Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to Dr. Reddy's Q3 FY22 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Agarwal, Head of Investor Relations. Thank you and over to you.

Thank you. Very good morning and good evening to all of you and thank you for joining us today for the Dr. Reddy's earnings conference call for the quarter ended December 31st, 2021. Earlier during the day, we have released our results and the same are also posted on our website. This call is being recorded and the playback and transcript shall be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS Consolidated Financial Statements. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy comprising Mr. Erez Israeli, our CEO Mr. Farag Erzerwal, our CFO and the investor relations team. Please note that today's call is a copyrighted material of Dr. Reddy's and cannot be re-broadcasted or attributed in press or media outlets without the complete expressed written content. Before I proceed with the call, I would like to remind everyone that the safe hardware contained in today's press release also pertains to this conference call. Now, I hand over the call to Mr. Farhad Darwal. Over to you, sir.

Thank you, Ahmed, and greetings to everyone. Hope all of you are keeping well. We had yet another quarter of good performance in terms of year-on-year growth in revenues and profits while maintaining healthy EBITDA margins and generating good cash flows. Let me take you through the key financial highlights for the quarter in a bit more detail. For this section, all the amounts are translated into USD at a convenient translation rate of Rs 74.39, which is the rate as of December 31, 2021. Consolidated revenue for the quarter stood at Rs. 5,320 crores i.e. USD $715 million and grew by 8% on year-on-year basis and declined by 8% on a sequential quarter basis. Year-on-year growth has been supported by growth across most of our businesses and was driven by good base business performance and recent launches. Sequentially, however, our revenues were impacted on a higher base of Q2 which had a higher contribution from COVID-related products and recognition of out-licensing income in our proprietary products business. Consolidated gross profit margin for this quarter has been at 53.8% which was flat over previous year. However, the margin increased by 40 basis points on a quarter-on-quarter basis. Gross margin for the Global Generics and TSAI were at 57.8% and 22.5% respectively for the quarter. The SG&A spend for the quarter is increased 1,541 crores, that is US$207 million, an increase of 7% year-on-year and a decrease of 3% quarter-on-quarter. The year-on-year increase is in line with our business growth and on account of continued investment in sales and marketing activities for brands in India and emerging markets. As a percentage of sales, our SG&A has been at 29%, which is lower by 20 basis points year-on-year. The R&D spent for the quarter is Rs. 416 crores i.e. USD 56 million and is at 7.8% of sales. R&D spend increased by 1% year-on-year and declined by 7% quarter-on-quarter. The product development activities continued normally during the quarter and we continue to build a healthy pipeline of new products across our markets. The EBITDA for the quarter is Rs. 1,266 crores that is USD 170 million and the EBITDA margin is 23.8%. The EBITDA margin for the 9 months in this fiscal is at 24% and is closely tracking our expiration target of 25%. Consequently, our profit before tax stood at Rs. 971 crores that is USD 131 million which is a growth of 242% year-on-year and a decrease of 23% quarter-on-quarter. Adjusted for the environment charges, our profits grew by 10.7% over previous years. Effective tax rate for the quarter has been at 27.2%. We expect our moment ETR to be in the range of 25-26%. Profit after tax for the quarter stood at Rs. 707 crores, that is USD 95 million. The total EPS for the quarter is Rs. 42.48. Operating working capital decreased by Rs. 512 crores, which is US$69 million, against that on September 3, 2021. The decrease was primarily driven by a decrease in receivables of Rs. 616 crores, aided by higher collections. Our capital investment during the quarter stood at Rs. 414 crores, which is US$66 million, The free cash flow generated during this quarter was a net inflow of Rs. 1,274 crores, which is USD 171 million. Consequently, we now have a net cash surplus of Rs. 998 crores, that is USD 134 million, as on December 31, 2021. Foreign currency cash flow hedges in the form of derivatives for the US dollar are approximately USD 360 million, largely hedged around the range of Rs. 75.4 to Rs. 78.9 to the dollar, Ruble 5875 million at the rate of 0.9909 to the ruble, Australian dollar 2.5 million at the rate of Rs. 58.74 to the Australian dollar and South African Rand 36.9 million at the rate of Rs. 4.97 to South African Rand, maturing in the next 12 months. With this, I now request Erez to take to the key business highlights.

Thank you, Farag. Good morning and good evening to everyone. I hope you and your family are all safe and healthy. I'm pleased to share that we had a strong financial performance during the quarter without any benefit from one-off or COVID-related sales. We have grown on-year across our key businesses, and both EBITDA and ROC margins are closer to our aspirational target of 25% each, while we continue to invest in our future growth business. We have been able to achieve this despite certain industry-level headwinds like a higher level of price erosion across the generic segment in the U.S. market, increasing commodity prices, and higher freight costs. This sustained performance shows the resilience we have been able to build with our diversified business model to mitigate such external headwinds. We also generated significant cash flow during the quarter and are now having a net cash surplus which will enable us to invest for future growth. Let me take you through the key business highlights for the quarter. The reference of these numbers and these sections are in respective local currencies. Our North America generic business recorded sales of $248 million for the quarter, with a year-over-year growth of 6%. However, a sequential quarter decline of 2%. During the quarter, we continued to gain market share for some of our key products, including a recent launch of hyposapent ethyl soft gels. However, the sales were impacted due to a price erosion for some of our products and has been the case for the entire sector. And seasonal demand variation for a few of our key products We launched four new products in the United States during this quarter. Our Europe business recorded sales of 47 million euros and was largely flat both year over year and sequentially. During the quarter, we launched four new products in Germany and one product each in France and Ireland. We are expecting few good launches during Q4, which should enable us to return to growth in this market. Our emerging market business recorded sale of 1,154 crores rupees with a strong year-on-year growth of 20%. However, registered a sequential decline of 11%. Within the emerging markets, the Russia business grew by 2% on a year-to-year basis and declined by 18% on a quarter-to-quarter basis in constant currency. As informed earlier, the Q2 performance in Russia was very strong, which supported the seasonal demand and launch of biosimilar Beba-Sizumab. In the rest of the world, market sales were supported by one-off sales of the COVID-related products. During the quarter, we launched 16 new products across various emerging markets. Our India business reported sales of 1,027 crores rupees with a year-over-year growth of 7% and sequential decline of 10%. Adjusted for COVID-related portfolio sales in the previous year and the last quarter, the business performance has been fairly strong and in line with expectations. During the quarter, we launched four new products in the Indian market. After our Cuba report of December 2021, we have grown higher than the market at 23.1% on a net basis against market growth of 18.1%. Our PCI business recorded sales of $97 million with a year-over-year growth of 2%, but a quarter decline of 14%. We expect the performance to improve in the coming quarters. During the quarter, we filed 32 drug master files globally, including two filing made in the United States. We have also filed 22 formulation products across global markets and one ANDA in the United States. As of December 31st, 2021, we had 91 community filing standing for approval within the US FDA, which includes 88 ANDAs and three 505BQ NGOs. During the quarter, we have signed a deal with Fresenius for commercialization of our biosimilarity eczema in the United States. We are also continuing with global development of 5 to 7 other biosimilar in our portfolio that are in various stages of preclinical and clinical development. Earlier during the month, we have launched Mununu Pravir in India, expanding our portfolio to fight against the ongoing COVID pandemic. We are also working on certain export opportunities in line with the licensing rights obtained from Merck. As regards to Sputnik, we are now ready with capacities in India. We are working actively with the government of India to register Sputnik Light as a vaccine and as a booster dose for Sputnik V. We have also submitted proposals to DCGI to conduct trials to test Sputnik Light as a booster to other vaccines. Sputnik continues to be a viable option for Dr. Reddy's for India and other countries. Consistent with our aspiration and healthy balance sheet, M&A remains an integral part of our growth strategy and therefore we are actively pursuing few deals across our focus geographies. We are progressing well to strengthen the key processes in core businesses and in the digitalization journey. Going forward, we are looking to double down our efforts on very critical and important areas of innovation as well as ESG. There is a good progress to deliver on the short-term and long-term growth levels across our businesses, and we remain committed and optimistic about this. I am pleased to share also the recent recognitions of our efforts toward ESG. In November 2021, we were position number 9 among pharma companies in the world in the Dow Jones Sustainability Index 2021. During the quarters, we were also recognized by the UN WEP for gender inclusivity in the workplace. Our FTO-ACZ PE1 manufacturing plant in Vizag was honored with the prestigious National Energy Conversation Award by the Bureau of Energy Efficiency, Ministry of Power, Government of India. We have been recognized as the most innovative company for the year of 2021 at the CE2 Industrial Innovation Awards 2021. Earlier this month, we won a prestigious Apex Award, Sustainable Corporate of the Year, at the 2021 Frost & Sullivan Terry Sustainability 4.0 Award. As you can see, LG should continue to remain our focus area and we are going to increase our efforts in that direction. With this, I would like to open the floor for questions and answers.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question, may please press star, then 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star, then two. Participants are requested to use handsets while asking a question. Anyone who wishes to ask questions, please press star, then one. The first question is from the line of Kunal Damesha from MK Global, please go ahead.

Good evening and thank you for giving the opportunity. So the first question is on the U.S. you have mentioned that the price erosion has been kind of a little bit severe but if we kind of do a back calculation is it fair to say on a sequential basis it's somewhere in the high single to low double digits kind of price erosion in U.S. for this quarter?

Yes, so we We did see, I don't see it as a kind of global phenomenon, it's continued to be a product-based situation, but in Q4, a relatively larger number of our products faced competition, and investors spoke on the On the overall basis, it's more like a double digit. But despite that, we're still growing. So we managed to offset this erosion with new products, with market share, as well as with the productivity activity. So this still remains the issue. And the growth of about, I think now, 9 out of 10 quarters we are growing in the U.S., And this will continue to be a kind of a phenomenon also in the future, in which I do see growth. It may be slower than other markets, but we are still going to grow in this.

Okay, sure. And secondly, on these COVID-related contributions across India and emerging markets, what would that be as percentage of revenue for the first nine months?

It was primarily in the second quarter, not so much in the third quarter. So third quarter was without a major sales of COVID products. And we will see probably also more in Q4. So in the... In this respect, let's say the main contribution of this portfolio will be in the second as well as in the fourth, not so much on the third.

And in India, there was contribution in first quarter as well, right?

In the third quarter, not so much. That's why on the sequential basis, when you compare India, that's why there is a decline because it was relatively large contribution during the second quarter, but not so much in the third quarter. The second, as you remember, was very much affected by the Delta wave, and this one is the Omicron wave. In between, luckily, there was no another wave, therefore, not so much tonight.

Sure. And just on the follow-up on that, now that you are seeing healthy COVID contribution, at least for the past nine months, do you see that to continue in FY20T, or do you see, you know, So we are preparing for that.

We are preparing for that. So all the activities around the prevention, whether it's vaccines or products, as well as community treatments, whether it's the products that we have, like mononucleotide and additional products that we are working on, they are meant for that area. Naturally, we don't know how this pandemic will evolve. It's hard to predict how it's going to be, but we are prepared for it.

Okay, and in case if it doesn't pan out, do we still have growth levers in place to grow on this day?

Absolutely, we will continue to Thank you. The next question is from the line of Neha Manpurya from Bank of America. Please go ahead.

Thank you for taking my question. Erez, you just mentioned about double-digit price erosion in the US. Could you give us some color on how this is trending in the quarter, given it was product specific? Should we see this abating to more normalized price erosion? Any color on that?

It should be. So I believe that most of the products that face erosion were already there. and I don't anticipate the business model that exists in the US will continue as it normally does. So the business model will not change. But in terms of the products that were affected by that, I believe that most of the effect is behind us.

Understood. And, you know, just to understand, given we saw doubles in price erosion in the U.S., but if you look at, you know, our generic cross margins, they seem to have improved close to about 100 basis points, you know, quarter on quarter. Any color room, and, you know, despite the fact that we had headwinds in terms of raw material cost, etc., what drove this improved margins?

Yeah, so it is a combination of It is a combination of what I discussed. First, lots of products which change the mix, so it's improved mix. Second is productivity activity that we are doing on cost-improving programs and others. And third is market share with the relevant products in which we have better productivity. So we were preparing for this phenomena. And like I mentioned in my script, we are growing despite of those red greens. So I'm not so concerned about that going forward.

Understood. And my last question is on the India business. Since you mentioned there was no COVID product contribution, should I assume there was no contribution from or very little contribution from Sputnik 2 in the quarter?

Yes, in quarter 2 there was relatively higher demand because it was very much affected at the time by the Delta wave. and in this quarter luckily there was no such a demand in India. So what we are going to see is the contribution in India of Q2 as well as we are going to see some in Q4 because of the current wave that we are in. But Q3 was very less.

And what about the export opportunity for Sputnik? Are we in discussions with the government to allow us to export, given that the booster trial will just start, so that is some time away?

We can export. We can export the products. Both the vaccine as well as the other products.

Okay. And we have started exporting it in the current quarter or not yet? Not yet.

In Q3, will you not export COVID products?

Understood. Thank you so much.

Thank you. The next question is from the line of Damianti Kerai from HSBC Securities and Capital Market. Please go ahead.

This question is, can you share your observations on the commodity and raw material price Whether you have seen some kind of moderation compared to second quarter and how do you see this part moving up in next few quarters?

Yes, we did see it. We saw it in three areas. Some commodity intermediates especially that are serving us in the API. The second is in the energy cost, especially coal, a few months ago, especially in India. And the third is on the freight and the shipping cost. All of that we absorbed and are within the margin. So we countermeasure it with other activities to offset all that. I believe that... So, very broadly we can assume that the peak is over and price might see, I'll say, more moderation from here on. As much as one can predict, it looks better now. How to predict with the pandemic and the geopolitical situation in the world, assuming no other big event, it should be better.

Thank you. And my second question is, can you talk a bit about your biosimilar portfolio, which you are working on, and which are your target markets? For key products?

You're talking about COVID?

For biosimilars.

Biosimilars? Yes. We are targeting globally. We have Rituximab, which we have now commercially with most of the emerging markets. and the primary markets for it today is India and Russia. And then we have the Bivazugimab and the additional four biosimilars primarily for emerging markets. In addition to that, we are in the development. As I shared in my script, we signed a deal for Bivazugimab for the United States and with that and with Europe we will do it by ourselves. So Rituximab is going to be our first global product and we have right now additional three products in clinical trials as well as additional products that are in the preclinical stage. So overall it's a healthy portfolio that covers us very nicely from about 2024 until 2031, 2032 in which we will launch all of these products.

And my last question is, have you heard any update on your Dubada plant from the US FDA?

We did not receive any feedback from the US FDA as of today. Normally it takes 90 days and 90 days are due sometimes next week. So we need to, around that date, we will probably get a feedback. We had two milestones to submit certain data as part of our commitment to the response to the US FDA of the 843 that we got, and we submitted it on time and in full. And we are awaiting the feedback and hopefully to get an EIR for this date.

Thank you. I'll get back in the queue.

Thank you. The next question is from the line of Ashwini Agarwal from Akash Ganga Investments. Please go ahead. Hello, am I audible?

Yes, yes, please.

Yeah. So, my first question would be on this pre-filled series, which we have talked that that would be mostly be commercialization in Q3 FY22. Can you just update me the status for like what is the right now current situation on that part?

Sorry, we couldn't get your question. Can you please repeat?

Yeah, sure. So, the question is on with the packed filled grass chain which we have the pre-filled syringe which we have been, will be launching in Q3 FY22. So, can you just update me with the status right now?

So, currently it is with Fresenius. For the US and Europe market we have a deal with Fresenius and basically they have guided for calendar 2022 launch. So, as of now that's the status.

Okay, okay. And my second question would be a bit odd but actually I wanted to understand on that part. Thank you so much. Thank you.

The next question is from the line of Suryan Arayanan from Phillip Capital. Please go ahead.

Thank you for this opportunity. So just on the pricing erosion situation in the US what you mentioned, is it largely to Dr. Reddy's specific that double digit kind of price erosion situation and possibly could be because of more number of Para-3 launches by you? Is that the situation or it is broad based? Double digit kind of price erosion that you have in the US?

It's the business model in the United States so naturally every company is facing price erosion. I think the proportion of the price erosion is very much based on how many of your products are facing competition and what is the timing in which the customers are issuing their In our case, we launched, let's say, in the last three years, about 80 products in the United States. Naturally, those products, by design, will face competition. They are larger in proportion out of the entire basket. That's why percentage per se is less, for me at least, indicator of the health of the business. The health of the business, the way I dictate it, is growth and EBITDA and ROCE. And so far it's pretty healthy and we are maintaining the margins and even growing a little bit in the United States, despite those hedges. Sure sir.

So the second point is on the let's say US has so far been the dominant revenue contributor and earning contributor for us. But in the recent times we have obviously thought about diversifying our focus towards emerging market, new market like China and all. And also accordingly reducing the R&D spend focus targeted for the US market. So, let's say five years down the line, is it fair to believe that the share of North America, revenue share of North America will be meaningfully different than what currently it is?

Indeed, you described our strategy for the last four years. So, we are investing in other markets for growth, both India and emerging markets, and this is providing us By using the same fixed assets, so it's based on our portfolio, our assets, our knowledge, etc. So this is allowing us more growth, more opportunity and with less risk. And yes, I think it's fair to say that these markets will grow faster than the US. So the United States will continue to be an important market for us. I just want to emphasize on it. And we will continue to invest and grow in the United States. and the other markets will grow faster than the United States and therefore then the average weight in the United States will decrease, is decreasing already and will decrease over time. And the capital allocation is done accordingly to the diversification efforts.

Okay. Just last one question on this generic revenue. We have already launched the product in Canada and that is also a kind of influence in science market for this product. So whether we have seen the appropriate number or the kind of revenue that the product could have generated out of Canada market, whether we have achieved the right science revenue out of it as of yet or we will take... Longer time to achieve the peak potential out of the market from resume.

In Canada it will take a bit longer because in the way that the Canadian process is working, we need to register it in each one of the relevant provinces in Canada. and then for each one of them to participate in the relevant sales processes with attenders or other mechanisms in which each one of the states is providing. So the process is taking a bit longer. It's not the day one launch that you see in the United States in that respect. In any case, The launch in the U.S. and the launch in Canada are unrelated as the launch in the U.S. is part of the settlement deal while in Canada is naturally a free market situation. So I would not draw a kind of, it's not the same situation. I would not draw any conclusion from one market to another. Last but not least, we are going to launch this product not just in Canada and the United States. We are going to launch it also in Europe as well as in some emerging markets. So this is going to be a global product for us. Sure. Okay.

Thank you. Wish you all the best.

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Thank you very much and good evening to everyone. So the first question is for Icosuppent, which is a vasika in the U.S. So good job done on the market share gain. I think it's now stabilizing around 11-12% for last few weeks. So have you reached the peak or what's the outlook over here? And is it the supply that is holding you back?

I think we... I think that the product is doing well and we are planning to continue to do well also in the next quarters to come. There is still a lot of market share to gain with this product as the innovators still holding a nice market share. And in terms of supply, it is not constraining us at this stage.

So then, why is the market share, you know, in early double digit and not much higher if supply is not holding it back? So what's the roadblock?

The roadblock is the desire of customer to take the product from us.

Okay. But so that's a little counterintuitive because generic is lower cost, lower priced. So, most of the time customers are too happy to take generic product.

Is there anything different over here?

No, nothing different. Okay, that's fine, sir. So, the second question is on the Russia-Ukraine business. Given the geopolitical situation, You know, what's your read of the situation? Have you seen any disruption or any problem in a business that you are doing over there?

The Ukraine-Russia situation is beyond my paycheck. But we are... Russia is a very important market for us. It will continue to be an important market for us. And if there will be any, hopefully not, I wish not, but if there will be any adversity, we'll have to accordingly be prepared for it, and we are. But I wish that it will be only peace in the world and calmness.

So far, have you seen any impact on the business?

No, no, no.

Okay, great. So one final question, if I may, which is on your health tech platform, is there any update over here? How has been the progress? Anything you can share on the physical infrastructure that you have built, especially for online pharmacy fulfillment and diagnostic site? And how many cities have you rolled out? What's the plan going forward for next, you know, four, six quarters?

Sure. It is going very nicely. We basically, in the last stages of finishing the pilot, we are now present in five cities, going to ten cities in the next few weeks. and this will cover of course the main cities of India including Mumbai and Delhi and accordingly it will be the rollout of the companies that will join this platform so our main way to grow this business is by convincing companies to work with us and give treatment to their employees and basically insured by our insurance in this product and, of course, rolling out a good service by physicians as well as by other vendors to provide excellent service. This is a very, very neat project and I'm very proud of the beginning and I believe in it very much. It's a good thing for us and I believe it's a very good thing for India.

Okay, great. Thank you so much.

Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Hi, good evening and thank you for taking my question. Just the first one is on the PSAI business. In your opening remarks, Erez mentioned we expect performance to improve quarter on quarter. What's driving that optimism? I remember last quarter we had the issue of inventory destock from some of our customers. So just can you help us understand the dynamics in the PSAI business?

Sure. So if we are taking out, let's call it COVID-related behavior by The main driver of growth will be the launches that will be in the marketplace of FY23, FY24 and FY25 by the customers, both by internal use as well as external use. And if we wish, the Pareto, meaning the top products that used to drive these, are going to be changed. by products that will be launched in that area, which will be one, more profitable, and second, bigger in their size. This will drive the growth on the base API. PCI is comprised also on RCDM activities that are slightly picking up, and we very much believe in it. So most of the seeding that is done now Our small projects which are in Phase 1 and early Phase 2 and actually some of these products will come to Phase 3 and beyond that and of course serve as a growth driver for the CDMO type of the business which is as I discussed in the past part of our Horizon 2 activities and it's seeding and picking up. The third is we are selling B2B The PCI and speaking up with launches of pharmaceutical products that we are serving in Japan as well as in some Middle Eastern and African countries. So the combination of the three should grow PCI in the future.

Got it. That's very helpful. Is it early days? Can we quantify some of the non-API sections in the PSAI? CDMO, the projects that you're talking about?

At this stage, the two sections are not big. We are not going to give yet a specific proportion. But they are not big. But they will be more and more meaningful. So right now, still most of the PCI comprise of the API per se cells. And in the case of Q2, It was comprised of some COVID cells as well, which was not the rate of death magnitude in Q2. So some of the sequential trend is related to COVID.

Got it. Helpful. Second question is on the Sputnik. I missed some of the early comments. You said you're actively looking to register Sputnik light as a booster, right? And the trial, we are doing it as... Just to, what's the reason for doing the trial with other vaccines?

Yeah, we will have to get approval from the authorities here in India for the protocol of the trial. And based on that, pending that approval of that protocol, we will have a trial with other vaccines, so it will serve as another option. Both private as well as the government for booster in the future. We believe that boosters will be part of our life and we'll have to take it one or twice a year now. And we believe that we want to be ready for that.

Got it. Last question. Again on your opening remarks, you are now net cash. MNA, can you just help us understand what those We are looking for opportunities in all of our spaces, all the geographies. India, naturally, as well as emerging markets, United States and Europe.

In all of those geographies, there are now active projects. Some of them can be faster and within the next few weeks, if of course will be concluded. And some of them may be later. The nature of the capital allocation will be the same as we discussed in the past. We are not in the shopping spree. We see it as complementary to our organic growth. At the same time, because we have a very Thank you so much Erez and all the best. Thank you.

The next question is from the line of Ashish Thapkar from Motilla Loswell Asset Management. Please go ahead.

Thanks for the opportunity. So on the Sputnik, you said obviously we have got permission from the government to export. Can you quantify the doses that we are planning to export or we are open to export any amount or there is a restriction?

No restrictions. I cannot specify now specific number, but there are no restrictions that prevent us to export.

Okay, but these numbers will be reflected in port quota, you believe so?

It's a... It depends on the type of approvals that we'll have for the product. For example, if a Sputnik light will be approved eventually as a vaccine, and the sub-segment will be as a booster for other products, then we'll obtain WHO. If all of this will happen, it can create a nice opportunity for us. and of course the quantities will be accordingly. So it depends of course on the type of approval that is relevant for that market at that particular time.

Okay, so just to get this thing clear, you cannot export till you get some sort of approvals from various agencies. Is that a right understanding?

No, no. We can export. We can export, but naturally our customers will not buy a product that is not approved for use in the relevant markets for the relevant patients that are going to use it. So it has to be approved in that specific country for the use either as a vaccine or as a booster. This is where from there we derive the quantities.

Okay. But as you understand, this product is approved from most of the Scandinavian countries. So how about that?

This is not a part of our agreement with the Russians. So this will come directly from Russia, not from us, to this type of market. Okay. Yeah.

Got that. So next question was on this Pexelgrass team. So earlier participant asked this but I missed it. So we were supposed to launch in Q3, right? Through Fresenius Caddy. So we have launched a product or there is a delay? And if the delay is there, why so?

I did not get the question, sir. Yeah, so I think basically Fresenius has mentioned or indicated basically calendar 2022. is when they expect to launch the product in both US and Europe market.

So do you say that we are still 2-3 quarters away from the launch?

So they have not specified the quarter but maybe in next one or two quarters it may happen but obviously we don't have the specific dates.

Okay, fair enough. So this last question on this price erosion in the US, it's been quite a while since we are facing double-digit price erosion. But as the investors understood, we felt that by the end of March, the intensity of the price erosion should gradually start coming off. So in your experience and what do you see in the market, would you be on similar lines? Would you also say that price erosion intensity would eventually come off by end of March?

As I mentioned before, its price erosion and the magnitude of the price erosion is not top-down, it's bottom-up, meaning it depends on the product that is facing that specific competition. And in our case, most of our portfolio faces it. So, luckily, we are not going to see another round for these specific products and hence the will probably come down. So it's not a top-down, it's a bottom-up. And that's from there come this level of thought.

Hello, Aki?

Mr. Tavkar, do you have any further questions? Mr. Tavkar can't hear you. Please unmute your line and respond. There is no response. We take the next question from the line of Shrikant Akolkar from Asian Market Securities. Please go ahead. Mr. Srikant Akolkar, your line is unmuted. Please go ahead with your question.

We can move on.

Sure, sir. We take the next question from the line of Kunal Damesha from MK Global. Please go ahead.

Thank you for the opportunity again. So on textile grasping, we are seeing that the launch can happen in the next one or two quarters, but have we supplied any So just to stress and as part of the deal, all the rights, all the activities of these people that are done, I think it's not right. And therefore,

We just have a certain financial arrangement with Reddy and once they will go we will enjoy a stream of value that will come from their launch. So we are not supplying and not involved in the launch and we are not aware of the date and we are going to be advised by them when they will decide to do that. Okay, sure. Thank you.

and Sameer Baisiwala from Morgan Stanley. Please go ahead. Yeah, thanks for the follow-up. I hope my voice is audible. There seems to be some disruption. So just one final question. How are you thinking about your injectable portfolio for the U.S. market? As in, how many, you know, ANDAs have been filed? And are there any complex, you know, long-acting type, you know, microspore type product, peptide products, that you've done the filing. And when can we start to see the approval cycle begin for these?

Yes, so it's naturally very important to us, not just in the US, but also globally. And the answer is yes, we do have these complex, generic assets at the start of that effort. Some of it It took a long time to develop. Some are still in development. Overall, the injectable and the complex generic will drive the growth in the United States on the generic part. And it will grow faster than the retail product.

Very specifically, have you filed some of these high-value complex injectables?

We did file some high-value complex injectables, yes.

Okay. And the PAI done at Duvada, does it relate to one such product?

Some of these products are coming from Duvada, yes.

No, no, sir. The question is, is the PAI pre-approval inspection done by FDA? Was it related to one such complex large injectable product?

The PAI was not related to specific products like that, but naturally when you have a PAI, they are not checking only the specific products, they are checking the entire site.

Okay, got it, got it. Thank you so much.

Thank you. Ladies and gentlemen, we take the last question from the line of Alok Dalal from CLSA. Please go ahead.

Good evening. Taking Sameer's question forward on DUADA, would you still expect to grow in the U.S. next year if there is an adverse observation on DUADA from the FDA?

First, we hope not to have this adverse effect. And second, at this stage we are not looking for scenarios that we don't have these sites. But these sites are very, very important for the growth in the United States, not just next year, but also in the years to come. Okay.

And Erez, any update on Newaring internally? Have you decided to go ahead with the launch or drop it?

We did not finish all the evaluation, but unlikely that you'll see launch in the next few months. Okay.

And lastly, any update on Copaxone?

Thank you very much for taking my question.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you all for joining us today for the earnings call. In case of any further queries, please reach out to the investor relations team. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Dr. Reddy's, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.