RDY

Our Chief Executive Officer, and Mr. M.V. Narasimham, our Chief Financial Officer. Our quarterly financial results have been published earlier today and are available on our website for your reference. We will start today's call with M.V.N. providing an overview of our financial performance for the quarter as well as the year. Following that, Erez will share his insights on key business highlights as well as the company's strategic outlook. We will then open the floor for questions.

All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed. Reconciliations to the corresponding GAAP measures are included in our press release. I would like to remind everyone that the safe harbor provisions outlined in today's press release apply to all forward-looking statements made during this call.

Before we proceed, I would like to call out a few housekeeping points. All participants will be in the listen only mode during the opening remarks. Should you need any technical assistance during the call, please use the chat function in your Zoom application. The chat, however, will not be monitored for any questions to the management.

This session is being recorded, and both the audio and transcript will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy's Laboratories Limited and may not be rebroadcasted or quoted in any media or public forum without prior written consent from the company. With that, let me hand the call over to M.V.N. to present the financial highlights for the quarter. Over to you, M.V.N.

Thank you, Aishwarya. Greetings to everyone on the call. It is my pleasure to walk you through our financial performance for the Q4 and full year FY 2026. FY 2026 reflected a resilient operating performance, delivering highest ever annual revenues amid product specific headwinds and certain one-time impacts.

The underlying base business continued to deliver double-digit growth for the quarter as well as for the full year FY 2026. At the outset, I would like to highlight a few items impacting the quarter. Number 1, a self-stock adjustment or SSA related to lenalidomide of INR 453 crores taken as a reduction in revenue. Number 2, an additional provision of INR 114 crores related to potential VAT liability in one of our subsidiaries included in SG&A expenses.

Impairment of INR 135 crores, including a R&D charge of INR 6 crores on account of discontinuation of R&D programs related to CAR T therapy as part of the portfolio prioritization. Impairment of INR 93 crores on account of discontinuation of a trial by our partner, Immutep, of an in-licensed asset following an interim futility analysis. The full year performance was further impacted by provisions related to potential VAT liability of INR 70 crores, as well as the impact of new labor law code in India of INR 117 crores.

After factoring these items, the adjusted profit before tax was INR 994 crores for the quarter versus the reported number of INR 199 crores. For the full year, INR 6,463 crores versus the reported PBT of INR 5,482 crores. Now I would like to discuss the underlying performance in detail.

Margins in this section are expressed as a % of the revenues before the impact of SSA, unless otherwise stated. For the reported figures, please refer to the respective earnings releases. All financial figures in this section are translated into US dollars using a convenience translation rate of INR 93.83, the exchange rate prevailing as of March 31, 2026. Excluding SSA, the adjusted revenue stood at INR 7,969 crores, which is $849 million for the quarter. A decline of 6% year-over-year and 9% on QOQ, and at INR 34,046 crores, which is $3.63 billion for the full year, representing a growth of 4.6%.

The decline was primarily on account of lower lenalidomide sales, while the base business excluding lenalidomide delivered double-digit growth on year-over-year basis. We expect the base business to sustain its growth momentum in the year ahead. The gross margin on the adjusted revenue base after excluding the one-offs for the quarter was at 48%, lower by 760 basis points on year-over-year and 615 basis points on sequentially, and at 53.5% for the year, lower by 498 basis points on year-over-year.

The decline in margins was largely on account of lower lenalidomide sales and price erosion in our unbranded generics businesses.

The gross margin for global generics was at 51.7% for the quarter and 57.74% for the year as a percentage of its adjusted revenues, while that for PSAI stood at 19.9% for the quarter and 17.2% for the PSAI for the fiscal on its reported revenues. Given our focus on the cost efficiencies and productivity improvement, we expect the margins to improve and be above 50% in FY 2027. Excluding one-off provisions mentioned earlier, SG&A spends were at INR 2,662 crores for the quarter, an increase of 11% on year-over-year and 1% sequentially, and 33% of the adjusted revenue base and INR 10,435 crores for the year, an increase of 11% on year-over-year and 31% of the adjusted revenues.

The increase was primarily on account of ongoing targeted investment to support long-term growth of our branded franchise, namely the acquired NRT Consumer Healthcare business and branded generics. We expect the spends to be around the same level as FY 2026 for the year ahead. The adjusted R&D spend for the quarter was INR 541 crores, a decrease of 26% year-over-year and 12% sequential, and a margin of 6% of adjusted revenue.

For the year, the spend, excluding one-time labor code-related provision, was INR 2,385 crores for FY 2026, a decrease of 13% and 7% adjusted revenues. That decrease reflects reduced biosimilars developmental expenditure as a significant portion of investments related to abatacept has been completed. We expect the spends to be in the range of 7%-8% in the fiscal ahead.

Other operating income for the quarter was INR 344 crores as against INR 247 crores in the corresponding quarter last year, and INR 763 crores in FY 2026 as against INR 436 crores in FY 2025. The increase during the quarter was largely on account of divestment of non-core brands in India business for net of INR 189 crores.

The underlying EBITDA, including other income, stood at INR 1,554 crores for the quarter, which is $166 million, a decline of 37% on year-over-year basis and 28% sequentially, and reflecting a margin of 19.5% of the adjusted revenues. For FY 2026, the EBITDA adjusted one-off was at INR 8,419 crores, which is $897 million. That is like 24.7% on the adjusted revenue base.

Impairment charge for the quarter was INR 259 crores as compared to INR 77 crores during the same quarter last year. The higher charge this quarter was largely on account of discontinuation of CAR T assets and partnered product, eftilagimod alpha, as mentioned earlier. Impairment charge for the year, INR 352 crores as compared to INR 169 crores last year.

The net finance income for the quarter was INR 62 crores versus INR 235 crores during the same quarter last year, and INR 413 crores for FY 2026 versus INR 472 crores for FY 2025. The decrease was primarily on account of lower foreign exchange gain in comparison to the corresponding period last year. As a result, the underlying profit before tax was at INR 994 crores. That is $106 million, representing a margin of 12.5%.

For FY 2026, at 6,463 crores, that is $689 million, a margin of 19%. Effective tax rate for the quarter was -10.8% compared to 20.8% in the corresponding period last year. While for FY 2026, ETR was at 22.5% versus 25.4% in FY 2025. The ETR for Q4 FY 2026 was lower, primarily due to recognition of a deferred tax asset on carry-forward losses in one of our subsidiaries and a favorable jurisdictional mix for the quarter in comparison to the same period in the previous year. We expect the ETR to be 24%-25% for fiscal FY 2027.

Profit after tax attributable to the equity holders of the parent for the quarter stood at INR 220 crores, which is $23 million, a margin of 2.9% on the reported revenues. For the year, INR 4,285 crores, which is $457 million, a margin of 13% before adjusting for one-off items mentioned earlier. Based on the company performance, the board recommended payment of dividend INR 8 for the equity share of face value of INR 1 each.

This is equivalent to 800% of the face value for the year ended March 31st, 2026, subject to approval of the shareholder of the company. Diluted EPS for the quarter, INR 2.64 and INR 51.42 for FY 2026.

Operating working capital as of March 31st, 2026, was INR 14,434 crores, which is $1.54 billion, an increase of INR 2,920 crores, which is $31 million over December 31st, 2025. CapEx cash outflow for the quarter stood at INR 438 crores, which is $47 million and INR 2,302 crores, which is $245 million for FY 2026. Free cash flow generated during the quarter before acquisitions related payout was INR 600 crores, which is $64 million and INR 2,004 crores, which is $214 million for FY 2026. As of March 31st, 2026, we have a net cash surplus of INR 3,271 crores, which is $349 million.

Foreign currency cash flow hedges executed through derivative instruments during the period are as follows: $462 million hedged using combination of forwards and risk reversal options scheduled to mature by March. These contracts are hedged at rate of INR 91.37-INR 93.46 per US dollar. RUB 1.6 billion hedged at a fixed rate of RUB 1.12 for Russian ruble with maturity falling within the next three months. With this, now I request Erez to take us through the key business highlights.

Thank you, MVN, and good day, everyone. We appreciate your participation on this call today and value your continued interest in our company. During the year, we remain focused on advancing our two pronged strategy of strengthening the base business while investing in our future growth drivers across peptides, biosimilars, consumer health, and innovation.

Our FY 2026 performance reflected consistent disciplined execution of our strategic priority, namely scaling the base business, advancing our key pipeline programs, semaglutide and abatacept, and targeted business development efforts to support our growth ambitions while continuing to enhance efficiency across operations. I am pleased to report that in this Q1 without one of our key products, lenalidomide, the company delivered an EBITDA margins of around 20% after adjusting for certain items indicated by MVN earlier.

Launches of products offering meaningful opportunity, BD, and continued cost optimization efforts will take us closer to our aspirational 25%. For FY 2026, the adjusted EBITDA margin was in the neighborhood of 20%, consistent with our stated aspirations. The underlying base business delivered double-digit growth in Q4 as well as the full for the full years of FY 2026. All geography beside North America recorded double-digit growth.

Performance in North America was impacted due to lenalidomide sales and one-time shelf stock adjustment related to this product. Let me now walk you through some of the key highlights of the quarter. In line of our strategic priorities, we made progress on our key pipeline assets, semaglutide and abatacept, during the quarter.

We are pleased to announce that Dr. Reddy's became the first company to secure regulatory approval of semaglutide injection for type 2 diabetes in Canada, reinforcing our in-house expertise in peptide science and complex product development. Likewise, as the first company to receive approval in India for the same product in November last year, we successfully launched our brand, Obeda, on day one of market formation upon patent expiry in India.

Our oral version of semaglutide is being approved by the CDSCO in India. We continue to engage with Anvisa in Brazil to address its concern related to our generic semaglutide filing and remain committed to making this important therapy available to patients across several markets, subject to approvals.

In February 2026, the U.S. FDA accepted for review our BLA for the intravenous IV presentation of our abatacept biosimilar candidate following its filing in December 2025. In line with our strategic focus to bring innovation to patients in India, we forayed in hormones replacement therapy segment with the acquisition of the Progynova and Cycloprogynova in India. Our partner product, COYA 302, received fast track review status.

The operation integration of our acquired consumer healthcare business in Nicotine Replacement Therapy is now largely complete. In March 2026, the U.S. provided the VAI classification for our formulation facility, FTO 11, in Srikakulam, Andhra Pradesh, following a GMP and pre-approval inspection, PAI, in December 2025. We continue to build on our leadership in sustainability.

Dr. Reddy's was awarded the gold medal for EcoVadis for FY 2026, achieving highest ever score of 80, placing us among the top 5% companies assessed globally. During the quarter, we were named by the business world among India top 5 sustainable company, ranking first in the Indian healthcare and pharmaceutical industry for 2024 and 2025. We've been recognized in the leadership category of 2025 Indian Corporate Governance Scorecard for the 3rd consecutive year.

Let me now take you through the key business highlights for the quarter and the full year. Please note that all financial figures mentioned are reported in the respective local currencies. Our North America generic business reported revenue of $199 million for the quarter and $1.3 billion for FY 2026.

Excluding one type shelf stock adjustment, revenue were INR 251 million for the quarter, a decline of 40% and 26% sequentially, at INR 1.36 billion, a decline of 21% year-over-year. The decline was primarily on account lenalidomide. During the quarter, we added 7 new products to our portfolio, taking the annual of total 25 products.

We aim to continue to launch momentum in the fiscal ahead. Our emerging markets reported revenue of INR 1,806 crore rupees in Q4 FY 2026, reflecting a robust growth of 29% year-over-year and a decline of 5% sequentially. INR 6,761 crore rupees in FY 2026, a growth of 23% year-over-year.

The growth was led by new product launches across markets and higher volume, particularly in rest of the world, further aided by favorable currency movements. During the quarter, we introduced 49 new products across countries, taking the FY 2026 total to 129. Within this segment, our Russia business report a growth of 8% year-over-year and a decline of 23% sequentially in concept currency terms.

Our India business processed revenue of INR 1,566 crore rupees in Q4 2026, delivering a robust double-digit year-over-year growth of 20% and a decline of 2% sequentially. While the full-year revenues were at INR 6,219 crore, year-over-year growth of 16%. This performance was largely driven by revenues from our innovation franchise, new brand launches, price increase and volume growth.

Our Q4 data as of March 31st, 2026 shows that we continue to outperform at the Indian Pharmaceutical Market, IPM, with the moving quarterly total growth of 15.2% compared to IPM growth of 11.6% and moving annual total MAT growth of 12.1% compared to IPM growth of 9.9%. Our IPM rank stood at 9 for the quarter and 10 for the year. We launched 10 new brands during the quarter and 28 over FY 2026, reflecting our continued focus on strengthening our domestic market presence.

Our European business, which include our acquired consumer health business in nicotine replacement therapy, posted revenue of INR 136 million for the quarter, a decline of 3% on year-on-year basis, as well as sequentially, and INR 542 millions for FY 2026, reflecting an acquisition-led growth of 37% year-over-year. The decline this quarter was primarily on account of price erosion in generics.

During the quarter, we launched 7 new generics product across market, taking the full-year total to 38, further expanding our European product portfolio. Our PSAI business reported revenue of $101 million in Q4 FY 2026, resulting in decline of 10% year-over-year and a growth of 10% sequentially. The decline was primarily on account of lower API volume uptake during the quarter.

During the quarter, we filed 48 Drug Master File globally, taking the total number of filing to 128 for the year. Looking ahead, we remain focused on delivering on our strategic agenda of strengthening our core business while building future growth driver. Underpinning this strategy is future-ready organization structure aligned to our business model with dedicated leadership across global generics, biologic, consumer health and innovation, enabling sharper focus, relevant capabilities and more effective execution across each growth pillar.

Within this framework, we'll continue to advance our differentiated pipelines program, such as semaglutide and abatacept, drive operational efficiency and pursue value-accretive inorganic opportunity that supports sustainable long-term stakeholder value. With that, I invite your question as we move into the Q&A sessions.

Thank you very much, Erez. We will now begin the question and answer session. To join the question queue, please use the Raise Hand option available on the bar at the bottom of your Zoom application. If you wish to exit the question queue, you may click on the Lower Hand option. Participants are requested to not ask more than two questions at a time and to rejoin the queue in case of any incremental queries.

I would like to reiterate that the chat will not be monitored for any questions to the management. However, in case of any technical concerns, please do feel free to use the chat option to reach out to us. The first question is from the line of Neha Manpuria from Bank of America. Neha, please go ahead.

Yeah, thanks for taking my question. Just wondering on the shelf stock adjustment that we had in the quarter, a $50 million number for, you know, a product like REVLIMID, where we knew that the, you know, patent cliff is coming, seems very large. If you could just give us some color in terms of why the shelf stock adjustment was so large, you know, given that we knew we're expecting competition in January?

We were also surprised by this. It was not part of any arrangement or anything like that. I cannot speak on the details on the relationship or the customers, but it's, it came from them, I guess, certain planning issues or mistake at their end and that's, the outcome of it.

Okay. Understood. My second question is on semaglutide. Now that we have Canada approval, I think they've mentioned 12 million, you know, unit sales for across markets, you know, in FY 2027. Erez, in your view, what could be the competitive landscape now that, you know, Dr. Reddy's and the second player have gotten approval? When do you expect more players? Out of the 12 million, in, based on your assessment, what could be the rough breakup between, let's say, Canada and EMs?

I believe that the current landscape of basically Novo Nordisk as well as the two of us will stay there probably for several months. Likely that others will come. I believe that the market in Canada is give or take, it's about 1/3 in for what we call public, 1/3 cash, and 1/3 what they call private. It's a kind of public/private cash. What I believe will happen is that the reimbursement price will go over time as expected. The launch quantities, at least in a couple of years, we should be very healthy. Obviously, I cannot say a price, but it should be very healthy.

You know, given that we have had a setback in Brazil, are we still confident of the 12 million units, or, you know, sale for Sema, in FY 2027? Do you think that would depend on us getting approval in Brazil as well?

Brazil is part of it, I believe is still in that number, but the number moved by several months. I'm still with the same number, but probably it will have like 12 months that will probably result in somewhere in the beginning of FY 2028 as well. Specifically for the next, let's say, until the end of calendar 2026, I believe that the number is somewhere between 6 to 7 million units.

This is for calendar 2026?

No, this is for the markets that will get approval, and Canada will be obviously a big part of it, but.

Understood

it will be, this is give or take the numbers.

All right. Thank you so much.

Thanks, Neha. The next question is from the line of Damayanti Kerai from HSBC. Damayanti, please go ahead.

Hi. Thank you for the opportunity. Continuing on semaglutide. Erez Israeli, just to clear, this 6 million-7 million units which you expect to market, it's by end of this calendar year, right? By 2026?

Correct.

Okay. Can you talk a little bit about your pricing strategy in the market where you'll be coming in, say, another 12 months? Specifically, in Canada after entry of 2nd generic, how do you position yourself versus Novo Nordisk pricing?

Our list price will be, give or take about half of what Novo Nordisk will be, that's can be shared because it will be listed. Obviously the rest is arrangement that we have with the customer that I will not be able to disclose, but let's say it will be the normal arrangement that you normally have. The, in terms of, I'm not sure I capture, sorry, the rest of the question. Sorry, I lost it. Can you remind me?

Yes. I was asking you about the pricing strategy in all the market. Where do you intend to come in, say, another 12 month or so, 12-15 months?

Sure. We believe that all the prices will be, let's say, at the neighborhood of, let's say, $30+. Why I'm saying that number also is because in some markets, we are going to work with a partner, and it reflect the net price that we'll have for them. Obviously, they will have their margins. These numbers may go down if the competition intensified, but I don't envision it to, at any case, to be below 25.

Okay. Somewhere $25-$30 per unit is the price you are working with.

There will be market, obviously, that it will be much more than that.

Okay

I just wanted to share with you the kind of the neighborhood of the floor area. Obviously, we are planning to have in markets also prices that are much higher than that.

Okay. That's helpful. My second question is on SG&A spend. You mentioned next year, sorry, this year, FY 2027, it could be similar to what we had in FY 2026. Just wanted to understand, in NRT in or some of the initiatives which you had started a few years back, you have been spending for last few years, if I may say. Where you are looking for investing more? This number, do we have any room to take a cut or see any reduction there? If you can just talk a bit on that part. Thank you.

Sure. We will have absolutely places that will have less, and we'll have places that will have more. Just to address, the NRT is a place in which we will have more. At the same time, the growth will well more than finance it. The level of profitability of the asset will stay the same and even maybe go. In terms of SG&A %, we will have more.

We are also launching innovative products in India and in certain emerging market, naturally we are investing in the marketing of those new products. At the same time, we are putting a lot of productivity activity, sales force excellence, as well as additional marketing excellence program, this will go up.

That's why we said that give or take in terms of nominal value, it should be the same level. Our sales will go by it. In percentage-wise, it will go down. In terms of to understand the range of the of the spend, it will be about give or take the same range that we have now.

In nominal terms, right?

Yeah. While of course the sales will go double-digit.

Okay. Thank you. All the best. I'll get back in the queue.

Thanks, Damayanti. The next question is from the line of Tushar Manudhane from Motilal Oswal. Tushar, please go ahead.

Thanks for the opportunity. Am I audible?

Yes.

Firstly, on gross margins, even after adjusting the shelf stock, for the quarter it is 48%, while ex-lenalidomide also we have talked in the past that the gross margin has been 50+. Is there anything which I've missed as far as gross margin for the Q4 is concerned?

This quarter is there is a product mix impact, that's why it is at 14%. We believe our gross margin range is in the range of 50-55.

What will drive this in the subsequent quarters? Are you including semaglutide sales for this gross margin?

Yeah, semaglutide sales of course, and then there is a cost improvement product cost improvement programs also are on. Considering what the new products we are going to launch in FY 2027, including semaglutide plus product mix. Considering all these things, I think, certainly our gross margin will be 50% or above.

I just want to make sure.

And, sir,

I want to make sure that we are planning to launch also product like sugammadex, upadacitinib, sitagliptin.

Rimondinin.

Rimondinin. Sorry for my reading. Sorry? Yeah. In addition to that, there are additional key products to do. The mix of the product, the mix of the market, as well activities that we are taking now on our APIs, we are very confident about our ability to manage the gross margins.

Just on these products which you mentioned, sir, currently U.S. revenue, even after including the shelf stock adjustment, it is $236 million. Effectively maybe $944 million if I normalize that. Will we sort of grow over and above this ex semaglutide in FY 2027?

We will absolutely grow in North America, ex lenalidomide, in double digits.

Got it, sir. Just lastly, for India market, if you could just share what has been organic and inorganic growth for the quarter.

It's organic. What do you mean inorganic? We did not licensing and consider organic or inorganic?

Brands what we acquired is not a significant impact in this quarter.

Yeah, no.

That Progynova is just recently acquired brands.

No, just to clarify, we consider if we license a product from China and we are launching it in India as organic. In this terminology, it's mostly organic. It's, let's say the inorganic is negligible.

Got it, sir. Thanks. Thanks a lot.

Thanks, Tushar. The next question is from the line of Dr. Bino Pathiparampil from Elara Capital. Bino, please go ahead.

Hi, good evening. Could you give an update on the status of denosumab and your IV abatacept?

Denosumab will launch in Europe, and we are awaiting for approval in the U.S. Our partner has a deficiency letter that they need to address for the U.S. abatacept, the IV is was approved for review, so it was accepted. It is going after the timelines. I know we are also awaiting an FDA inspection in Bachupally, Hyderabad, for the same. The abatacept so far in the right direction. Of course we are working on the sub-Q that will be submitted later, and also will be launched later as we discussed in the past.

Got it. The IV is online for potential launch this calendar year?

IV will be likely at the beginning of calendar 2027. Hopefully this fiscal, only hopefully in this fiscal. That's the plan. Of course, we need to see the approval for that. Right now that's the plan.

Got it. Do you expect denosumab in the U.S. before that?

I don't know. It depends on the ability of Alvotech to get approval.

Got it. Second one, you said that you have wound down your CAR T related investments and taken a write-down. Could you just tell us a bit about what your investment was and why it failed in that area?

No, the investment, give or take is what we, MVM guided, it's INR 150.

135.

INR 135 crore. That's what we took down. We saw that we have issues with the clinic, and we decided to kind of deprioritize it at this stage. We just impair it as per appropriate accounting. This is give or take what we invested.

Sorry, I got the figures, but my question was more technical. Is it something wrong with the specific product you used or with the technology itself?

I'm not sure I understand the question. It's what we invested in the clinical trials and getting the products.

Yeah.

The products. Okay. Your product doesn't work, but CAR T technology as such is still okay?

I don't know what is The product is the CAR T, sorry.

Got it.

Yeah.

Understood. No problem. Thank you. I'll join back.

Okay.

Thank you, Bino. The next question is from the line of Surya Patra from PhillipCapital. Surya, please go ahead.

Yeah. Thank you for this opportunity. My first question is on the biosimilar business. Since it is a closure of the Q4 of the year and full year data is there. Just wanted to have sense, what is the size of the biosimilar right now, and whether it is already a broken even or it is a loss-making. If not, what is the timeline for the break even for this business?

Overall, our global biologic sales is about, it is not very high. This is above $100 million sales. At this sales, certainly whatever investments we are doing for the development of abatacept, other products, pembrolizumab also we are with Alvotech. Definitely it's not a break even. Once we launch abatacept, certainly I think post that, I think certainly we can see the break even.

FY 2029?

It is in certainly could be in like I already said, if abatacept everything goes well, our inspection, everything, and we'll be launching in calendar year 2027. That would be like FY 2028.

Okay. Okay. Second question was on the NRT. The, two thing here, observation-wise. Last two quarters, since last two quarters we have been seeing a strong growth. Last quarter it was 25% Y-Y growth. This quarter it is around 16%. What is driving this growth, and whether this is sustainable one? Secondly, Q4, is there any seasonality? Because last year also there was a kind of a sequential decline that we had witnessed for NRT.

The NRT business is indeed growing more than we expected it to be. We expect it to be kind of mid-single digit. It's certainly more than that. Specifically for the 16%, there is some impact of the fact that in the transition, some customer take more stock. So it's not fully, let's say, in that respect, sustainable. I believe that the right place for it is either high single digit or even low double digit. We will be somewhere in this neighborhood.

Okay. Just last one point. What is your experience about the semaglutide penetration here in India? Because generally it is understood that of the target patient population for weight loss application, let's say, the penetration is very low. It is around 2% or even less than 2%. What is the trend that you are witnessing here in India in terms of the penetration of semaglutide?

Yeah. I don't recall exactly the market share, but so far it's a great launch.

Okay.

Same.

I think our market share is about 10%, more than 10%, on a standalone basis.

Okay. In that light, are we talking anything about the growth for the domestic business?

I believe that it will grow, plus in the next coming days we will launch also the oral product, the combination of both should give us a very healthy growth.

Sure, sir. Okay. Yeah. Thank you.

Thanks, Surya. The next question is from the line of Lavanya Tottala from UBS. Lavanya, please go ahead.

Hello. Hope I'm audible. Thanks for the opportunity. Just one question from my side. Even after adjusting for SSA in your sales sequential decline of 25% QOQ despite having a limited REVLIMID in Q3 seems quite high. Am I missing something? Is there anything other which is one-off here?

No, in Q3 we had a little bit sales, right? This, little bit sales.

Okay.

Yeah. Hence I think definitely from Q3 to Q4 there will be a natural decline.

I don't think we don't see a pattern of a loss of market share or a price erosion or anything like that. There could be that there were certain, you know, buying patterns with some customer. Overall, it's very consistent the way we see it. The primary difference between the quarters is lenalidomide.

Yeah.

Okay. The one which is adjusted for SSA in Q4, one can consider this as base sales for U.S. from here on. Is that right way to look at it?

Yeah. I would not come. I don't know exactly the origin of the SSA specifically. Let's say that there might be some customers that bought a little bit more as per their pattern, as per their patterns of acquiring products in terms of dates and stuff like that. Overall, if you look at market share prices, this kind of stuff, it should be about the same.

Erez, this is one we will be also going to new launches. This is from the existing products, and then going from rest of the year, we'll be launching like 27 new launches overall for the full year.

Oh, got it. Got it. Thank you. Thank you so much for the opportunity.

Thanks, Lavanya. The next question is from the line of Saion Mukherjee from Nomura. Saion, please go ahead.

Yeah. Hi. Thanks for taking my question. Just one question on semaglutide. If you can indicate when you expect approval in Brazil, and what are the key market approvals that you're looking at? You know, you mentioned, I think, 6 or 7 million units for this calendar year. What's your expectation for the full fiscal year, FY 2027?

The additional markets, beside of course, first of all, we are expecting to get approval also in Brazil. We have a partner in Brazil that is also there, and he got also our comment. We hope to get approval to our clone product that is there. And in parallel to that, of course, we are seeing approval for our initial submissions.

We will be in Brazil, probably, I don't know if it will be 3 months delay or 4 months delay, but that is still the expectations. In addition to that you have markets like Turkey. You have a bunch of, relatively high number of smaller markets that we have a partner that will probably serve, like in Latin America or in Southeast of Asia.

Because altogether, we are planning in this calendar to launch in more than 50, and in 12 months in more than 80. In terms of number of markets, but in many of them, we will do it with a partner that will do it for us. Between the, what we call the B2B, in which we are selling to the partners or selling ourself directly, we probably will be in a pace of 3 or 4 million pens per quarter.

If you add to that, it will come to around 10 or 11, close to the 12 that we discussed last time, give or take one month. We are still in the same neighborhood, but with the delay of the few months that took those approvals.

Understood. There's one question on U.S. generics. I think, if I heard you right, are you expecting 27 launches? You actually mentioned a few of those products. It looks like most of them are very competitive. Are there any chunky large product opportunity in the U.S., you know, outside of abatacept, that you expect in fiscal 2027?

I believe that bosutinib can be nice product. I agree with you about that most of them will be competitive, I fully agree with that. Overall, it should give us a double-digit growth without Lena.

Okay. Yeah. Thank you.

Thanks, Saion. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Abdul, please go ahead.

I'll find this.

Abdul, you are unmuted now. Okay. In the interest of time, we will move on to our next participant, and we'll come back to Abdul, once he's able to unmute. The next question is from the line of Vivek Agrawal from Citi. Vivek, please go ahead.

Yeah. Thanks for the opportunity. Just want to understand, out of this, 3, 4 million pens per quarter, how much of this capacity that you are going to sell directly, and how much of the sales you are expecting through partner, partners, et cetera? If you can help us understand. Thank you.

Calculation. It's if I need to guess, I must admit that I did not do any kind of calculation, top of my head I will say 50/50, give or take, in the neighborhood.

I understood, sir. Thanks. One question on North America. If you look at, in this quarter we have done close to $250 million kind of revenues and it is again, close to pre-development levels, right? In the last 3 years, we have launched many products, but our, the U.S. revenues haven't moved up much. Is it fair to assume that, there's a price erosion in some of the major baseline products in the U.S.? How to look at overall profitability of the U.S. business? Is it, still lower than pre-development levels or is it, everything almost similar? Thank you.

Yeah. First, obviously, there was in this period of time there was price erosion, what it tells is that market share and new products, give or take, covered. I see it as a kind of very low single-digit growth, not flat, but I'm in agreement with you that that's this market is not growing as the other markets that we have that are all growing in double-digit.

Moving forward, this year, again, without Lena, we will see double-digit growth, going forward, the main growth in the United States will come from biosimilars, consumer health, as well as certain type of IB2S. Over time, the business will diversify itself, but right now it's mostly generic products.

understood. Right. The double-digit growth that you are highlighting for this year, that includes Sema in Canada, right? I'm just trying to understand how to look at only the U.S. sales. What kind of the growth you are expecting in the U.S. business ex Lena and ex Lena this year?

Yeah. It's ex Sema. It's not with Sema. Sema is on top.

Perfect. This is helpful. Thank you.

Thanks, Vivek. The next question is from the line of Ashutosh Jha from Barclays. Ashutosh, please go ahead.

Hi. Thank you for taking my question. I had 2 questions. Number 1, when you look at the next year, I think you have given the breakup of the costs by line items, but given that the base business right now is at, call it, 19%-20% margin, where do you see the overall margin for the business with sema, et cetera, in the next year and the year after versus our target of 25%?

We are planning to maintain the base without Sema at around 20%. This is the plan, and the Sema is supposed to help us to get more than that. Now, it obviously depends how much we will be able to sell and what price and what will be the mix, because I shared already that it will be a range of price that can go, let's say, between INR 30 or INR 25 to INR 30 all the way to INR 70.

Obviously there will be a range of prices. Let's say, with semaglutide it should be close to the 25%, but maybe a bit less. Depends on how much semaglutide we will sell.

Understood. Sir, any thoughts on the number of pens that you can possibly sell in FY 2028?

FY28, potentially we will have a lot of capacity because we will be able to qualify in addition to the current cartridge suppliers that we have today, we will be able to qualify also a capacity of FTO 11. It can be any number. Let's say it can be also 40 million also, but right now I don't see a demand for this. Hopefully we will-

Understood, sir. Thank you so much. Those are my questions.

Thank you, Ashutosh. The next question is from the line of Alok Dalal from Jefferies. Alok, please go ahead.

Yeah, thank you. One quick clarification. It is on semaglutide in Canada. Has innovator Novo already introduced an AG in the market?

Sorry, can you repeat?

Yeah. In Canada, has Novo already introduced an AG in the market?

I know that they are offering. I don't know if it was already sold. I don't know the units, personally. I don't have a knowledge for that.

Okay

assuming that they will have. That's my assumption.

All right. In that scenario, will it be a three-player market and lead to 75% discount to the innovator product? Is that the way to think?

I don't think so in that way because the market is divided to public, cash and private, and what you're discussing is absolutely public. likely that this will happen to the public eventually. I do see it as a mix of markets. we are not planning right now our assumption based on the number that you mentioned.

Okay. Understood. Thank you so much.

Thanks, Alok. The next question is from the line of Vishal Manchanda from Systematix. Please go ahead, Vishal.

Hi, good evening, and thanks for the opportunity. Could you outline how much would you expect in annual biosimilar sales by FY 2029?

I wish I could.

A broad number, a broad guidance.

A broad, hopefully it will be in the range of $half a billion, $600 million, $700 million. Sorry that it's very much depends, of course, of how abatacept will perform. It will be the lion's share of those sales.

Would this have margins above company margins? Like, can this be the entire biosimilar portfolio, can it give you 25%+ margins?

In the case that there will be no competition or low competition, absolutely it will be above the average margin that we have.

Right. Are we on track to file the subcutaneous version this year in Europe and U.S.?

Yes, we are in the U.S. for sure. In the Europe, there might be some delay.

Okay. Okay. Just if you could give the split of sales between IV and subcutaneous in the U.S. by value?

It is 50/50. In U.S. is. Whereas in Europe, IV is very less, and SC is high.

Got it. Got it. Your CapEx plans for the next two years, annual CapEx plan?

Next year would be in the range of INR 2,000 crores, around INR 2,000 crores.

Got it. Would this largely be on biosimilars or you have other areas?

Biosimilars, certain like a product specific investments I think are there, and then general CapEx.

Got it. Thank you. Thank you very much.

Last question.

In the interest of time, we'll take one last question, from Sidharth Nigandhi from CWC. Sidharth, please go ahead.

Thank you for the opportunity. On biosimilars, you had mentioned that your R&D spends would reduce given that the spends toward abatacept have been completed. You know, going forward, given the draft U.S. FDA guidelines, how do you expect your cost per molecule to behave? How do you see competitive intensity playing out?

You know, given that you're guiding for a lower R&D spend, should we assume this is because of those draft FDA guidelines or is it because the new set of launches post abatacept and denosumab will be, you know, much later and therefore the spends will be lower? Yeah, that's one question. On semaglutide, just wanted to get your perspective on how you see dosage forms playing out given that you're also launching oral in India.

Do you see oral Being unique to India or do you see that having a play in other emerging markets too? You know, between the 3 dosage forms, how do you see the likely salience, say, 2, 3 years out?

Yeah. on the R&D,

Those were my two questions.

Sure. The R&D, naturally we abatacept we paid for a phase III trial, and going forward, we don't anticipate phase III. Obviously, the level of R&D in this area will not be the same. In addition to that, the products that will come in the next coming years in biologics, for us will come, primarily with partners unless that something that will come in-house. Obviously, then we share the R&D cost as part of that. And number three, we are becoming more productive. One day we'll discuss it, but we love AI and we love this kind of stuff, and the overall, the R&D will have less cost and more output. This is on the R&D question.

On the semaglutide question, definitely we believe that the oral will grow not just in India, for sure in India, but also in other places. Depends of course on how people appreciate the compliance of the oral product. As time will go by, also the oral will have probably additional, because that's what the innovator is doing, additional forms, and we will have all of them. There is a life cycle management that we are looking, and obviously we are following as well, and we will launch the same as IP will allow us to do that.

Sure. Any thoughts around how do you see the salience between pens, vials, and orals in emerging markets for semaglutide?

I believe that in the places that, you know, in the emerging market, you have countries in which there is a full use of the pens and innovator fully launched the product in a place that it was done partially or And also markets that not at all. Obviously, the price point for each one of the market is a bit different. In the places with the lower prices, we believe that the oral will be more successful than in the lucrative markets, at least the way we look at it now.

Thank you.

Thanks, Sidharth. That was the last question. Thank you for joining us today. We value your time and participation on the call. If you have any further questions or need additional information, please feel free to reach out to me. With that, we conclude today's earnings call. Thank you, everyone. Have a good evening.

Good day, everyone, and welcome to the Quarter 3 FY '26 Earnings Call of Dr. Reddy's Laboratories Limited. We appreciate your continued interest in our company. I'm Aishwarya Sitharam, Head of Investor Relations at Dr. Reddy's. Joining us today are members of the leadership team. Mr. Erez Israeli, our Chief Executive Officer; and Mr. M.V. Narasimham, MVN, our Chief Financial Officer. Our quarterly financial results have been published earlier today and are available on our website for your reference. We will start today's call with MVN providing an overview of our financial performance for the quarter. Following that, Erez will share his insights on key business highlights as well as the company's strategic outlook. We will then open the floor for questions. All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed. Reconciliations to the corresponding GAAP measures are included in our press release. I would like to remind everyone that the safe harbor provisions outlined in our press release today apply to all forward-looking statements made during this call. Before we proceed, I would like to call out a few housekeeping points. [Operator Instructions]. This session is being recorded, and both the audio and transcript will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy's Laboratories Limited and may not be rebroadcasted or quoted in any media or public forum without prior written permission from the company. With that, let me hand the call over to MVN to present the financial highlights for the quarter. Over to you, MVN.

Thank you, Aishwarya. A warm welcome to all. Thank you for joining us on our Q3 FY '26 earnings call. It is my pleasure to take you through our financial performance for the quarter. The business delivered a resilient performance in Q3 FY '26, reporting a 4.4% revenue growth and steady profitability despite product-specific headwinds. The performance reported this quarter was largely attributable to the double-digit growth delivered by our underlying base businesses, excluding Lenalidomide aided by favorable Forex. Reported EBITDA margin, which stood at 23.5% included a onetime provision related to impact of changes in the implied benefit obligations under the new labor law codes in India. Adjusting for this onetime provision, the EBITDA margin was 24.8%. All financial figures in this section are translated into U.S. dollars using convenience translation rate of INR 89.84, the exchange rate prevailing as of December 31, 2025. Consolidated revenues for the quarter stood at INR 8,727 crores, which is USD 971 million, a growth of 4.4% year-over-year and a decline of 0.9% on a sequential basis. Strong performance across our branded businesses, namely India, emerging markets and the acquired consumer health care business in Nicotine Replacement Therapy. Further supported by favorable currency exchange rate movements was partially offset by lower Lenalidomide sales and continued pricing pressure in the U.S. and Europe Generics. Consolidated gross profit margin for the quarter was at 53.6%, a decrease of 505 basis points year-over-year and 104 basis points sequentially. The decline in margins during the quarter was largely on account of lower Lenalidomide sales, price erosion in our unbranded generic businesses, adverse product mix in PSA and the onetime provision related to new labor law codes mentioned earlier. Adjusting for this one-off, the margin was at 54.1%. The reported gross margin was 57.4% for global generics and 17.3% for PSA. The SG&A spend for the quarter was INR 2,692 crores, which is USD 300 million, an increase of 12% on year-over-year and 2% on Q-o-Q. The year-over-year increase was primarily on account of ongoing targeted investment to support long-term growth of our branded franchises, namely the acquired NRT Consumer Healthcare business and branded generics. Adverse Forex impact as well as the onetime provision related to the new labor law codes. SG&A spend accounted for around 31% of the revenue during the quarter was higher by 199 basis points year-over-year and 82 basis points on a sequential basis. Excluding the one-off provision, SG&A spend as a percentage to the revenue was around 30% in Q3 FY '26. The R&D spend for the quarter was INR 615 crores, which is USD 68 million, a decline of 8% year-over-year and largely flat sequentially. The decrease reflected lower development spends in biosimilars given that large part of investment related to abatacept have been completed, the spend this quarter also included onetime new labor law codes related to the provision. The R&D spend was 7% of revenues for Q3 FY '26, lower by 92 basis points on year-over-year and the same level as the previous quarter. Excluding the on-off R&D spend was at 6.8% of Q3 revenues. Other operating income for the quarter was INR 77 crores as against INR 44 crores in the corresponding quarter last year. EBITDA for the quarter, including other income stood INR 2,049 crores, which is USD 228 million, a decline of 11% on year-over-year basis and 13% sequentially. The EBITDA margin stood at 23.5%, lower by 401 basis points on year-over-year and 322 basis points Q-o-Q. Adjusting for onetime new labor law codes related to the provision, the underlying EBITDA margin was at 24.8%. The net finance income for the quarter was higher at INR 117 crores as compared to net finance expenses of INR 2 crores during the same quarter last year. The increased net finance was primarily on account of higher foreign exchange gain this quarter in comparison to foreign exchange loss reported in the corresponding quarter last year. As a result, profit before tax for the quarter stood at INR 1,543 crores, that is USD 172 million. PBT as a percentage of revenue was at 17.7%. Excluding the onetime new labor law code-related provision, the PBT margin was at 19%. Effective tax rate for the quarter was at 22.9% compared to 25.1% in the corresponding period last year. The ETR for Q3 FY '26 was lower primarily due to favorable durational mix for the quarter in comparison to the same period in the previous year. Profit after tax attributable to equity holders of the period for the quarter stood at INR 1,210 crores, which is USD 135 million, a decline of 14% year-over-year and 16% on Q-o-Q. This is at 13.9% of revenue before adjusting the one-off provision related to a new labor law codes. The diluted EPS for the quarter is INR 14.52. Operating working capital as of 31st December 2025 was INR 14,142 crores, which is a USD 1.57 billion, an increase of INR 811 crores, which is USD 90 million over 30th September 2025. CapEx cash outflow for the quarter stood at INR 669 crores, which is $75 million. Free cash flow generated during the quarter was INR 374 crores, which is $42 million. As of December 31, 2025, we have a net cash surplus of INR 3,069 crores which is equivalent to USD 342 million. Foreign currency cash flow hedges executed through derivative instrument during the period are as follows: USD 481 million hedged using a combination of forwards and structured derivative contracts scheduled to mature through March 2027. The contracts are hedged at the rate of USD 89.1 to USD 90.3. RUB 2.93 billion hedge at a fixed rate of RUB 1.06 with a maturity falling within next 3 months. With this, I now request Erez to take us through the key business highlights.

Thank you so much, MVN. Good day, everyone, and thank you for joining us today. We really appreciate your continued engagement and interest in our company. Thank you all for joining our meeting. Our overall performance in Q3 FY '26 remain consistent with our strategy. And we continue to deliver on our strategic priorities during the quarter, namely growing the base business, driving gross efficiencies across operations, advancing our key pipeline programs, semaglutide and abatacept as well as pursuing selective business development video opportunities to augment our organic growth efforts. In line with our stated aspirations, our underlying base business delivered overall a double-digit growth this quarter. The company EBITDA margin was about 25%. And this is adjusted for onetime provision related to the new labor codes in India. Let me now walk you through some of the key highlights of the quarter. Revenue grew by 4.4% year-on-year despite lower contribution from Lenalidomide. Our base business, excluding Lenalidomide, delivered double-digit growth. The overall growth for the quarter was also aided by favorable Forex. EBITDA margin stood at 23.5%, which included a onetime provision related to the new labor codes mentioned earlier, excluding this onetime provision, EBITDA margin is at 24.8%, like I mentioned, about 25%. Annualized ROCE was at 20.4%. Net cash surplus at the end of the quarter was $342 million. In alignment with our strategic focus to deliver a first-in-class and innovative therapies in India and emerging market, we entered into a strategic collaboration with Immutep for commercialization of a novel immunotherapy oncology drug, Eftilagimod Alfa, a key global market outside of North America, Europe and Japan and Greater China with an upfront of $20 million potential regulatory and commercial milestones of up to $350 million as well as royalties. Further, we recently launched Hevaxin, a novel, recombinant vaccine for the prevention of Hepatitis-E virus infection in India. We are pleased that the integration of the acquired Nicotine Replacement Therapy business is progressing as per plan. 85% of the business by value is now under operational controls. The next phase of integration will include selected countries, Asia Pacific, Middle East and Latin America. We expect integration largely to be completed by the end of this fiscal. We continue to make progress on our key pipeline products. During the quarter, we received a marketing authorization for semaglutide injection in India from DCGI following the recommendation of subject to expert committee in the SEC under Central Drug Standard Control Organization. Further, necessary local manufacturing license have been secured. We have also started filing in various emerging markets through the COPP route. In October 2025, we received a notice of noncompliance from the Canadian pharmaceutical drug directorate for our semaglutide injection, which outlined a request for additional information and clarification on the specific aspect of the submission. We promptly submitted our response by mid-November 2025, well within the stipulated time and now we are awaiting a response from the regulatory agency in Canada. On the biologics front, we have completed the filing of the biologics license application, the BLA, for the IV presentation of abatacept biosimilar candidate in December 2025 as per the schedule. Following the positive opinion for CHMP, we received European Commission approval for denosumab biosimilar in Q3 FY '26. Likewise, we have received the approval from MHRA in the U.K. Our in-house commercial team has launched the product in Germany in December and launched a preparation are underway for the U.K. and other European countries. We received a complete response letter from the USFDA for denosumab biosimilar BLA, which is -- was developed by our partner, Alvotech. The CRL refers to the observation from a pre-license inspection of Alvotech, Reykjavík manufacturing facility. On the regulatory front, in November 2025, the USFDA conducted GMP inspection of our API facility CTO-SEZ in Srikakulam, Andhra Pradesh with 0 observations. In December 2025, the USFDA completed a GMP and a preapproval inspection of our facility FTO-SEZ PU-01 in Srikakulam, Andhra Pradesh and issued Form 483 with 5 observations. We have responded already to the agencies within the stipulated times. Recently, the USFDA issued a post application action letter in relation to the response submitted to the observation received post the PI conducted at our Bachupally biologics facility in September 2025 for our rituximab biosimilars. We are actively working to resolve the outstanding observations. Our CDMO business, Aurigene Pharmaceutical Services Limited served as an exclusive API manufacturer for 2 of the 46 novel drug approved by the USFDA in 2025. Further, APSL delivered 3 discovery programs through its in-house AI-assisted discovery platform called Aurigene.Ai. We continued progress on our industry-leading sustainability practices. During the quarter, we announced a science-based net zero climate target, making us the only Indian pharmaceutical company to commit to such a target by FY '24 -- FY2045. We are in the leadership position in CDP Water Security & Climate Change categories for 2025. Let me take you to the key business highlights for the quarter. Please note that all financial figures mentioned are reported in the respective local currencies. Our North America Generics business generated revenues of $338 million for the quarter, a decline of 16% year-on-year and 9% sequentially. The decline was primarily on the account of level in Lenalidomide sales and price erosion in certain key products. During the quarter, we continued to launch momentum, adding 6 new products to our portfolio. Our European generic business reported revenue of $140 million for the quarter, a growth of 4% on a year-to-year basis as well as sequentially. The acquired Nicotine Replacement Therapy portfolio, which is now also in the base has been performing well. Further, new product launches helped offset the impact of price erosion in generics. During the quarter, we launched 10 new generics products across markets, further strengthening our product portfolio. Our emerging market business delivered revenue of INR 1,896 crores in Q3 FY '26, reflecting a robust growth of 32% year-on-year and 15% sequentially. Growth was primarily driven by new product launches across various markets and favorable Forex. During the quarter, we introduced 30 new products across countries in line with our commitment to improving access and further deepening our market presence. Within this segment, our Russia business delivered growth of 21% year-on-year and 16% sequentially in constant currency terms amid continued adverse macroeconomic conditions. Our India business reported revenue of INR 1,603 crores in Q3 FY '26, delivering a healthy double-digit year-on-year growth of 19% and 2% increase sequentially. This performance was attributable to revenues from our innovation franchise, new brand launches price increases and higher volumes as well as contribution from recently acquired Stugeron portfolio. According to IQVIA, we continue to outperform the Indian pharmaceutical market, IPM, with a moving quarterly total mass quarterly, MQT, growth of 12.3% compared to the IPM growth of 11.8% and moving annual total, MAT, growth of 9.7% compared to IPM of 8.9% growth. Our IPM rank is 10 for the quarter and 9 for the month of December 2025. During the quarter, we launched 2 new brands as we continue to enhance our domestic market presence. Our PSAI business reported revenue of $92 million in Q3 FY '26, resulting in a decline of 5% year-on-year and 15% sequentially. During the quarter, we filed 31 Drug Master Files globally. In line with our strategic priorities, we remain committed to investing in differentiated R&D programs, especially peptides and biosimilars that offer meaningful commercial opportunities. In addition to our enhanced development efforts, we also -- we will also continue to strategically collaborate to build our innovation portfolio for India and emerging markets. During the quarter, we completed 28 global generic filings. As we look forward, our focus remains on effective execution to deliver on our strategic priorities improving base business both advancing differentiated pipeline products like semaglutide, abatacept, driving operational efficiencies and pursuing value-accretive acquisition and partnership aimed at creating long-term value for our stakeholders. Before we move to the Q&A session, I would like to announce that Aishwarya Sitharam has recently taken over as the Head of Investor Relationship from Richa Periwal. I wish both Aishwarya and Richa, Richa is staying with our organization success in their respective new promoted roles. With that, I welcome your thoughts and questions as we move into the Q&A sessions.

Thank you very much, Erez. [Operator Instructions] The first question is from the line of Neha Manpuria from Bank of America.

I have 2 questions from me. First, on the India business growth. The 19% growth, how should I think about organic growth for the India business because we did have the Stugeron acquisition in this quarter. Was that a meaningful contributor to this 19% growth? If I were to strip that out, would that growth still be, let's say, north of 15%? Would that be a fair assumption?

So it's somewhere between 17% and 18%, if I calculate, I'm not sure exactly where it is. But let's say, it's more than 17% organic without acquisitions.

That's right, Erez.

And what is driving this strong growth? It is because we've been doing -- I know we've been moving in the double-digit category for a few quarters now, but to step up to 17%, 18%, does seem very large in a quarter's time. What's changed in this quarter? And how sustainable is this growth trajectory, particularly this, let's say, mid-teens sort of growth trajectory as we look through the next few quarters?

So it's primarily the performance of the innovative product. So normally, and there are actually very good products that are being really appreciated by the market. So normally, when you produce a brand that is not known, there is a period of time in which you have a cycle of physicians that recognize this product and then recommend it. So there is a certain gross pattern like introduction of any brand. And I think what happens to us is actually the strategy is working. We are in some of these brands in the third year since launch and some of them in the second year. And you will start to see the move of that. So the -- in addition to the brand didn't perform in a similar manner, meaning that we are increasing the prices, we have the support of those, but it's primarily the -- what we called at the time of Horizon 2 introducing of innovation to India, this is the primary move that it's actually working.

Understood. Sorry, one last question on India. The innovative portfolio would be what portion of our sales roughly today if you were to quantify it?

15% to 20%...

No, it should be less.

It should be less.

If I need to, it's somewhere between 10% to 15%, but I'm not sure, Neha.

All right. No problem. And my second question is on sema. I think you mentioned that we have submitted the response, and we are waiting -- sorry, we are awaiting response from the agency. So have we not got a follow-up goal date as well? And according to you, what would be the next time line that we should look at for sema approval in Canada?

Yes. So we do have a goal date because it's come automatically 6 months from the response time. So it takes us to May. But it doesn't mean that we need to get approval by that date, it can be any time between now and May, and hopefully, in May, no additional question. So I'm -- I don't know when we will get a response. We are preparing for a launch even in Q4 and there is scenarios like that. And if not, it will be in Q1. But let's say, any time between end of February to May, we should expect to launch in Canada.

The next question is from the line of Damayanti Kerai from HSBC.

My question is again on India business. So you mentioned the innovation -- innovative products, et cetera, is helping you to achieve such strong number. So 2 things. Again, I think what is the sustainability of these numbers -- growth numbers in India? And also if you can clarify if the December quarter has some spillover benefit from the prior quarter where we had seen the GST disruption?

So it's absolutely sustainable. I don't know if it's 90%, which could be also 15%. So it's absolutely sustainable in this range. And I don't think that we had a major spillover.

There are no spill like on account of GST implementation. This is a clear quarter.

Got it. My second question is on semaglutide. Again, I guess we are awaiting for Health Canada to revert. But meanwhile, what are your expectations in terms of pricing compared to, say, a few months back, given now most of the companies are, I guess, gearing up for these opportunities? And what's your broader expectation on the pricing and competition in the key markets where you are looking to launch semaglutide.

So expectations did not change much from our recent discussions. We know that eventually, there will be a competition in Canada. We also know that Novo Nordisk announced that they want also to participate, and they even started to offer certain organization in Canada, their -- what they call their own generic brands, if you wish, in Canada as well. We have made some arrangements like that. I still believe that if we will get the approval, we have a good chance to be alone or even with a low level of numbers of players that will compete. And over time, they will accumulate the opportunity to my opinion, is still there.

Sure. And earlier, I guess, your expectation for pricing across different markets where some were say $20 to $70 per unit. So are you still expecting the similar range in terms of pricing in different markets?

Yes, yes. The -- most of the markets will be on the lower end of the spectrum. But yes, the spectrum is still there. We did not get yet indications that it will be lower. So over time, when people will get approval, we are expecting to be very competitive markets. There will be a short period of time that can be from weeks to months. It depends on the market, in which we can have healthier prices. But then we are preparing ourselves for another very competitive markets.

So somewhere closer to the lower end of the range, right? That's the expectation.

Yes, yes, yes. I think this is a fair assumption for your analysis.

The next question is from the line of Dr. Bino Pathiparampil from Elara Capital.

A couple of questions. One, how much has generic Lenalidomide still contributed to the EBITDA margins in the quarter? And now that we have a visibility of our expense levels, et cetera. What shall we look forward to in terms of EBITDA margins in Q4 and FY '27?

Four years, I did not answer this question. And this is the last quarter that I need to answer this question. So I will not be able to tell you the amount, and this is because of the confidentiality agreement that we have with the innovator. It's not because I don't want. But what we can say that the decline that you see in America is primarily Lena. And actually, without Lena, we didn't grew. So you can take it from there.

Got it. When you say decline in the U.S., it's Y-o-Y or Q-o-Q?

Both.

And second, can I also understand the time lines now, latest time lines for denosumab and rituximab in the U.S.?

Yes. So the denosumab, Alvotech needs to answer the deficiency letter. And then, of course, it depends on how the USFDA will address the response. So the answer is I don't know, but it is likely that will be in the second quarter of -- and maybe even after, of FY '27. So I'm not expecting it. The normal time that they evaluate the efficiency letter, a new goal date, likely that will take us to this time frame. But I really don't know because it's -- in biologics, you don't always end up with 1 deficiency letter. So we need to see. Answer to denosumab -- on rituximab, I think you asked for both unless I...

Yes. Yes, correct.

On rituximab, we have 1 -- out of the 2 comments that they gave, which is repeated to our response, it is primarily related to one of the lines of the fill and finish. And on that, we will answer in the next 2 weeks, give or take. And then the expectation that they will come to visit us again and reinspect us. So the approval likely. It's not official, but I'll give you my best assessment that likely that we'll get reinspection on that specific line. And I'm ready preempting one of the next question. There is no impact on abatacept because abatacept is not on the same lines. But this is the task of rituximab. So right now, it will be a response, then they will decide when they want to come to visit, and it will come for there. So unlikely, let's say, in the next 6 months and maybe more than that.

The next question is from the line of Abdulkader Puranwala from ICICI Securities.

So just firstly, on semaglutide, so I heard your comments about Canada entry in Feb to May where you expect. I mean, how about the other countries in which the patent expires in March, including India? And in terms of -- we previously talked about having a capacity of 12 million cartridges. So I mean, is there any increase to that? And by when we should see a meaningful traction coming from this product?

So the starting point is India, we will launch on time. The date is March 21. It happened to be my birthday for everybody. So this is one. In Canada, like I mentioned, it can be any time from now until the goal date of May, that's what I answered Neha. I don't know exactly in what -- in that spectrum, when exactly it's going to be. But the expectation is that we have an approvable product and we will launch at this time frame. In addition to that, we are using our COPP that we got already for media to register in other markets. Altogether like I mentioned in the past, it's much more than 80 markets. I think it's 87 or 80-something markets altogether. But the most meaningful will be Brazil, somewhere around July, as well as Turkey, give or take the same time frame. In addition to that, we have partners both in India as well as outside of India that wants the right for our semaglutide for their market. And we are obtaining also licensing fee for these kind of activities, not just for this product but also for other products. So that's overall. So the 12 million pens remains the same for that period of time. For the period after, we can have more than that. Right now, as you know, we are using primarily the fill and finish from Stelis. But as time will go by, we have additional capacity and we continue to use our partner as well as our internal facilities.

Got it. And just to follow up on the biosimilars as well. So what we're having now a CRL for denosumab and rituximab, so internally, how is that impacting our estimates for your entire biosimilar time lines -- launch time lines? And secondly, with abata, is there any time line for launch we are planning internally?

Sure. So on rituximab, the main the launch -- delay of the launch is to our partner Fresenius. As you recall, rituximab was a product we primarily used to qualify Bachupally. It's actually served the purpose well. Maybe even too much engagement with the authorities. It's actually served the purpose really, really well. in that respect. So the launch -- overall delay in the launch versus the regional plan is probably a year plus. In Europe, we already launched. So Europe is good, and we are progressing there. They're also about the same. We launched in Europe, and we are going to launch in additional markets. It's a very competitive market over there. Denosumab right now because of the efficiency letter, I don't know exactly when it will answer. So I don't know how is the delay, but it is at least 6 months, if not more than that, for this particular product. I don't see an impact of abatacept. The denosumab is made by a partner, Alvotech in Reykjavík, Iceland, abatacept make on different lines in Bachupally, India. Obviously, we need to get approval for abatacept in the stipulated time. We submitted it on time. So the first expectation is that we'll get somewhere towards the end of the calendar of '26, the approval for the IV product and then we can launch it. The approval for the subcu should be by January or February of 2028. We believe that we are still on time for that. Of course, we need to see that we are actually making it happen. But abatacept so far looks in the right direction, especially in the United States.

The next question is from the line of Kunal Dhamesha from Macquarie.

Yes. Just one on the sema Canada. Is there a requirement of plant inspection from Health Canada before approval or all those things are already done from our side as well as from our partners side?

So no inspections are expected or needed. We just hope for approval. Of course, Kunal, can give us additional queries like a normal regulatory process, but we are expecting approval.

But normal regulatory process does not do all plant inspection from Health Canada, like the USFDA has.

No, no inspection.

Sure, sure. And secondly, no, I think in one of the media articles, the Health Canada spokesperson has kind of mentioned that the manufacturing of the API is different between generic players as well as the -- versus the innovator and hence, substitutable status whether the generics would be substitutable as kind of questionable. So if you could provide any color on this, how much confident we are that our generic would be substitutable at the pharmacy level.

No, it's absolutely substitutable. And by the way, what we said is not correct, which actually also the innovator is using synthetic API for the injectables and recombinant products for the oral. And we are planning to do the same for the generics. So in that respect, I don't see a merit to that statement. I believe the product is absolutely going to be substitutable. So there is no need for a prescription or special processor branding or any branded generic activity. It's a normal retail products once we'll get approval.

Sure. And my second question is on the new labor code related provision that we have basically provided some INR 117 crores, so how should we think of this? Is it some bit of retrospective cost also baked into this INR 117 crores or it's just a prospective cost? And is it recurring in nature that structurally, our employee expenses would be a little higher now? How should we think about this?

Kunal, as per the new labor law codes now, the wage definition has been revised in line with the new labor law codes, it's like whoever employees on the payroll of the company as on December 31, we have recomputed retrospectively. It is not like a prospective. So that's where this entire gratuity leave catchment proportion has been made. And going forward, in line with this may not be this extent, but that would be like my view, less than, I think, 50 basis points, would be the impact, but that's not very significant.

The next question is from the line of Madhav Marda from Fidelity International.

Could you talk a little bit about biosimilar abatacept launch in the European markets as well. Is that something that we are planning to target in the next couple of years? And also, if you could talk about the addressable market in Europe as well? That's my first question.

So yes, sure. So yes, Europe is a very important market for abatacept. We are going to do it by ourselves as well as with partners. The -- and we have to cover all the markets because in some of the markets, we don't have the ability to go to physicians. And so we are trying to cover as much as possible. Obviously, the markets that are tender markets, we can cover easily by ourselves. Likely, that the launch is July.

July, we have filed submitting July 2026 and expecting approval by 12 months.

Yes. So July 2027, you should expect a launch in Europe.

For both IV and the subcu.

For both IV and subcu.

And how large is the addressable market in Europe for abatacept today?

About $2 billion, maybe a little bit more.

And is this also in terms of the competitive landscape, given an abatacept seems like we're the only one who's completed Phase III, maybe 1 more person is starting off. I don't know where they are right now. But even in Europe, similar competitive landscape, like we'll probably be the first only company at launch?

Yes. And by the way, the idea is to launch abatacept in every country that has a demand for this product, either by ourselves or with a partner. So the -- we are planning to launch at this time frame in Europe, in the United States, in Japan, in Canada and in every market that there is a demand for this product.

The next question is from the line of Shyam Srinivasan from Goldman Sachs..

Just the first one on the NRT, the disclosure you have shared around the growth there, right, is about 25% Y-o-Y. Can you split it out into like constant currency and what the growth was? I remember and we had about INR 6 billion -- INR 600 crores last year same time, and we had INR 1 billion pretax profits. So how has that evolved even for at these levels now?

So Shyam on the constant currency is year-over-year 8% growth.

Okay. So the rest is all coming from currency [indiscernible]?

Yes.

Okay. So how should we look at the steady-state growth for this? Is there something that has changed? Because I remember single-digit growth was what we guided to. So that continues, right, in constant currency?

Yes, Shyam, firstly, yes. It can be -- right now, we have -- we see upside to the model. It's not a significant upside. But let's say, instead of -- we always said single digit. But right now, it looks like on the upper side of the single digit. And it may go to double-digit depends because we are also participating in certain tenders like Brazil, and other stuff. So if you win this tender, it gives you a chunk of sales in a particular situation. Overall, it looks good. It looks that we are exceeding the expectations that we had internally. And actually, the demand from this product is higher than what we thought.

Helpful. So just a subpart of the question was on the profitability as well. As we have -- I know we have done additional brand building access, but has the profitability materially changed?

Yes. Because of like sales are also higher and then it is like here, the A&P investments overall, if you remember, like at the business case level, we said EBITDA is around 25%. But now since we are doing well, the EBITDA percentage is higher than 25% currently.

Going forward, right now, it looks really well above expectations. But let's say, I think fair assumption will be that we'll stay with 25%.

Yes.

Got it. And just the last question to some of the opening remarks you made, Erez, on Novo strategy in Canada. Just curious why would they want to tie up with some local organization? They didn't file -- they didn't defend their patents originally. Is there a chance that slippage happens across the border into the U.S. for the lower-priced version? Any philosophy or thought process, you're able to understand why they're doing it?

It's beyond my paycheck. I'm not managing Novo Nordisk, I hardly manage to read this with a lot of difficulties. I'm assuming that they want to protect their market share. They understand what will happen when a company like us, we launched and other companies we launch. Apparently, it's important for them to keep the relationship. They also said it, so I'm kind of that. About over the border, probably, but I have no data or indications about it. We are not building on that. Let's say, we are building on selling to Canadian. And if it will be bought, it will be bought.

The next question is from the line of Tushar Manudhane from Motilal Oswal.

Thanks for the opportunity. First question on India, semaglutide opportunity. Just would like to understand the approval which we have got is for diabetes and weight management or only diabetes?

We got it for the diabetic product. And we are planning to launch eventually all products in India. Also the other part of the products are in the queue to get approval. But what we will launch in March is the generic version of Ozempic, if you wish.

Got it. And so effectively, if at all for weight management, it would not be in March, but subsequently, as and when you get the approval from the regulatory authority.

The physicians will prescribe the way they believe they should. But the indication of the product launch is for diabetic...

Because the concentration of the product would be relatively -- or the strength of the product is relatively lower for weight management, right, in that way?

Also, many, many people use the Ozempic for the same. But yes, for the second, the equivalent of Wegovy will come later. In March, we will launch. But in India, we are going to have all strengths. We will have the -- both the indication as well as the oral.

Got it. Sir, secondly, just on this rituximab, let's say, if at all that reinspection happens post your response. In your experience, has it happened like USFDA accounts only for a particular line for inspection and doesn't inspect the entire site as such?

No, absolutely. It's this is what PI, pre-approval inspection is all about. So they are coming for a specific line. They can extend it if they wish. It's up to them. But it's very, very common, especially on sterile product.

Got it. And on the same thing, what would be the tentative time line for submitting the subcutaneous version filing for USFDA?

Filing time, you guys remember? The subcu for the U.S.

U.S. it's July.

July.

July 2026.

In July, we will submit, and we hope to get the approval and the patent date, which is January or February 2028.

Got it. And just one more from my side. R&D spend guidance, if you could share?

Sorry, what to share?

R&D guidance.

R&D guidance...

Is in the range of, Tushar, is 7% to 8%, what we have guided earlier. That is -- remains same.

But sir, now that major product, I guess, it was with respect to [indiscernible] largely done. So you think that we will be still on the higher side of this guidance, at least for FY '27?

So because like pembro also, we have just started the collaboration with Alvotech. I think there's new molecules also we'll continue to introduce. That's why we are saying 7% to 8% range.

When we have -- we finish a budget of products, we obviously want to develop more products. We have aspiration to launch hundreds of products in the next 15 years. So there is enough products to develop. So it's more how much we can afford in a particular time in our capacity in R&D.

The next question is from the line of Vivek Agrawal from Citi.

My question is related to SG&A spend. That continues to remain high. And this is against the company's guidance of some moderation ahead of Revlimid cliff. I just want to understand the outlook here. Are we expecting any kind of decline in SG&A spend next year in FY '27? Or is it or it can still grow Y-o-Y maybe at a lower rate. So if you can help us understand.

Well, Vivek, if you see like at lower Lena sales for the quarter and our -- as a percentage to the sales is SG&A still is like without this labor law codes impact at 30%. And then in this 30% also the way which like ForEx has given the favorable impact on the top line, here also like where our SG&A spend also there in Russia, in Europe for the NRT, there is a -- like a ForEx impact also is the SG&A. So considering and also we are continuing to invest. I think if you look at like how our branded business as growth be it India, emerging markets, NRT, all are on the solid part of growth. And despite we have continued to invest and then a 30% of the sales, we believe I think we are in the control of the overall SG&A.

Understood. And that makes sense. But just want to understand an absolute level, right? So in absolute terms, are we expecting any kind of moderation or decline in next year? Or it can still grow from here on?

So you'll see that it will be -- it will grow less, so moderation of the growth. The reason for that, as -- and we discussed it in the past, we want -- and we obviously prepared for the post Lena era for quite some time. We knew it is coming. We are aware of the implications -- it's not -- it did not come as a surprise to us. And part of our cost containment, which is one of the key principles that I mentioned is that we want to control the cost. So also the SG&A, the idea is that, overall, the discretionary costs we are controlling very much like we discussed in the past. And the pace of the growth of the cost will be less than half of the growth of the top line.

The next question is from the line of Kunal Lakhan from CLSA.

My question was on the emerging markets, especially Russia, we saw some good growth numbers this quarter. And I do read your commentary that it's primarily driven by new product launches. Just wanted to understand how much of this growth was because of the new products and how much was the base business growth here?

It is both. It is both. And then -- so we have growth in all 3 segments in Russia, meaning the retail, the hospitals and retail, both on the Rx and OTC. So it's both the old product as well as new products.

And also in terms of pipeline of new products, if you can give some color on the -- in the coming quarters and years, how does the pipeline look like? And is there this growth is sustainable once the current high base is actually in the base?

So the growth in Russia is sustainable. Not always, you'll see a 21% growth every quarter, but double digit -- healthy double digit in Russia is absolutely sustainable.

The next question is from the line of Shashank Krishnakumar from Emkay Global.

Just one question on our sema tablets filing in India. I think the SEC has asked for some on-site verification of our Phase III trial data. Now is it something that could -- does it typically meaningfully impact approval time lines? Or is it sort of relatively easier to address? I just wanted to understand that.

I don't have any concerns on this one.

Got it. That's -- and just a related question. So post-March, subject to an approval, there's no litigation overhang even for the launch of tablets, right, in India?

Correct.

The next question is from the line of Surya Patra from PhillipCapital.

Yes. My first question is on the Aurigene CDMO opportunity that in the opening remarks, you have mentioned that it has been qualified as an exclusive supplier of 2 innovative APIs. So how important this opportunity be for us? And when of that we fructifying? And how important or in terms of the revenue contribution that we should be seeing out of it?

So as we speak, this is still a small business. We -- as I'm sure you all recall, we started the CDMO efforts in a more, let's say, with -- let's say, more emphasis on this activity for the last 2 years. What we try to do is to engage meaningful products and get -- initially, we started with Phase I, Phase II. And we are very happy that effort has started about 2 years ago and now started to yield. How significant it is now? It's not that significant, but we should absolutely see, I believe, $100-plus million coming to us as a growth in the next 2 to 3 years from that. From the overall scheme, it's not big for, but for the CDMO business, it is an important place because it will allow them to have sustainable capabilities over time.

Sure. My second question is on the Lenalidomide, so knowing the fact that we are an integrated player means having our own API also for that. So given that situation, what is the kind of tail end opportunities in the Lenalidomide that we should be seeing?

We'll continue to be in the product. But given the fact that we are comparing it to the period of time which we had this agreement, I always advise the people not to give a value to it. So it will not confuse all of you. So you should assume that the old arrangements from Q4 is 0. Doesn't mean that we will not sell, but let's say, just for...

Another generic, another molecule...

As for clarity, just it will help everybody.

Sure, sure. Just one booking question. We have talked about the ForEx element in the couple of line items this quarter. So whether there is a kind of a net positive impact that we have seen in what are the kind of a net Forex loss or gain that we have seen in the financials for the quarter? And the same number if you can give for the corresponding previous quarter also?

Follow-up in the Erez -- Surya, if you see that, I think for each of the sales we have called out, especially in the Europe and EM. Definitely, there's a ForEx element. At the same time, in the SG&A as well as COGS, whether we import also we ought to account at a higher price. There is a net-net if you ask and then there's a positive impact on the EBITDA margins.

Sure. Are we quantifying, sir?

I think we haven't. Not that it's significant, I think, because I don't know if there were several...

It is not that significant. I don't remember exactly the numbers, but it is not -- like it's not very significant for the second. It's -- I don't remember exactly the percentage, but it's not huge.

Yes.

In the interest of time, we will take one last question from Foram Parekh from Bank of Baroda Capital Markets.

My question is on the India market. So with the new acquisition that we have done, we have seen growth expanding to 19%. So in FY '27, can we assume with sema launch and as the new acquisition scales up, would it be wise to assume a growth rate higher than the current growth rate of 19%?

I will not -- I think you should -- we feel very, very comfortable with 15% plus. Can it be more than 19% it can, but I don't recommend to use it for now. What we can say that the 50%, 60% is very sustainable. The rest is depending on certain scenarios, but it might. Plus, we are not done with BD. So likely the things will come, but of course, we cannot guide for it.

Okay. That's helpful. My second question is on the European side, ex of NRT where we have seen sales mellowing down to 15% growth even with the launch of biosimilars. So again, the question is, as these biosimilars scales up and probably with the launch of abatacept in the European market. So can European region, ex of NRT scale north of 20% or so?

Again, it can, but it depends on the scenarios. So the -- I think what I can say about Europe, and this is something that we are very proud of in 2018, we had less than EUR 100 million above sales in Europe. And in the future, in the next 2 or 3 years, we will see 10x this number. So it's emphasized the importance of euro for us. Europe is not only what we do in Europe, so what we do with partners in Europe. So it's very, very important for us because we will not have capability in all the markets. So the answer is it's possible if it is possible. We are not guiding for that. What we are saying is that all markets should grow double digit besides the United States that will grow single digit, and this is without taking the impact of Lena. Like I mentioned from next quarter, this arrangement is done and that's how we should see.

Sure. And last question is on the Global Generics gross margin. As REVLIMID sales have come down, we're seeing gross margins also coming down to 57%, so from next quarter onwards, with 0 REVLIMID sales, can the gross margin territory scale down further?

So we can expect without Lenalidomide scenario from Q4 onwards. Our gross margin of both Global Generics and PSA in the range of 50% to 55% because some quarters depends upon the products and business mix, it vary, but the range is like 50% to 55% is the range.

That was the last question for the call today. Thank you all for joining us. We value your time and participation on the call. If you have any further questions or need additional information, please do feel free to reach out to me. With that, we conclude today's earnings call. Thank you, everybody.

Thank you.

Thank you, guys.