management expressed optimism about sustaining growth momentum. A key highlight is the expectation of achieving EBITDA break-even in the fourth quarter of FY26, with a promise of meaningful contribution to the bottom-line EBITDA in the subsequent year (FY27). The company is targeting the higher end of its 20% to 21% EBITDA margin range for FY26.
Strategic initiatives are set to bolster future performance. The ramp-up of the Pen-G facility is progressing well, with an anticipated annual production exceeding 10,000 metric tonnes. The Indian government's recent notification introducing a one-year Minimum Import Price (MIP) on Pen-G, 6 APA, and Amoxicillin is viewed as a significant positive catalyst for domestic manufacturers.
The Lannett acquisition remains a key strategic move, currently awaiting regulatory approvals. The company is actively engaging with the U.S. Federal Trade Commission (FTC), with an expected closure in the first quarter of FY27. Meanwhile, the Dayton facility is transitioning to its commercial phase, and the Raleigh facility is on track, pending regulatory clearance.
Aurobindo's biosimilar strategy is also advancing, with an inflection year projected for 2029. Milestones include obtaining Canadian approval for Dyrupeg and preparing for launches of Bevqolva (Bevacizumab) and Dazublys (Trastuzumab) biosimilars.
Key Events & Outlook
Beyond the financial results, the company noted the positive impact of the Pen-G MIP notification. The ongoing progress with the Lannett acquisition and the USFDA inspection at the Eugia III facility, which yielded procedural observations but no production stoppage, were also discussed. Management remains confident in their response to the USFDA observations.
The outlook suggests continued growth drivers, including the Pen-G initiative, capacity expansions, a focus on complex generics, new product launches, and strategic acquisitions. Europe is expected to maintain its strong revenue trajectory, while the U.S. business is entering a significant growth phase driven by new facilities and acquisitions. The biosimilar business is poised for commercialization and growth.
Peer Comparison
Aurobindo Pharma's Q3 FY26 performance, particularly its revenue growth and European market strength, places it competitively within the Indian pharmaceutical sector. Competitors like Sun Pharma and Dr. Reddy's Laboratories have also reported strong results, often driven by their U.S. generics businesses and increasing focus on specialty products. However, Aurobindo's specific strategic moves, such as the Pen-G initiative supported by government policy and the significant pending Lannett acquisition, present unique growth vectors. While peers continue to navigate market dynamics, Aurobindo's diversified geographical presence and pipeline development in complex generics and biosimilars position it for continued expansion, especially as it moves towards profitability in the upcoming quarters.
Risks & Negative History
The Lannett acquisition, while strategically important, is subject to ongoing regulatory approvals, introducing an element of execution risk. The USFDA's procedural observations at the Eugia III facility, though not impacting production, require diligent follow-up. Historically, Aurobindo Pharma has faced scrutiny and regulatory actions common within the pharmaceutical industry, including USFDA inspections and observations at manufacturing sites. However, a review of publicly available information and past reports does not indicate any instances of major fraud, significant SEBI penalties, or systemic governance failures that would raise immediate red flags beyond standard industry regulatory oversight. The company's focus on addressing these procedural observations transparently is key to maintaining market confidence.