Gland Pharma's Q2 FY26: Strategic Growth and Margin Expansion

Gland Pharma Limited has delivered a robust performance in Q2 FY26, showcasing strategic clarity and operational resilience. The company reported a consolidated revenue of INR 1486.9 crore, marking a 6% year-on-year increase. Gross profit surged by 12% to INR 933.1 crore, reflecting an improved product mix and enhanced operational efficiencies. Profit After Tax (PAT) also saw a healthy 12% rise, reaching INR 183.7 crore. These figures underscore a positive trajectory, with management expressing confidence in an even stronger second half of FY26, driven by new product launches, CDMO contract wins, and continued improvements at its Cenexi subsidiary.

The company's performance was significantly bolstered by its core business, particularly in regulated markets. The U.S. market witnessed an 8% year-on-year revenue growth, reaching INR 800.5 crore in Q2 FY26. This growth was propelled by the launch of seven new molecules, including Daptomycin-RTU and Sumatriptan, alongside sustained performance from existing products. Europe also contributed positively with a 16% growth in Q2 FY26. While the Rest of the World (RoW) market remained largely flat, the company's own product sales in RoW grew by 19% in H1 FY26, demonstrating underlying strength despite a 53% decline in tech transfer and CMO product revenue in the same period.

Strategic Initiatives and Capacity Expansion

Gland Pharma's strategic roadmap is centered on growth, capability, efficiency, and Return on Capital Employed (ROCE). The company is heavily investing in R&D, with expenses totaling INR 61.4 crore in Q2 FY26, representing 5.8% of revenue. This investment is directed towards complex injectables and next-generation delivery systems, aiming to build a differentiated portfolio. A significant focus is on Ready-to-Use (RTU) infusion bag products, with 20 filings and 14 approvals to date, targeting a market opportunity of approximately $659 million in the U.S.

Furthermore, Gland Pharma is aggressively expanding its capacity for GLP-1s, pens, and cartridges, increasing from approximately 40 million to 140 million units by mid-next year. This expansion supports both GLP-1 and insulin programs, with two more contracts for GLP-1 in the pipeline. The biologic CDMO facility is also slated for an expansion from 8 KL to 23 KL, positioning the company to capitalize on biosimilar and biologic fill/finish opportunities. These initiatives reflect a clear commitment to high-end innovation and CDMO leadership.

Cenexi Turnaround and Financial Health

The Cenexi acquisition, while presenting initial challenges, is showing signs of a turnaround. Despite a planned shutdown in Q2 FY26, Cenexi's EBITDA losses decreased from EUR 11 million in H1 FY25 to EUR 5 million in H1 FY26. This improvement is attributed to strategic initiatives such as headcount optimization, the establishment of a back office in India for finance and IT, and price increase initiatives with key customers. Management expects Cenexi to achieve an EBITDA positive status from Q3 FY26, targeting a revenue run rate of EUR 50 million.

Financially, the company maintains a strong balance sheet. Total capex for H1 FY26 amounted to INR 196.9 crore, primarily deployed in Cenexi for new projects, capacity building, and maintenance. The expected capex for Gland's base business is approximately INR 250 crore for FY26 and INR 300 crore for FY27, demonstrating disciplined capital allocation towards high-ROCE initiatives. Cash flow from operations remained robust at INR 593.3 crore for H1 FY26, with an improved cash conversion cycle of 163 days, reflecting efficient working capital management.

Outlook and Investor Confidence

Gland Pharma's Q2 FY26 performance underscores its strategic clarity and disciplined execution. The company's focus on complex injectables, CDMO expansion, and geographical market penetration, particularly in regulated markets, positions it for sustained growth. The ongoing turnaround at Cenexi, coupled with robust R&D and capacity enhancements, reinforces investor confidence. The management's commitment to improving profitability and ROCE, while maintaining high standards of quality and compliance, sets a strong foundation for future value creation.