RDY

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, we call 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 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 on your Zoom application. The chat will not be monitored for any questions to the management. This session is being recorded, and both the audio and the transcript will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy’s 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 MVN to present the financial highlights for the quarter.

Over to you, MVN.

Thank you, Aishwarya. Greetings, everyone, and thank you for being with us today. It is my pleasure to take you through our financial performance for the second quarter of FY 2027. The business reported a 1.5% year-over-year decline in revenue, while EBITDA margin was at 20.6% for the quarter. Excluding lenalidomide in North America, the underlying base business maintained its growth momentum, delivering double-digit growth. All financial figures in this section are translated into USD using a convenience translation rate of INR 95.83, the exchange rate prevailing as of September 30, 2026. Consolidated revenues stood at INR 8,671 crore, which is $905 million, a decline of 1.5% on year-over-year and a growth of 7.4% on sequential basis. Strong underlying base business performance across key businesses, except Europe and API, driven by new product launches and favorable Forex movements, helped mitigate the impact of lower lenalidomide sales.

Consolidated gross profit margin was at 52.1%, an increase of 562 basis points sequentially, and a decrease of 254 basis points year-over-year. The year-over-year decline in margins during the quarter was largely on account of lower lenalidomide sales. As a reminder, margins in the preceding quarter were adversely impacted by a provision for inventory and other costs associated with the semaglutide API-related challenges. The reported gross margin for Q2 FY 2027 was 56.2% for Global Generics and 11.8% for PSAI. The SG&A spend was at INR 2,808 crore, an increase of 6% year-over-year and a decline of 3% sequentially, accounting for 32% of revenue. The year-over-year increase was primarily driven by higher personal costs following annual increments, adverse Forex movement, as well as elevated freight costs due to supply chain disruptions arising from the Middle East crisis.

The R&D spend was at INR 524 crore, down by 16% year-over-year and 9% sequentially, accounting for 6% of revenues and primarily reflecting lower developmental expenditure in the generics as compared to the previous year. The EBITDA, including other income, stood at INR 1,783 crore, which is $186 million, a decrease of 614 basis points year-over-year and an increase of 806 basis points sequentially, reflecting a margin of 20.6% of the revenues for the quarter. The profit before tax was at INR 1,228 crore, that is $128 million, representing a margin of 14.2%. Effective tax rate for the quarter was at 25.6% compared to 22.2% in the corresponding period last year. The ETR for the quarter was higher, primarily due to an adverse jurisdictional mix for the quarter in comparison to the same period in the previous year.

Profit after tax attributable to equity holders of the parent for the quarter stood at INR 925 crore, which is $97 million, a margin of 10.7% on revenues. Diluted EPS for the quarter is at INR 11.1. Operating working capital as of 30th September 2026 was INR 14,650 crore, which is $1.53 billion, an increase of INR 297 crore over 30th June 2026. CapEx cash outflow for the quarter stood at INR 186 crore, which is $19 million. Cash flow during the quarter was INR 171 crore, which is $18 million. As of 30th September, we have a net cash surplus of INR 2,502 crore, which is $261 million. Foreign currency cash flow hedges executed through derivative instruments during the period are $229 million, hedged using combination of forwards and risk reversal option scheduled to mature by March 2027.

These contracts are hedged at a rate of 93.03 to 95.54 per U.S. dollar. With this, I now request Erez to take us through the key business highlights.

Thank you, MVN. Good day, and thank you for your continued interest in our company. Apologize for my voice. I hope it will stay consistent. We remain consistent in our strategic priorities of delivering double-digit growth across geographies and sustainable profitability through strong execution in our core businesses, progress on key assets, continued productivity improvement, and disciplined investment in future growth drivers, both organic as well as inorganic. During the quarter, the underlying business that is excluding lenalidomide in North America continued to perform well, delivering a double-digit growth overall as well as across North America, emerging markets, and India. We achieve an EBITDA margin of 20.6%, supported by the strength of our base business and our continued effort to drive productivity. Subject to successful validation, we expect to relaunch semaglutide both directly as well as to our partners in November 2026, consistent with the timelines communicated earlier.

We also remain focused on advancing abatacept and other complex generics as they move through the regulatory review process in the coming quarters. Let me now walk you through some of the key highlights of the quarter. We partnered with Takeda to bring India first approved dengue vaccine, we call it QDENGA, to the private markets in India in the first half of 2027. We expand our collaboration with Gilead Sciences to enable access to investigational once yearly lenacapavir for HIV prevention in 120 countries. In collaboration with the GARDP Foundation, we secured approval for zoliflodacin, an antibiotic used in gonorrhea treatment in Thailand within six months of USFDA approval. We received USFDA approval for rituximab biosimilar, which will be commercialized in the U.S. through our partners, Fresenius Kabi. We launch nivolumab in India, marking our entry to biosimilar immune oncology in India.

Both rituximab and nivolumab are developed and manufactured in-house. Generic semaglutide is now approved in 10 countries across Latin America, Africa, the Middle East, as well, of course, as Canada and India. Our CDMO business under Aurigene Pharmaceutical Services generated revenues over $100 million in the last 12 months. We continue to receive global recognition for commitment for true sustainability. FinanceAsia Awards, a silver medal in the best large cap company in India category as Asia Best Companies 2026, reflecting strong endorsement by the Asian investor and analyst community. We improve our CRISIL ESG score to 73 out of 100 from 66, becoming the only pharmaceutical company in the leadership category. Let me take you through the key business highlights for the quarter. Please note that all financial figures mentioned are reported in the respective local currencies.

Our North America generic business reported revenue of $264 million for the quarter, accounting for 29% of our overall revenues and reflecting a decline of 29% year-on-year and a growth of 12% sequentially. The decline is attributed to lenalidomide sales versus last year. The underlying base business, excluding lenalidomide, continued to deliver strong double-digit growth, driven by new products launches. During the quarter, we launched six new products, including first to market launch of sugammadex injection. We remain on track to launch additional products, including complex injectable, during the year. Our branded franchise comprising India, emerging markets, and consumer health business in nicotine replacement therapy, or NRT, together accounted for 53% of our overall revenue and continue to provide a strong foundation for stable margin for the company.

Our emerging market business recorded revenue of INR 2,059 crore, accounting for 25% of our overall revenue and reflecting a robust growth of 24% year-over-year and 12% quarter-on-quarter. New product launches across market, including acquisition coupled with favorable currency movement, drove growth during the quarter. We introduced 27 new products across countries in Q2 FY 2027. Our India business revenues were INR 1,851 crore, accounting for 21% of overall revenues and consistently delivering a robust double-digit year-on-year growth of 17% and 8% sequentially. Growth was driven by recent launches, including acquired brands, along with price increases and higher volumes. According to IQVIA September 2026 data, our IPM rank improved to 8 for the quarter and 9 for the year.

We continue to outperform the Indian pharmaceutical market IPM, with moving quarterly total growth of 21% versus 14.7% for IPM and moving annual total MAT growth of 19.4% versus 13.2% for the market. Four of our brands feature in IPM top 50 new launches, and we launched four new brands during the quarter. Our European business, which include NRT, posted revenue of EUR 127 million for the quarter, accounting for 16% of our overall revenues. Revenues declined 6% year-over-year and 3% sequentially on account of price erosion in generic, partially offset by revenues from new product launches. Growth was further affected by the continuing impact of the operating model changes post-NRT integration as highlighted last quarter. During the quarter, we launched six new generic products across market. Our PSAI business reported revenue of $88 million, accounting for 10% of the overall revenues.

Revenue decline of 19% year-over-year and 3% sequentially, primarily on account of lower API volume uptake. Our CDMO business delivered a double-digit growth this quarter. During the quarter, we filed 28 drug master files globally. We remain committed to improving the health of our business and to delivering consistent growth and sustainable margins as we continue to strengthen our core business. We are also investing in a future growth driver across peptides, biosimilar, consumer health, and innovation. Our focus remains on progressing key products such as semaglutide and abatacept, driving operational efficiency and pursuing targeted inorganic opportunities to support long-term growth and shareholder 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, use the raise hand option available 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 not to 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, hi. Thanks for taking my question. My first question is on sema. I think you mentioned that we're on track to resume sema in early November. Erez, I think you had given us a volume guidance last time when we had announced the disruption in supplies. Two questions on sema. First, is the resumption happening with our own API? Is it the same partner that we're using? Second, given what has happened in Canada with the one player which is already there, how confident are we of meeting the guidance that we'd given for sema?

I am very confident, and the confidence is based on orders that we already have, and we just obviously need to supply. The main issue was with our ability to scale up the API. This problem is solved, and we shipped all the necessary API to our partner to do. We still need to have the results of the validation, so this is still pending, but I am confident that it will be successful. Then we are ready to launch. Most of the quantities will go to Canada, and some of the quantities will go to Latin America, primarily to Latin America and a little bit to Africa.

Understood. My second question is on the gross margin improvement that we've seen in the quarter. MVN, if you could give us some color in terms of what's driving this gross margin improvement, and is it fair to assume that as sema comes through, this is the bottom in terms of gross margin, and gross margin should only improve from here?

Yeah. Neha, just as we guided earlier, we want to be gross margin in the range 50%-55%. That's why this quarter, what we see, 52.1%. This improvement from last quarter to even this quarter is a combination of the new products and the business mix. That's where I think we will be in this zone, certainly in the coming quarters as well.

Your assumption is correct.

Yes.

It will only go better from here.

Yeah.

Understood. Thank you so much.

Thanks, Neha. The next question is from the line of Dr. Kunal Dhamesha from Macquarie. Kunal, please go ahead.

Hey. Hi, thank you for taking my question. First one on the one cash flow line item. On other assets and liabilities, there is a large change that has happened around INR 1,370 crore. Could you please help us, what is driving that?

This is the one where this SSA claim, what we had, I think there were the payments have happened this quarter. That is one change, and then other balances due to various operation. But that is the biggest one.

Yeah.

If you remember, $50 million what we have provided in the Q4 during this H1.

Okay, the cash flow has happened now. Okay.

Yeah.

Great, thank you. Just continuing on the gross margin front, or the other way to look at it is there is a sequential improvement in U.S. revenue, a meaningful improvement, right? Would you be able to split between the new product launches driving that and the volume improvement in existing product or pricing improvement? How should we think of that delta in U.S. business and the similar driver and approximate split for the gross margin improvement on a quarter-over-quarter basis?

Certainly new products what we have launched in Bosentan, Sugammadex, I think in the U.S., I think these products, as compared to our company average gross margins, I think certainly is on the higher side, as well as what we have launched, the nivolumab. Just in the business mix also has contributed to this margin.

Kunal, the main driver is actually the business mix the businesses that are relatively with high profitability, meaning India, EM, and the NRT, all of them are much more profitable than our average, went to 53%.

Okay.

This is one contribution. The second is what MVN said, that the U.S. is more profitable because of the contribution of the new product. The combination of both gave that. And the last, we did not increase the expenses. The expenses are essentially flat this quarter. If you grow the sales double digit and you don't increase the cost, it's obviously lead to this margin improvements.

Sure. Lastly from my side, would we have also seen some drag from the raw material price increase? Given the, I think the oil prices are high and the chemical prices are also high, how should we look at that cost line item from the, let's say second half perspective? Do you think that quarter two is when we have seen most of the increase, or quarter three, quarter four, we can see some drag?

Here, just I think this because of the war, I can say increases what we have seen in the KSMs, then the second one is solvents, and the third is like a logistics freight outwards what we are exporting material from India to all countries. We have seen the increase on the three fronts, then overall, it has an impact close to 100 basis points on the EBITDA. We believe that is already part of the gross margins, then we believe, I think this trend will continue for Q3 and Q4 as well.

Sure.

I don't anticipate additional growth unless, of course, there will be as much as we can predict additional geopolitical issues but with our limited understanding, if it will stay the way it is now, we are in the same place.

Sure. I have more question. I will join back the queue. Thank you, and all the best.

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

Yeah, hi. Good evening, everyone. It is a clarification on semaglutide resumption. You mentioned you have already started supply of API to your partner, fill and finish partner. However, what is remaining is the validation. I actually am not clear. I thought validation will be done, and then you will supply to your fill and finish partner. Can you just help us understand this?

Sure. You do validation as we had to come back and basically tweak the process on the API. Then you do validation of the API. Then when you ship it to our partner, you know you need now to do validation on the drug products using that API. This is a process that takes about three weeks, and so far, give or take, all the activities are on time. That is why it took us to November from the first place. So, so far it is in iteration, but you have basically validation in each stage of the scale-up of the process.

Sure. That is helpful. Another point on semaglutide, as you mentioned, so far it is approved in around 10 countries. Did you secure for more approvals in other market while you are trying to resolve the API issue? Or you want to go after you resume the supply in the existing or approved market? So how do you plan? Because you mentioned you will be targeting to launch in more than 70 countries across the world, right?

Yeah. The right number is now 89 markets. It is just that all the markets that the process started, we did not stop. The scale-up issue has nothing to do with the regulatory process, and we do not require any amendment to the file or anything like that, so everything continued. All the approval we got was in according to the process in each one of those respective countries, and this will continue. Some of the approval in some other markets got delayed because of the scale up, as we needed to ship them samples of the products, and those samples will be now sent to those places. So we will continue with the process for all the other markets as well.

Sure. My second question is on your NRT, the nicotine business. So, flat performance for last two quarters, and you mentioned it was due to change in the business model. So when we should see recovery in NRT business?

Last year or last quarter, if you recall, we had to carve out from Haleon. It means that Haleon used to do it, and we gave them certain margins for handling the business. The new business model, it means that now we are selling it, either by ourself or through distributors. The payment to Haleon is not there anymore. It means normally, in this respect, less sales, but more profit. What I can say about it is the comparison year-over-year will be until we will finish the year. I think we have two more quarters like that. In general, the business is doing well. It will grow in the same way that you saw until now, somewhere between a high single digit to maybe even double digit. And the profitability is way above the expectations that we put in the business model.

We are very, very pleased with this one.

Sure. Thank you. I will get back in the queue for more questions.

Thanks, Damayanti. The next question is from the line of Tausif Shaikh from BNP Paribas. Tausif, please go ahead.

Good evening, and thanks for the opportunity. First question about abatacept. While the goal date is set for December, is there any incremental update that you would like to share with us, especially from the Bachupally plant?

Yeah, so the plant went for the inspection. We are still waiting for the EIR to come, and the goal date is indeed December 22nd, and we are hoping for an approval. It is obviously in the end of the U.S. FDA.

Okay, that is helpful. On the R&D spend, which seems lower compared to year-over-year and quarter-over-quarter, where you have mentioned is on account of lower spend on global generics. How do you see this trend going ahead? Shall we assume this is of new base now?

This quarter is R&D is low, absolutely you are right, and coming quarters, what we believe our R&D is going to be in the range of 7%-8%.

Okay, that's helpful. I will get back in the queue.

Thanks, Tausif. The next question is from the line of Madhav Marda from Millennium. Madhav, please go ahead.

Hi, good evening. Just one question. If I understood right, during the initial remarks, you mentioned about one or few complex injectable launches in the second half of the year. Could you just clarify, if you could share some more views on that product? Did I hear that right, that we have some complex injectable lined up?

Well, we'll talk about it more when we get closer towards the end of the year. But yeah, we do have a few interesting products in our pipeline. We've always spoken about that. We've done a bunch of launches, and we want to continue with that momentum.

Yeah, I am kind of careful to promise because I got burned in the past when dealing with the approval of complex generics, and some of you have been with us for many, many years, and you remember that. But let's say we have some exciting products ahead.

I remember in 2022, we had done the analyst meet in Bombay. I think that time we had shared names of a few products. Is it from that list itself, like you will disclose four or five products in the pipeline then?

You will know by the end of the year.

Okay. Okay, fine. All right. But it is a meaningful product for the U.S. market, is that right?

These are meaningful products, yes.

Okay, got it. All right, cool. Thank you.

Thanks, Madhav. The next question is from the line of Foram Parekh from Bank of Baroda Capital. Please go ahead.

Thank you for the opportunity. My first question is on Europe business, ex of NRT. The growth seems to be declining there. Probably because of Germany. How should we look at it? I mean, NRT is also now flattish because of the change in business model, and ex of NRT also it is declining, which is taking a toll on the Europe business. Can we expect it to go back to double digit?

Yes, it will. First of all, the NRT will grow. The NRT is growing, and obviously that part will positively impact also the relevant part of Europe. Absolutely, you are correct about the performance of this quarter. The next quarter should be better. Let us say the NRT, I am expecting, again, either high single digit growth or even double, depends on certain scenarios. As for Europe, I am expecting growth, but it will not be significant growth this year.

Sure. On ex of NRT, how should we look at growth ramping up?

Ex NRT Europe, you mean?

Yes.

It should grow, probably single digit this year.

Okay, that is helpful. My second question is on SG&A cost. Here also the contribution has come lower to 26% versus earlier trend of 29%. Would this be the new sustainable number to look at?

Yeah. Overall, just want to clarify, our SG&A percentage is 32%, and just as you know here we have also spoken about cost productivity, what we are doing is now that is coming visible. Even coming quarters also, at least in this year coming, you may not see significant changes to this number. It is going to be at this level around here and there, I think small changes.

I just want to reiterate, to take the opportunity. We believe that the level that we agree and we discuss it all the time, actually with all of you, is sustainable. We think that the 20+, we are actually aiming for the famous 25% that we are always discussing.

EBITDA.

EBITDA.

This will continue, and we are planning to consistently continue to deliver of this number.

Sure. Thank you. Last question is on the India business. We have done good, and IPM growth also is inching up in double digit and is likely to sustain at current levels for the remaining year. Can we expect current run rate of 17% to be the growth rate for the year?

It is going obviously to stay a high level of double digit. It may be a little bit less or a little bit more, but we are in the right neighborhood.

Also, we want our growth to be higher than the market growth or a few basis points.

Sure. That is helpful. Thank you.

Thanks, Foram. Participants are requested to restrict the number of questions to two to ensure that everyone in the queue gets an opportunity to interact with management. The next question is from the line of Prakhar Nigam, who is from BNY Mellon. Prakhar, please go ahead.

Firstly, thanks for the question. Thanks for taking these questions. What is the company's strategy for expanding the biosimilar business within research and development and partnership? Could you please shed some light on this?

Sure. We are going after both. We naturally are leveraging our Bachupally facilities as well additional facilities that we will build in the future. Abatacept is going to be the first meaningful product to be launched out of our own facilities. Rituximab is obviously one of them. Abatacept is going to be obviously meaningful, and more products to follow. In parallel to that, we are talking to partners around the world, and we are trying to license product in which we do not have in our own pipeline, in our own internal pipelines. We have it whether globally or for specific regions, so both will continue.

Perfect. Thanks for. One more question. What revenue can we expect for the next three to four years?

It depends on the success of abatacept, obviously, in the next coming years, because this is going to be a significant product for that. Abatacept should be in the hundreds, so you should expect hundreds of millions of dollars.

Followed by abatacept, then we have pembro and durvalumab also will come within the next five years.

Okay. Okay. Thank you so much. Thanks for taking my questions.

Thanks, Prakhar. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Abdul, please go ahead. Abdul, you've been unmuted.

Just move on, then I will come back.

Abdul, we'll come back to you. The next question is from the line of Vishal Manchanda from Systematix. Vishal, please go ahead.

Hi, good evening, and thanks for the opportunity. On rituximab, would it be possible for you to share where are we in terms of market share in Europe?

We have a single digit of market share in Europe.

Low single digit or high single digit?

Low single digit.

Any timelines and any guidance as to where we can be maybe a year or two year down the line? Do we have the capacities there?

Indeed, we were constrained by capacity. We should be better once we will be able to add more qualified capacity for that. At the same time, we are talking about a product with a high level of competition, so I would not expect a significant change because of that.

Okay. Second, your JV entity in China got a first generic approval for a drug called icotinib in July.

Correct.

Is that contribution part of your numbers in the current quarter, or will this come in subsequent quarters?

We are recording our share. We are not recording the sales, we are recording our share of the profit of that. It is part of the profit and our share in that, which is 51%.

This would be part of the JV, share of profits from JV?

Of course.

Have we kind of started selling this, and have we ramped up to our full potential? And are we the only generic here, or there are other generics that have entered?

To the best of my knowledge, we started. I don't recall about the competition.

Okay. Just one final one on abatacept. Once we get the approval, how long can we take to get listed on the formularies? Will it be six months, or we can start getting market share quickly post-approval?

The ramp-up, like you said correctly, will be after six months after we'll get all the codes and all the registration. But we can initially sell smaller quantities from day one. So expect that the launch will be upon approval, but the ramp-up will be correctly after six months.

Got it. If I can ask one more on sema, if you can guide on where generics are in terms of market share in Canada as on date.

As of date, there is only one generics in Canada.

Right.

I don't remember their market share. But let's say that the Canadian market will have to get a sweep.

Got it. Thank you.

Thanks, Vishal. The next question is from the line of Surya Patra from PhillipCapital. Surya, please go ahead. Surya, you've been unmuted. While Surya joins back in, the next question can be from the line of Dr. Bino Pathiparampil from Elara Capital. Bino, please go ahead.

Hi, good evening to all of you, and congratulations on a great set of numbers. A couple of clarifications. I see from the footnotes this bendamustine deal and some milestones in Russia, which is part of revenue. Where is it included in the revenue breakup? Is it part of U.S. revenue and Russia revenue, respectively?

It is in the sales line.

Bendamustine is in the U.S. revenue, and the milestones are in the Russia revenue. Am I right?

That milestone of Russia is part of the EM.

Okay. Second, what is this bendamustine deal about? What was the logic behind sending the product rights, selling the product rights?

Which one?

Bendamustine out licensing.

Yeah. That's where I think here we thought a partner will get overall as a deal, I think we get a better economics. That's why we have given this rights to the partner.

Got it. In the quarter, I see that the finance income is significantly lower versus INR 290 crore last quarter and kind of similar numbers in previous quarters. This quarter is only about INR 90 crore. Is there any reason why the finance income is so much lower?

Here, what the exposure we have on the balance sheet is now the Forex, especially the movements from June to September of the ruble spot rate is, I think, significant variance. I think that has given this P&L debit, I think, in this quarter as compared to the Q1.

Sorry, this quarter it is lower compared to Q1?

Yes.

Okay. Got it. I am sorry, one last question. What would be the CapEx for the full year? Because the first half I have seen is much lower than your typical number.

Earlier we have guided around INR 1,800 crore. My view, it could be little lower, but definitely I expect around INR 1,600-INR 1,700.

Got it. Thank you. I will join back with you.

Thanks, Bino. The next question is from the line of Amlan Das from JPMorgan. Amlan, please go ahead.

Sorry. Just wanted one clarification on the abatacept scenario. So apart from the IV indication, we also heard from the previous calls that for a sub-Q indication, you expect an approval in the U.S. in 4Q FY 2028 and in the non-U.S. markets for both indications in 1Q FY 2028. So do the timelines remain consistent, or has there been a change in this?

Consistent. We stay consistent with it, yeah.

Okay. Thank you. Thanks for that. The non-U.S. market is also roughly $1 billion for the reference drug. How do you expect the ramp-up in the non-U.S. markets for you for abatacept?

We believe that the European market is a very important market for this. It's going to be launched a little bit after the United States, but Europe is, we believe, a significant market.

Okay, and lastly, for these markets, the manufacturing would be done in Bachupally itself, right?

Correct.

Okay. Thank you. Thanks for the opportunity.

Thanks, Amlan. The next question is from the line of [Dhara Ganatra from UTI Pension Fund]. Dhara, please go ahead.

Am I audible?

Yes, we can hear you.

Thank you so much for taking my question. I had one question largely from the India market perspective. What we have seen in the last two years is that IPM growth has been in high single digits, and in the last six odd months or last three odd months, what we are seeing, that the growth has accelerated. Versus the last two years, the growth was more driven by pricing. This time around, there is a lot more volume growth. Both for Dr. Reddy’s and for the industry, what do you think is changing and what is the outlook for the second half of the year and going forward?

One thing that changed significantly is obviously the launch of semaglutide and the GLP-1 product. This is a significant addition both for volumes. The second one is that you have more new products like us, innovative products that are coming to the market. In general, this is the main contribution. I believe that if you take the GLP-1, you will get either close to the single digit or to high. I did not do the maths, but this is the main contribution, I believe.

Okay, so you do not see any smaller players vacating the market or slowdown in trade generics or that sort of that would be driving the IPM growth?

The main, at least the way I see also, that the main, at least growth for us is in places in which you have those utmost demand. For us, it is primarily the innovation. The branded generic, those that we are investing behind are doing well. The rest are doing like in the market, like normally, mostly driven by prices.

Sure. Thank you.

Thanks, Dhara. We're going to try and see if Abdul can join us now. Abdul, can you please unmute yourself? Abdul, you've been unmuted. Okay, looks like there's continued technical issues at his end.

The next question will be from the line of Vivek Agrawal from Citi. Vivek, please go ahead.

Thanks, Aishwarya. My question is on abatacept. Just trying to understand what can be the fair market share of your biosimilar in the U.S., let's say once the product is there across the formularies, even one year down the line. Because we have seen in a lot of biosimilars that sometime the market share remain range bound to around 10%-15%, and some of the products get market share as high as around 50%-60% kind of stuff. What is your assessment based on the opportunity itself, competitive dynamics, as well as your capacity and capability, that what kind of the market share is a fair market share for this product for you?

No, thank you. At least at the moment, assuming that we'll get approval, we are alone. In terms of competitiveness, it's us and the innovator. It's a medical benefit product in the United States, so the sensitivity to the price and to market share is not as big as in pharmacy benefit. I know you know that well. I believe that a fair market share can be any number from 15% to 25%. It depends, of course, on the success of the launch. We need also to add that once the sub-Q will come to the market, it's obviously going to add to the market share, which will come later. We are talking about February 28th. This is biologics, so it's primarily about the sweet spot between market share and prices.

Just a clarification. This 15%, 25% is the entire abatacept market you are talking about, or only the IV version?

Initially, it will be on the IV. It could be that there will be some movement on that, but we will start with the IV, and the sub-Q will come in February 28th.

Understood. In terms of confidence on approval based on your discussion with the FDA, would you like to assign any kind of probability how comfortable you are based on your discussion with the agency, type of queries, et cetera? What kind of the chances that you have in terms of approval, or is there any possibility of getting CRL in December and approval may get delayed by a few months, et cetera?

I am 33 years in this business and I had my share of scars from these predictions. We feel good about the product. We feel good about the inspection. We feel good about the correspondence with the USFDA. We want and we are preparing to launch in December. If you ask me, is there a chance that we will get a CRL, there is a chance. Obviously, none of us want it, but there is a chance.

Understood. The second question was on the U.S. generic business trajectory, right? On a quarter-on-quarter, we have seen improvement, right? A part of the improvement is also being driven by some of the products which may face competition in the incremental quarters, Q2 and Q3. Just want to get your understanding how we should look at the U.S. numbers with the North American numbers on quarter-on-quarter. Is there any possibility of dip in 3Q, 4Q, or you can maintain the current trajectory even going forward in the second half?

For the U.S., one we discuss is abatacept. The other is obviously semaglutide that are going-- It's not the U.S., but it will going to be including in the North America sales. Also those complex generics that are on paper. If we will have that or the combination of that, we will actually grow versus the current state and for sure sustain it. I believe that the numbers are sustainable. Naturally, we have Bosentan obviously after the six months, that SKU, we have one SKU that has 180, that will obviously go down. I do not think it will impact significantly, so that we will be able to absorb without a problem. Overall, I am optimistic, but it obviously depends on our ability to be successful with those products that I mentioned.

Understood. Just last question on margins, because the reason I also asked the question on the U.S. business sustainability, that in the coming quarter, you are also indicating or alluding that the R&D spend is also expected to go up, right? I am just wondering, if R&D spend goes up, some of these products like Bosentan comes down, and in this quarter, you also had some impact of milestone incomes, et cetera. Just trying to understand from where you are getting confidence that you will be able to maintain close to around 20% kind of margins in the second half.

First, we know our numbers. I am sharing that confidence again. We will reach that, and it will even go higher. The reason that we feel it, first of all, is the growth that we see in EM, in India, with the consumer health, as well as the United States. Second is the way we control the expenses. Indeed, R&D, we will have more, but we will have on the other expenses less, and we are planning to continue to do that. It is primarily the mix, the growth, and obviously, the continued launch of new products. For me, by the way, 20% or 21% is not impressive. We always say that we want 25. We are recovering from lenalidomide, and that is what we are going to be.

I said it also before, now I think people believe me, we will have 20%+, and if we will launch successfully the way I believe semaglutide, it will be 21%+.

Thanks, Erez. Congratulations for the good set of numbers, and best of luck. Thanks.

Thank you so much.

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

Yes, thanks for the opportunity. Just one question from my side. What kind of price erosion we have seen in case of Sugammadex post-launch?

I don't recall the price erosion.

There is no price, I think. Whatever we have initial contract signed, I think it's getting continued. I think a product launch.

That's probably versus the innovator, I don't remember.

Maybe I can get back to you on this later, Tushar.

Sure. That is it from me. Thanks for the opportunity.

The next question is, I think there is a follow-on question from Kunal. So next question is from the line of Dr. Kunal Dhamesha.

Hey. Hi. Thanks for the follow-up. Just one on the abatacept sub-Q filings, where are we in that process?

We are supposed to submit it, if I remember correctly, in February.

February of 2027?

2027, if I remember correctly.

Yeah. Sure.

Aishwarya will see if I will keep me on it.

Yes, February or March, I think around same period.

Yeah, in that quarter we are going to submit.

Sure. Another one on the complex generics launch that we are basically looking forward in the second half. Are these or that product particularly is we are dependent on the IP outcome on those launches, or is it more just the approvals?

Approvals. Every approval.

Sure. Are these Para IV filings?

Launch and approval situation for now.

Sure. Lastly, on abatacept, you suggested that the ramp-up will happen couple of quarter later as we get included in the formulary. Just one, when we launch what kind of commercial infra do we require, especially for the U.S. market, and when do we start the build-out of that?

We started to do it already three years ago. The main framework of the sales and marketing in North America is already there. We will hire a couple of more sales team, the team that will cover certain geographies, this is still pending. The lion's share of the team is there.

Sure. There's not much incremental cost related to that?

No, not much.

Perfect. Thank you and all the best.

Thanks, Kunal. The next question. The next question is from the line of Aman Vij from Astute Investment Management. Aman, please go ahead.

Yeah. Good afternoon, team. Am I audible?

Yes.

Yes. My questions are on the semaglutide side. First, given we expect the validation to be completed by November, where are we in terms of launches in other big markets like Brazil and Turkey in terms of approval timelines and launch timelines? Any rough estimate?

Brazil, likely in Q4, the beginning of Q4. The rest of the markets, we are going to launch in all the smaller markets either in the end of Q3 or at the beginning of Q4. This is primarily the timelines from the time that we finish validation and we start to sell batch by batch. Some of it may come to the markets in Q3, some will come in January. All of it will be in that timeframe, some in December, some in January.

Sure. That helps. Second question is, you've talked about we are still adhering to our guidance of 6 million-7 million devices this year. What are the latest estimates, say, for next one to two years, FY 2028 and 2029? Where do you see this number?

It obviously depends on the success of this 6 million-7 million. Like I mentioned in the past, the run rate of 12 million-15 million pens that we discussed in the past is still my estimate. Obviously, it can fluctuate as we understand better the markets, once we'll get all the approvals and we'll understand the competition in each one of the markets. So right now, take it as a very tentative number. This is what we are preparing for the, let's say, the 12 months from April.

You had mentioned this number last time also. I just want to understand, are you more positive on the number or slightly negative that point?

I did not change my attitude. It is because we need to see the success of the market share that we will take, as well as the success and the market share of our partners. I do not have any additional information. Right now, it is the same, consistent with what we discussed in the past.

Thank you for answering the question.

Thanks, Aman. In the interest of time, we will take one last question from the line of Saion Mukherjee from Nomura. Saion, please go ahead.

Yeah, thanks for taking my question. Just one question on the PSAI segment. The growth has been muted for a while. How you see that growth playing out? You also mentioned the CDMO revenues at 100+ million. If you can give some color on the nature of this revenue, is it generics or innovation related? Also the new contract that you signed, when you expect that to kick in, is that meaningful? Any other CDMO contracts that can be added over the next year or so? Thank you.

No, thank you, Saion. On the CDMO, I believe that the growth trajectory will come. It's a combination of growth in discovery, what you call innovation. This is growing in double digit. We have also certain contracts with the big companies in which they want to transfer their production into our line, so we have several of these projects. As well as a normal CDMO, meaning that we are doing a project for phase III, phase II for innovative companies. I believe that this business should grow and should reach 2x-3x of these numbers in the next three to four years. This is still our plan. I believe that we should get there. On the API side, part of it is that our older products have less demand.

Part of it is because most of our launches and most of our activities are done more of a, as a B2B of a finished product. This is actually going well. Part of it we are recognizing as part of PSAI and part of it we are recognizing as part of the relevant EM or North America. Overall, the B2B is actually growing. The API merchants part of it is declining, because most of the product, the peptides and this kind of stuff, people prefer to buy the finished good rather than to buy the API.

Understood. Thanks, Erez. Thank you.

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

Thank you.

Thank you.

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. 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. Reconciliation 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.

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 on your Zoom application. The chat will not be monitored for any questions to the management. The session is being recorded, and both the recording as well as the transcript will be made available on our website shortly. 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 first quarter of FY 2027. The business reported revenue decline of 5.6% and EBITDA margin of 12.5% for the quarter, reflecting the impact of lower lenalidomide revenues, which contributed to the corresponding period last year, as well as a provision of INR 240 crores for inventory and other costs associated with the recent semaglutide API-related challenges. Notably, the underlying base business, excluding lenalidomide, continued to deliver healthy double-digit growth across all key geographies, including North America, supported by new product launches and favorable currency movements. All financial figures in this section are translated into U.S. dollars using a convenience translation rate of INR 94.66, the exchange rate prevailing as of June 30th, 2026.

Consolidated revenue stood at INR 8,071 crore, which is $853 million, a decline of 5.6% year-over-year, and a growth of 7.4% on a sequential basis. Strong performance across key markets, further aided by favorable forex, was offset by lower lenalidomide sales. NRT revenues declined primarily due to change in operating model post-integration, under which rebates and discounts are offered to distributors and recognized net of revenues as compared to the transition period when sales were managed by the seller, Haleon. This change in operating model is profit neutral. Consolidated gross profit margin was at 46.5%, a decrease of 1,039 basis points year-over-year, and an increase of 169 basis points sequentially. The decline in margins during the quarter was largely on account of lower lenalidomide sales, the semaglutide API-related provision mentioned earlier, as well as higher solvent costs on account of Middle East conflict.

The reported gross margin was 51.6% for Global Generics and 4.5% for PSAI. Excluding the semaglutide API-related provision mentioned earlier, the overall margin was 49.4%, while that for Global Generics was 53.8%, and for PSAI was at 12.9%. The SG&A spends was at INR 2,880 crores, an increase of 12% and 4% sequentially, accounting for 36% of revenues. The year-over-year increase was primarily driven by higher personal costs due to annual increments, adverse forex movement, targeted investments in the branded business, as well as elevated freight costs arising from disruptions related to the Middle East crisis. The R&D spend was at INR 577 crores, a decline by 8% year-over-year and up 6% sequentially, accounting for 7.1% of revenues and reflecting lower biosimilar development expenditure as compared to the previous year.

The underlying EBITDA, including other income, stood at INR 1,009 crores for the quarter, which is $107 million, a decrease of 1416 basis points year-over-year and 55 basis points sequentially, reflecting a margin of 12.5% of the revenues. Excluding the semaglutide API-related provision, the margin was at 15.4%. As a result, the profit before tax was INR 553 crores, that is $58 million, representing a margin of 6.8%. Excluding the semaglutide API-related provision, the margin was at 9.8%. Effective tax rate for the quarter was 21.3% compared to 26% in the corresponding period last year. The ETR for the quarter was lower, primarily due to reversal of previously recognized tax provisions no longer required consequent to the favorable resolution of the tax assessment pertaining to earlier year and favorable jurisdictional mix for the quarter in comparison to the same period in the previous year.

Profit after tax attributable to equity holders of the parent for the quarter stood at INR 443 crores, which is $47 million, a margin of 5% on the revenues before adjusting for the semaglutide API-related provision mentioned earlier. Diluted EPS for the quarter is INR 5.32. Operating working capital as of 30th June 2026 was INR 14,353 crores, which is $1.52 billion, a decrease of INR 81 crores over 31st March 2026. CapEx cash outflow for the quarter stood at INR 307 crores, which is $32 million. Cash flow during the quarter before acquisition-related payout was INR -216 crores, which is -$23 million. As of June 30th, 2026, we have a net cash surplus of INR 3,057 crores, which is $323 million.

Foreign currency cash flow hedges executed through derivative instruments during the period are as follows: $354 million hedged using combination of forwards risk reversal options scheduled to mature by March 2027. These contracts are hedged at the rate of INR 92.34-INR 94.63 per U.S. dollar. RUB 2.8 billion hedged at a fixed rate of 1.26 per Russian ruble, with maturity falling within the next three months. With this, I now request Erez to take us through the key business highlights.

Thank you, M.V.N., and good day for all of you. We appreciate you joining us today. Thank you for your continued interest in our company. We remain consistent in our strategic priorities and committed to delivering growth and profitability through discipline execution. As the operating environment continue to evolve, we are focused on strengthening our base business and building future growth engines in peptides, biosimilar, consumer health, and innovation while pursuing targeted business development initiative to augment our organic growth efforts. The underlying base business delivered healthy double-digit growth across all key geographies, including North America. The quarter's EBITDA margins were adversely impacted by semaglutide-related challenges, including lower sales, provision for rejected batches, loss of production, linked incentives, and other associated costs, as well as the conflict in the Middle East. Excluding this impact, we estimate that the EBITDA margin would have been in the high teens.

We are working towards resolving the issue and are planning to resume semaglutide commercial supplies by November. Importantly, there is no risk to any patient who has consumed the product. Patient safety and product quality remain our highest priorities and will continue to guide us in every decision we make. We remain confident of a strong second half of the fiscal with the resumption of semaglutide supplies. The strength of our base business and our ongoing productivity initiatives will continue to support double-digit base business growth and steady margin improvement. Let me now walk you through some of the key highlights of the quarter. We commercialized a few key complex generic products, including the anticancer drug bosutinib, a first-to-market launch with the 180 days of generic drug exclusivity for the 400-milligram strengths, and nintedanib used in the treatment of lung disease in the U.S.

In Canada, we are first company to secure approval for the launch semaglutide for the treatment of type 2 diabetics. We launched oral semaglutide in India and remain committed to building this important metabolic franchise complemented by nutrition offerings such as Celevida GLP+ through our collaboration with Nestlé. We continue to make progress bringing innovation to patients in underserved markets through partnership. Our in-licensed novel therapy toripalimab for treatment of nasopharyngeal carcinoma has entered the INR 100 crore club in less than two years of launch in India. During the quarter, we partners with Innoviva Specialty Therapeutics to develop and commercialize XACDURO used in treatment of hospital-acquired bacterial pneumonia in selected markets across South and Central America, the Caribbean, Russia, and CIS countries.

Through our collaboration with GARDP and our subsidiary Aurigene Pharmaceutical Services, we achieved an important milestone in our access agenda by securing Thai FDA approval for zoliflodacin, a first-in-class treatment for uncomplicated gonorrhea. The approval came just six months after the U.S. FDA approval, making Thailand the first LMIC country to approve the product. On the regulatory front, the U.S. FDA completed a pre-license inspection, PLI, at our biologics manufacturing facility in Bachupally, Hyderabad in June 2026 and issued a Form 483 with seven observations, which we already responded well within the stipulated timelines. Our commitment to good governance and sustainability continues to be recognized globally.

During the quarter, we celebrate 25 years of our New York Stock Exchange listing, reinforcement our distinction as the first and only Indian pharmaceutical company listed at the exchange, as well as our commitment to global best practice in governance, compliance, and capital market access. FTSE Russell placed us as a top 1% worldwide, while TIME/Statista rank us 165th globally and five among Indian companies among the World's Most Sustainable Companies. Let me take you through the key business highlights for the quarter. Please note that all the financial figures mentioned are reported in their respective local currencies. Our North America generic business reported revenue of $236 million for the quarter, accounting for 27% of our overall revenue and reflecting a decline of 41% year-over-year and a growth of 19% sequentially. The year-on-year decline was primarily on account of low revenue lenalidomide.

The underlying base business delivered double-digit growth aided by new product launches during the quarter. During the quarter, we launched six new products in the region, including complex generics such as bosutinib and nintedanib, and we remain on track to bring more such products to the market as we progress through the year. Our branded franchise, including India, emerging markets, and consumer health business in Nicotine Replacement Therapy, or NRT, together accounted for 42% of our overall revenues and remain an important source of stable margins for the company. Our emerging markets business recorded revenue of INR 1,833 crore, accounting for 22% of our overall revenues and reflecting a robust growth of 31% year-on-year and 2% quarter-on-quarter. Growth was driven by new product launches across market and favorable currency movement. During the quarter, we introduced 43 new products across countries.

Our India-based revenues were INR 1,780 crore, accounting for 21% of our overall revenues and delivering robust double-digit year-on-year growth of 17% and 10% sequentially. This performance was primarily driven by the innovation franchise new launches, including acquired brands, price increase, and volume growth. IQVIA June 2026 data highlights our continued outperformance of the Indian pharmaceutical markets and moving quarterly total growth of 14.6% versus 13.5% for the IPM in the moving annual total MAT growth of 13.5% versus 11.1% for the market. Our IPM rank stood at 9 for the quarter and 10 for the year. We launched seven new brands during the quarter, further enhancing our domestic presence. Our European business, which include NRT, posted revenue of EUR 131 million for the quarter, accounting for 18% of our overall revenues.

Revenues were broadly in line with the corresponding period last year and declined 3% sequentially on account of a price erosion, as well as the impact of operating model changes post-NRT integration explained by M.V.N. offsetting the contribution from new product launches in the generics. During the quarter, we launched 24 new generics product across market, further expanding our European product portfolio. Our PSAI business reported revenues of $91 million, accounting for 11% of the overall revenues. Revenues declined 5% year-over-year and 10% sequentially, primarily on account of lower API volume uptake. During the quarter, we filed 38 Drug Master Files globally. We remain focused on strengthening our core business while building the next wave of growth across peptide, biosimilar, consumer health, and innovation.

We'll continue to advance key products such as semaglutide and abatacept, improve operational efficiency, and pursue value-accretive business development opportunities to drive long-term value creation. With that, I invite your question as we move into the Q&A session.

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 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 that option. The first question is from the line of Neha Manpuria from Bank of America. Neha, please go ahead.

Yeah. I guess my first question is on the EBITDA margin guidance that we had mentioned, that we should be able to get to 20% EBITDA even without sema. Given how the quarter shaped up, even if I were to adjust for sema, Middle East, I think you mentioned high teens. How should we think about the margin improvement from here, even assuming that there's still uncertainty about when and how much sema comes back?

Yeah, just the technicality is the first part of the question, if you can repeat. We heard you from the middle.

My question was that we had given a guidance of 20% margins excluding sema. Just wanted to get a sense of how we improve the current high teens margin that you've indicated, adjusted for sema and the Middle East impact, given that we're still uncertain about when sema comes back and how much it comes back in the second half.

Neha, just to make sure that if we are taking out from the 12.5%, and we take out the impact of what we provide, plus and here that what we did not sell, just to make sure that in addition to PLI and the rest of the staff, what I say the high teens, it's actually around 18%. Okay. This quarter, the equivalent of the 19% last quarter, it's 18% for this quarter. We are still, I maintain, what we discussed a few weeks ago, that we are in the neighborhood of the 20% and likely to stay, and that's what we are saying we will do in the next quarter, including the next quarter, which will not be with semaglutide. That's still the case to be in the neighborhood of the 20%.

As we will resume, because with the assumption that we will come back with semaglutide in November, of course, under this assumption, the margins will be higher than that. We are maintaining what we have discussed in June.

Understood. Second question is on the U.S. business. There seems to be a decline quarter-on-quarter despite the fact that we launched Canada, we had bosutinib. I'm adjusting the shelf stock adjustment in the base quarter here. What exactly happened in the U.S.? Because given we had the bosutinib FTF launch, I would assume some channel spending as well as the Canada supplies.

Nothing happened. It's actually in the right direction. There were some timing of procurement of the product, the launch of the product was very successful. Overall, I'm still maintaining a double-digit growth for the U.S. market. Q-on-Q, as you saw already in this quarter, we grew double-digit, and it will continue throughout the year. It's a double-digit growth in the United States. It's just timing of product, nothing special.

Okay. Thank you so much.

Thanks, Neha. The next question is from the line of Dr. Kunal Dhamesha from Macquarie. Kunal, go ahead, please.

Hi. Good evening. Thank you for the opportunity. First question on abatacept update. Two aspects here. One on plant inspection, where we have got seven observations and we have submitted the response. Let's say when we compare the observations with the last inspection, which had five observations, how does those compare? Second aspect, from an ongoing dialogue perspective with the U.S. FDA on the product approval, what are the types of query we are receiving? Is it on data on the clinical side, manufacturing related, CMC related? Color here would be helpful.

Sure. The observation, the seven were very different than those got, we believe they are addressable, we sent all the relevant information to the U.S. FDA on Friday, which was well within the stipulated time. This is undergo, now we will seek a feedback, obviously, from the FDA of what we submitted. As related to the BLA, we did not receive any query as we speak. The goal date of the product is still in December, this is still intact. We did not have any query or any ask as of date.

Sure. On that, let's say inspection, what is your understanding? Would it require another inspection or the response you have submitted would suffice?

To my opinion, we should get approval.

Sure. That's the first question. Second question is, some of the productivity measures that we have talked about in the past, right? That we will try to improve the efficiencies. The way I see it, when I look at the SG&A expense without R&D, after removing R&D, Q-on-Q is still higher, right? Is there any specific cost saving measures are we undertaking? If yes, what's the quantum in terms of saving that we can see, and when those measures would be visible in the overall performance?

Kunal, on this side, we said our absolute is the amount like FY 2026, largely in line with FY 2026 actuals. This quarter, because whatever growth you have seen, largely that growth is on account of adverse forex rates movement, as well as there is a elevated freight cost on account of the Middle East conflict. These two is like almost what the increase, what the growth you have seen on either QoQ or on the year-over-year, almost like a 75%-80% on account of these two factors.

And to—

Otherwise, absolute amount is almost like if you take it out, there is not a much significant increase.

Just to, Kunal, to you, that we are planning to grow a double-digit, and we are planning to grow the associate cost by a low single-digit. The productivity measures will be primarily that the sales that associate obviously with this S&M will grow much faster than the expenses. As we grow in most of our 52% now for business is branded markets. Naturally, in such a case, we need S&M to grow the business. What is important, they will grow the sales much faster than the cost. In this case, we are talking about the gap of 10%-12% because between the sales growth and the cost growth, that's where the productivity we are going to see.

When should we start this difference in the growth? I assume it would be gradual, right, eventually? It's just linked to the revenue and not any specific cost measure?

No, it is. First of all, you already see that.

I know it's hard because of all those one-time activities and or war activities, but you already see it. As time will go by, it's obviously we'll see it more, but the way to see it is that eventually that the margins, that the growth in emerging market, most of the S&M is in emerging market. The growth in emerging market is right now north of 15%, and in some places more than 20%, while the cost in a very low single-digit growth.

Sure.

If we take out the one-time activities.

Sure. Last one, if I may just squeeze in. We have around INR 3,000 crore of cash on the balance sheet. Right? What kind of opportunities are we looking at from the business development activity? Secondly, on today's announcement from U.S. President on tariffs on generics as to how we think about the overall development, I know the details are missing, but what would be your initial impression of that, and how would you tackle that? Thank you.

Sure. Just the first one was? The tariff was the second.

3,000.

The INR 3,000 crore.

Cash.

The cash. First of all, we are engaged in business development. I also mentioned it in my script. There are actually quite a few deals that we are engaging in all sectors, in generics, in innovation, in biosimilars, and hopefully, we can announce those deals as we sign it. The cash and the balance sheet will be used for inorganic. On the tariff, we've been there last year. Obviously, it's a tweet, between tweet to the reality, a lot of things likely to happen. As we speak, I don't see any reason to be concerned, even according to the tweet, we are supposed to have two years without tariff. It's not practical to move any facility in two years. You know it well. Everybody know it well. I'm assuming that it's an opening for a discussion and dialogue.

Both the IPA here in India as well as the association in the U.S. already engage on that. We will see as it evolve. Personally, I don't at this stage give too much weight to that.

If I may add, almost 25%-30% of our revenues are actually being manufactured by CMOs in the U.S. We already have that as a starting point.

Yeah. I will not give too much weight at this stage for that. Let's see how it will evolve. We've been there last year, between what we started and how it end, it was very different.

Sure. Thank you, all the best.

Thank you.

Thanks, Kunal. The next question is from the line of Tausif Shaikh from BNP Paribas Exane. Tausif, please go ahead.

Thanks, Aishwarya, for the opportunity. Good evening. First few question on semaglutide pens and API. Can you tell us how many pens has Dr. Reddy's able to sell during the quarter? A broad-based breakup regional wise would be helpful.

Yes, we sold 180,000 pens before we stopped. We were supposed to sell more, by the way. Obviously, that's also part of the reason why there is relatively high level of provision that we have to do on material and batches that we'll not use. Obviously, most of it will be for the market of Canada. We have also for India as well. We are still maintaining what I said nine days ago, that with assumption that we will finish, and this is still the timelines that around the third week of September, we are supposed to finish all the testing of the API, then supply to our partners OneSource. We have the slotting and agreement with them, if everything will go well, we should be able to give to the market 6-7 million pens between November and March.

That's still the same place that we are.

Yeah, that's helpful. Second question on the sema API. Just wanted to confirm that Dr. Reddy's also supplying this API to many global pharma manufacturer player who are also your competitors in Canada and other markets. Just want to understand your strategy over here, means how much percent of capacity Dr. Reddy's plans to keep for captive consumption for the future.

No, we have plenty of capacity. The theoretical capacity, I'm saying theoretical because we need to scale up in the satisfactory manner. We have plenty of capacity for both third party as well as ourselves. We are talking about the theoretical can go up to 550, but let's say even with the non-scale up, it can be north of 300 as capacity. At this stage, it's not relevant. It's more about the quality of the API, not the capacity.

That's helpful. The last question, abatacept. What would be your timeline for the launch if the product has to be approved from the CMO side? Can we expect some delay from the earlier guidance which we have planned in calendar year 2027?

Abatacept is not out of CMO. Abatacept is made by our own facility in Bachupally, and that's the facility that underwent the FDA inspections. The timing is a launch upon approval. Right now the goal date is December, so obviously we hope for that, but we need to see whether we will get additional query and if that will stay intact.

I guess, I think we have filed the product from two of the facilities, right? The other one is from CMO side. We have done the dual filings for the product, right?

Abatacept was filed only from our Bachupally site.

Understood. That's helpful. I'll get back in the queue.

Thank you, Tausif. The next question is from the line of Damayanti Kerai from HSBC. Damayanti, please go ahead.

Hi, thank you for the opportunity. My question is again on semaglutide. As you continue to work towards resuming supplies after addressing the OOS issues, we understand in some of your targeted market, new players are getting approvals, et cetera. We understand you are B2B supplier to a few of them, but nonetheless, by the time you get back in these market, how do you assess the competition scenario and your ability to gain market share there?

We believe right now that the demand for the 6-7 million pens will be there for us, and it's even backed with orders, we believe that we'll be able to sell all the 6-7 million. Obviously, it's a bummer. We cannot deny it. We see the consequence. We lost the four months of sales for that. Obviously from the 10, 11 to the 6, 7, this is the impact on us. But we feel that we will stay there, that the demand for the product is still very high, and the people that will enter the market in these four months, to the best of our knowledge, there are not that many, at least in the markets that we are planning to get approvals. It's a bummer, but we believe that the product will stay solid for us.

Okay. Also wanted to understand, this API issue, will it impact the review of application for semaglutide in some of the market, apart from, obviously, Canada is something where you have approved product, but say in Brazil or in other market, will the applications will be halted till the time you resolve the API issue?

Because the specs stay the same. We are not changing the specs or the quality. It was just our ability to meet the specs in the scale of batch on the API, which we need to resolve. The file is good, and the quality of the drug product is good, I don't anticipate any delays or a change to our applications anywhere, including Brazil.

Okay. In how many countries you have filed semaglutide application so far?

How many we filed already?

More than 20, 30 countries.

For sure. The program of the 80 countries remain the same, if I remember correctly, but please forgive me if I'm not fully accurate. It's around the 30 countries already, if I remember correctly.

Sure. My last question is, how should we look at R&D and tax rate from here on? We understand this quarter had some benefit on the taxes. On a normalized basis, how should we look for the full year?

Our tax rate around between, I think 24%-25% on the full-year basis. R&D, what we have stated earlier, it is in the range of 7%-8%.

Okay. Any major R&D programs after abatacept, where you plan to spend majority?

We have a long pipeline for the future, both on the peptides as well as additional biosimilars. This year likely that we'll be closer to the 7%, like M.V.N. Said, most of the R&D spend is right now going to products post 2034. Between 2034 to 2040. That's where the R&D goes. Of course, some allocation comes for licensing fee, as well as remediation of product. Mostly it's for later product.

Sure. Thank you. I'll get back in touch.

Thank you, Damayanti. The next question is from the line of Saion Mukherjee from Nomura. Saion, please go ahead.

Thanks for taking my question. Since you last addressed on the sema situation, is there any progress in terms of root cause analysis and how you see possibility of a resolution? How do you assess the risk of that program at this stage?

We identified the root cause. We started also the activities in the sites. There is a program management that takes us again to around September 22nd, September 23. The success rate is high. I don't know to say exactly percentage. If I need to throw a number, it's somewhere between 80%-90%, but there is a chance that it will fail. I just want to make sure it's not 100%, but we feel relatively confident. Let's cross our fingers on that.

I see. Okay. Just one last one on CapEx. What's the guidance for this year on CapEx and for next year, please?

We see, I think this year close to, at this point of time, I think around INR 1,800 crores on the full-year basis.

Will this come down next year, you think?

Hopefully, that's what is our expectations, around that range, because I don't know, there is a continuously for the specific product investments in the biosimilars and the peptides and then regular CapEx assigned.

Thank you, sir.

Already if you see that earlier, we were in that INR 2,500 crore-INR 2,700 crore range, and then from there, we have just, this year is reducing to INR 1,800 crore. I believe, I think that stays at that level.

Okay, sir, if I can just ask one question, because you mentioned about Middle East conflict and freight cost, et cetera. What's the level of impact, either as a percentage of sale or in absolute amount, if you can quantify?

It would be both solvents and the freight on the EBITDA is close to around 1%.

Okay. Is there any improvement now? Because the conflict seem to have escalated once again. How you see for the rest of the year?

We believe, I think even as long as it continues, because earlier we thought, I don't know, suppose is stopped, then it is all the solvent prices and we have seen the decline. Now because of, once again, the war is going on, we believe, I think this will stay at least up to December, this level of increase.

I see. Okay. Thank you.

Thanks, Saion. The next question is from the line of Rahul Jeewani from IIFL. Rahul, please go ahead.

Yeah. Thank you, sir, for taking my question. Sir, I wanted some clarity in terms of our base business growth. If I look at our North America revenue base in FY 2022 was close to $1 billion. If I take this quarter's number, then we are annualizing at around $950 million. Over these past four years, we have launched around 90-100 products in U.S. We did a Mayne acquisition as well, which contributed $100 million in terms of incremental revenue. Despite these launches and Mayne acquisition, where have we struggled in terms of driving growth on the base U.S. business? If you can please comment on that.

No, sure. Obviously, we faced on the base of the FY 2022 or any other year that you're referring, a significant price erosions that was through this period of time. In some of the years it was even in double-digit. In some of them it was in single-digit. You know that very well, very normal for the United States. Against that, we brought a new product, some brought a small value and some less. Overall, I'm reiterating what I'm saying all along, that the U.S. market, the generic piece of it, is at the best single-digit growth without the upside. From time to time, there is an upside that comes, and we had upside through the years, whether it's by lenalidomide, and before that there was other products.

That piece of the market is a single-digit, even low single-digit type of a market, in which new product compensate for price erosion. That piece, the reason that we are still there beside that is that this group of product is what's feeding the growth in emerging market as well as in Europe. The leverage growth and what you see now in Europe as well as in emerging market is primarily the U.S. portfolio that is growing there. We moved from investing in the U.S. to take a product and launch it globally. Overall, the ROI of the product that we launched in the years that you mentioned actually give us a very, very good ROI. Just it's not coming in United States. We see it in the other markets.

In addition to that, we're obviously diversifying ourself to other business model, as we stated. To your analysis, you are correct. In this period of time, if you take out product like lenalidomide, your analysis is correct.

Sure, sir. Do you think that we have lagged peers in terms of R&D productivity for the U.S. generic business, given that many of our Indian peers have been able to launch products in, let's say, respiratory segment or injectables, which has allowed them to scale up their U.S. portfolio, while we obviously seem to have had a pretty muted performance on the U.S. business over the past four to five-year period. Is there any issues in terms of the productivity for R&D business and do we have any measures in terms of evaluating this R&D productivity, particularly for the U.S. generic business?

To your question, yes, we failed in the certain complex generics. We even stated some of them in the past, like iron sucrose, like conjugated estrogen, like some of the peptides that we relate. The answer is yes, we did have these issues. I believe that we corrected it. Obviously, as we know very well, the R&D expenses of today's product that we will launch on average 10-12 years from now. Obviously the products that we launch in this period of time were products that were developed before that, and we absolutely had productivity issues, and I believe that we took the right measures to correct it. Again, I agree with your observation. I believe that we took care of it.

Sure, sir. Last question from my end. On abatacept, I was also under the impression that we would file abatacept from the partner facility as well. Right now you're saying that abatacept is only filed from Bachupally. Do you see any risk to abatacept now in terms of, let's say, contributing to us in FY 2028, and are we evaluating an alternate site filing for abatacept?

Abatacept was never meant to be filed from a CMO. It was developed and meant to be filed out of Bachupally from our CCM5, which is our drug substance, and our FFM2, which is the fill and finish, both of them in Bachupally. That was always the plan. There was some discussion in the past whether because of tariff, we should get a kind of a, in the case of tariff, should we get a CMO in the U.S.? We did engage with this issue, but tariff became not relevant, plus any CMO that we'll do now will have to be post-approval supplement, because first they will have to approve the product, and then, based on that, you can add information about the CMO.

Any activity like that will be a post-approval supplement and will require also relatively high cost because, as you know, CMO of biologics product is not cheap. At the moment, the launch will be out of Bachupally. About the risk, there are two types of risk. One is in the case that we will have additional query on the GMP, and I believe that is addressable, like I mentioned, but it is possible to get. Second query is about the queries that we may get on the BLA. If we will get this, naturally can delay the launch of abatacept. As we speak today, the goal date for abatacept is in mid-December 2026.

Sure, sir. That's it from my side. Thank you.

Thanks, Rahul. The next question is from the line of Vivek Agrawal from Citi. Vivek, please go ahead.

Thanks, Aishwarya. Thanks for the opportunity. Just want to understand with the India business, we have done a good growth in the quarter. Just want to understand what is the organic growth if we remove a couple of small acquisitions that we have made in this quarter? Thank you.

In India, if we remove the recent acquisition, it's 15%?

15.5%.

15.5% fully organic.

Understood. Does that include semaglutide supply as well?

Not much, Vivek.

Understood. Thank you. Just one more question on bosutinib. Does that include a full-quarter impact of launch or it's just a very small launch in this quarter?

It's one month.

Less than a month, actually.

Less than a month.

Two weeks.

It's two weeks of supply and we have exclusivity on the 400 mg.

Understood. Thanks. That's from my side. Thank you.

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

Hi. Good evening. Just a couple of quick questions. One, in Canada, I believe we had an arrangement to provide semaglutide to Sandoz as well. Does that deal still hold, and are they going to wait for our supplies to be back?

Yeah, it still hold, and we believe that if supply will come back in in November, we'll be able to meet the commitment to Sandoz.

Got it. Second, on bosutinib, I believe it's a partner product. You are selling it in the market. What would be the broad profit share arrangement? Is it equal, or do you make only a distribution margin?

Overall, if you see this margin from this product is above company average margin.

Got it. Thank you.

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

Thanks for the opportunity. My first question is about the NRT. You mentioned in your opening remarks that we have seen a decline this quarter. This is after the complete integration of the acquisition. Can you give some sense that, okay, what led to this kind of decline, and whether this is a kind of a trend likely to be seen even subsequent quarters?

No, the trend is a trend of growth. What we had this quarter is that in some markets, because of the cutoff in inventory that were in the market, we did not sell in some weeks in this quarter, and that's what led to that, plus the timing of the tender in Brazil, in which we won, but we sold more in the quarter and we did not sell in this quarter. Overall, you should see continual growth and very healthy margins. So far so good on this one.

Apart from what Erez said, Surya, is another one is because there is a till March 2026 last year, I think we were just depending on Haleon, I think, they were doing, then we are paying certain fee. This year we completed the integration by March 2026. The entire sales we are operating. As part of this new model, what the Haleon was offering earlier, rebates and discounts, were not impacting the sales lane. This year now, since like we are directly distributing the product to the distribute customers, what the rebate discounts I think we are giving, that is now part of the gross to net in the revenue line. Corresponding, there is a reduction. Overall, if you look at on the profit, it is a neutral.

Absolutely, there's no impact, it's continuously overall of this business. EBITDA's margin is very healthy, and the business momentum is continuing in the very right direction.

All right, thanks. Thanks, Surya. The next question is from the line of Shashank Krishnakumar from Emkay Capital. Shashank, please go ahead.

Hi. Thanks for taking my question. Erez, my first one was on our rituximab filing. I think one of our competitors has received interchangeability recently. Does our filing also include comparative data, so that on approval, would we also get interchangeability on this product?

Rituximab.

Yeah. Our rituximab for sure will be interchangeable. As you know, we got delays because rituximab approval in the United States got delayed. For us, it's mostly to obtain approvals because the U.S. FDA inspection PI was for both abatacept, rituximab. Once we go, our partners will not have a problem to switch product. Our products will be also interchangeable.

Got it. Thank you. That's helpful. Second one on denosumab. I think obviously our filing was stuck because of issues at our partner's facility. I believe our partner has addressed the FDA's observations, the resubmission obviously has to happen at our end. Have we resubmitted the BLA for denosumab?

The BLA is coming only from our partner. He's also making the product in that, we are now in discussions with the partner of what to do with this product.

Got it. Thank you. That's it from my side.

Thanks, Shashank. Participants are requested to restrict the number of questions to just one to ensure that everyone on the call gets an opportunity to interact with management. The next question is from the line of Yogesh Soni, Haitong Securities. Yogesh, please go ahead.

Thanks for the opportunity. My question is, with regards to the semaglutide API provision that you have taken, if you could help us understand, had this provision not been taken, what would have been the pen volume that would have been sold? The question is coming to understand what is the opportunity lost that we have faced as a result of this API provision.

The opportunity is about 3-4 million pens, assuming that we are coming back in November.

Understood. Thank you for that. Second question is just to understand, in one and a half months of commercialization in this Canada market, what kind of market share did we enjoy in the semaglutide space?

Yeah, we did not have the chance to sell much. I cannot really speak on market share. Obviously, we were one of the first to launch, along with Apotex. Naturally, by the time that we'll come back, we'll probably not going to be only the two of us. Naturally, when you are two, it's a relatively high market share, but we did not manage to get market share per se, as we did not sell much.

If I can squeeze in one more question. Given that we are looking to resume the supplies from November, what gives us the confidence of doing around 6-7 million pens, given that Apotex would have already scaled up its market share in the next three to four months? How difficult does this target seem to us?

The confidence is high. It's not just Canada for us. By that period of time, we'll have approval in quite a few markets, plus we have engagement with partners. We mentioned some of the names. The confidence is very high, actually. All of our partners are looking forward that we'll come back. Like I mentioned before, I believe that we will have a solid demand for these 6-7 million pens, and also, I believe that our relationship with our partners will allow to make us this product as required. We just need to give them the API.

Thank you, Erez, for your clarifications.

Thanks, Yogesh. I would once again request everyone to restrict the number of questions to just one, since we have many in the question queue. The next question is from the line of Amlan Jyoti Das from JPMorgan. Amlan, please go ahead.

Yeah, can you hear me? Sorry.

Yes.

My question is regarding the Canada market. We have seen that a third competitor has also gotten approval recently, and one of the other competitors are saying are targeting December-end approval. With three to four peers in the market, what kind of pricing do you see in the Canada market when supply resumes for you in November?

Yeah, the partner that got approval is using our product. I'm not anticipating any more prices because the price went, day one, to the type of market that reflect the three players and above. I do not anticipate additional pricing or reimbursement pricing. Naturally, once we'll come back and we'll see how many more, we may have to change rebates or stuff like that. This is yet to be seen. At the moment, also, the one that got approval is waiting for us to resolve the operation issues.

Just to put a perspective, what kind of prices do you expect then? Would it be in the range of CAD 30, say, or it will be lower than that? Could you just give us a directional sense on that?

As you know, and I discussed it in previous meeting, the price in Canada is CAD 78. Then from that, you need to have the margins that you need to give to the relevant retailers, depends on the type of market that you do, whether it is a private market, public market, or cash market. It is range from 38%, which is for the retail and for what you call the private market. Then in accordance, depends on how many patients are also reimbursed by the relevant provinces, you may need to give additional 5%-6% to the relevant products. This did not change from our previous meetings. It's the same set of numbers.

Okay. Thank you. My next question is on the U.S. Your credit for double-digit growth in the U.S., so is it the guidance for the base business excluding semaglutide? Or just wanted a clarification on that.

Yes, semaglutide is in Canada, and so we are not selling in the United States. Yeah, it's without semaglutide and without lenalidomide.

[crosstalk]

Sorry?

Okay, ex lenalidomide, which primarily for the U.S., it will be double-digit growth.

It's a double-digit growth and was already that this quarter. Yeah.

Okay, thanks.

Thanks, Amlan. The next question is from the line of Sumit Gupta from Antique Stock Broking. Sumit, please go ahead.

Hey. Hi, thanks for the opportunity. Sir, what are the biologic sales globally as of now, and when can we expect it to break even?

Sorry, again?

Biologics.

On the biologic sales, how much is it now?

It's about 2%. It's about 2% of the overall.

It's about 2% of our sales, and we are supposed to be profitable the day that we launch abatacept.

Okay. How should we see abatacept going forward, let's say over the next two to three years? What will the timeline do you expect?

We submitted the IV products in U.S. Like I mentioned before, December is the goal date. That is the earliest we can get approval. We can launch upon approval.

Europe IV also we filed.

The Europe IV was also filed, but it's very small because in Europe it's primarily the subcu. In terms of the subcu, it will be in 2028, likely around March of 2028 or February or March 2028 U.S., and probably around September to October in Europe.

Understood, sir. Thank you.

Thanks, Sumit. The next question is from the line of Vishal Manchanda from Systematix. Vishal, I would request you to restrict yourself to just one question, please.

Yeah. Hi, thanks for the opportunity. On our biologic plant inspection, can you share whether we had any observations related to sterility assurance?

No, there is none as such, like I mentioned before, all the observation are addressable and we already answered them.

Do you expect any scale-up issues in abatacept, like we saw in semaglutide?

It's obviously a very different product. I hope not. We are not planning that. In pharmaceutical, you never know. Right now, we are optimistic.

Got it. PLI incentives, if you can call out, do we expect any meaningful number here?

In the first quarter financials, no PLI.

Yeah. Anything in the next nine months meaningful?

Once, I think, semaglutide supply resumes, I think as for PLI scheme also, we should have, for the set of products, minimum growth. Once we assess and then if the growth is there, and then PLI, we start accounting.

Got it. Thank you.

All right. I think in the interest of time, we will—

No, continue. We can allow that.

The next question is from the line of Krishnendu Saha from Quantum Mutual Fund. Krishnendu, please go ahead.

Can you hear me? Hello.

Yes.

Yes.

Yeah. Just quickly, we are supplying to partners like Sandoz, Aspen, and others. Is there any penalty we have to pay for failure to supply?

Failure to supply.

Here, as per what the orders we received from India, like Torrent and USV. Whatever is as per the agreement, suppose whatever it is, that's already taken care. In case of Sandoz, Aspen, I think at this point of time, we don't expect any such claims.

Okay. Just to jog my memory, the API is being supplied from a U.S. FDA plant or which plant is it coming from?

This is from our Vizag plant C206.

Is it a U.S.—

It's a U.S. FDA-approved plant.

If there's an OAI from this plant, does our approval in Canada get settled back?

Sorry.

There's no OAI.

There is no OAI.

No, just thinking out loud

If there will be an OAI, it will affect the U.S. Maybe the Canadian will that, but it's very hypothetical because the U.S. inspected the plant already this year, and we got approval. Not relevant.

That's a hypothetical question. Canadian and American are different regimes.

Yeah. It's from the Indian plant. Okay. This 40 mg which we have exclusivity, how big is the market size? Just for my knowledge, please.

400 mg, you mean? 400.

Yeah, sorry, 400. My mistake

Yeah, I think overall the product is a large one. It's in billions.

Just the 400 mg, any idea?

We will come back on that. Sorry.

I think Aishwarya will just get back to you. Come back.

How is the nicotine patch doing for us as of now? Any growth rate you're seeing out there? Because it's a profitable business for us. Can you just give me the thoughts on that?

It's profitable, it is growing, we are very happy with it. We answered these questions before.

Thank you.

Guys, if we can not repeat questions, we're happy to give our time, please let us.

Sure. Thank you. Thank you very much.

Just to answer your question, bosutinib is about [$300 million] as far as the market is concerned.

Market says.

Yeah.

Yeah, thank you.

The next question is from the line of Rupesh [Tatya] from [Long Equity Capital]. Rupesh, please go ahead.

Yeah. Hi, am I audible?

Yes.

Yes.

My question is on interchangeability in Canadian markets. There are these various provinces, which gives out interchangeability designation. Also I think private insurers also give interchangeability designation. Most of this insurance has a clause of mandatory, generic substitutions. Could you give color that what does it take to get this interchangeability designation and when I mean, when that happens, my expectation is all of the prescription volume will move to generic. When do we expect that to happen? Any color on that will be helpful. The other aspect also is, the innovator's product is recombinant product, and our product is synthetic product. Does that create some problems for this interchangeability tag?

There is no problem with interchangeability in any market. The product is approved as generics, the type of the API doesn't affect it. The semaglutide is approved as a generic product, no issues of interchangeability, you don't need to prove anything beyond what the normal submissions. We had to show, obviously, comparability as well as all the relevant safety like immunogenicity and other data.

Next year, then generics will have 80%, 90% market share in Canada. Is that a fair thing to assume?

I don't know about that. It's about also the confidence of the people. At least at the launch time, the allocation of the retailers assume 60% and then will grow.

Insurance-driven markets. Pardon for interruption. Insurance-driven market. I'm not asking about out-of-pocket or retail.

I'm trying to answer that. It started with 60% and likely to go higher. What exactly the number will be, I don't know, but yeah, I believe that as the confidence and the supply will be there, it's going to be primarily generic market. Yeah.

Okay. Then just quickly, when do we expect Brazil approval for us or any of our partner? Any time estimate you can give?

It should be shortly. All the stuff about the rejection that was reversed, and we are expecting approval in next few weeks.

Thank you. Thank you for answering my questions.

In the interest of time, we'll take one last question from Saion Mukherjee. I think he's joined back the queue. Saion.

Thanks for taking the follow-up. Just one question, a couple of questions. In the U.S., I think you mentioned 20, 25 launches. How many we are expecting through the rest of the year, and are there any material launches that are lined up or you expect?

Altogether right now we are targeting 27. At least, we are supposed to have a reasonable launch, let's call it, I cannot share here the name of the product, already in the next couple of weeks. In the second quarter.

How large is the opportunity? Can you give an idea about the size or the revenue potential from that launch?

It should be in the range of tens of millions of dollars, that specific launch.

Okay. Thank you. M.V.N., if you can talk about, I understand biologics and peptide facility operations are not generating any revenues at this point. What's the revenue cost mismatch there? What's the cost that is hitting the P&L on account of this, which is not generating any revenues?

In the biologics, like already we invested for like a CCM5, for abatacept, certainly, we are just waiting for approval, and then whatever is the expenses is already it is hitting in our P&L. Similarly, what the capacities we have created for peptides, both for API and formulations of fill-finish also, it is there. Once these two products comes back and definitely, then it will be profit positive.

Yeah, I was wondering if you can quantify the amount of cost that you're incurring on account of these two at this point.

Maybe I'll just come back.

Okay. Okay.

Thanks.

No problem. Thank you. Yeah.

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

Thank you.

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.