Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to Dr. Reddy's Laboratories Limited Q3 FY23 earnings conference call. As a reminder, all part of seven 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 this conference call, please signal an operator by pressing start and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Richa Periwal. Thank you, and over to you, ma'am.

Thank you. A 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 31, 2022. 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 transcripts shall be made available on our website soon. All the discussion 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's, comprising Mr. Israel Israeli, our CEO, Mr. Parag Agarwal, our CFO, and the investor relations team. Please note, that today's call is a copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlets without the company's expressed written consent. Before I proceed with the call, I would like to remind everyone that the safe harbor contained in today's press release also pertains to this conference call. Now, I hand over the call to Mr. Parag Vargaon. Over to you, Parag.

Thank you, Richa, and greetings to all and wishing you all a very happy new year. I am pleased to take you through our financial performance for the quarter. For this section, all the amounts are translated into US dollar at a convenient translation rate of rupees 82.72, which is the rate as of December 30th, 2022. This is yet another quarter with a strong all-down financial performance reflected in highest ever sales and profits and strong free cash flow. Consolidated revenue for the quarter stood at Rs. 6,770 crores, that is US$818 million, and grew by 27% year-on-year basis and by 7% on a sequential quarter basis. The performance was supported by healthy growth across our businesses, with contributions from both base business and new product launches. Consolidated gross profit margin for this quarter stood at 59.2%, an increase of 545 basis points over previous year and 15 basis points sequentially. On a year-on-year basis, the gross margins were mainly aided by an increase in contributions from new products and favorable product mix. Gross margins for the global generics and the PSAI business were at 64.6% and 18.2% respectively for the quarter. In line with our expectations, PSA gross margins have rebounded compared to the last quarter. The SG&A spend for the quarter is Rs. 1,798 crores, that is, US dollars 217 million, an increase of 17% year-on-year and 9% quarter-on-quarter. The expense in the current quarter reflects an increase in investments, certain runoff expenses, and an impact of the forex rate. As a percentage to sales, our S&D has been at 26.6%, which is lower by 240 basis points year-on-year and marginally higher by 30 basis points sequentially. The R&D spent for the quarter is rupees 482 crores, that is US dollars 58 million, and is at 7.1% of sales. We have been making good progress on our R&D pipeline in line with our business strategy. We continue to drive productivity across our businesses while also making investments to strengthen the product pipeline and capability development in marketing, digitalization, and people, including for the Horizon 2 initiatives. The net finance expense for the quarter is Rs. 14 crores, that is, US$2 million. The EBITDA for the quarter is Rs. 1,966 crores, that is, US$238 million, and the EBITDA margin is strong at 29%. Our profit before tax stood at Rs. 1,635 crores, that is US$198 million, which is a growth of 68% year-on-year and a growth of 1% quarter-on-quarter. Effective tax rate for the quarter has been at 23.7%. We expect our normal ETR to be in the range of 25% to 26%. Profit after tax for the quarter stood at Rs. 1,247 crores, that is US$151 million, Reposal EPS per quarter is Rs. 74.95. Operating working capital decreased by Rs. 490 crores, which is US$59 million, against that on September 30, 2022. The decrease is majorly due to higher collection of receivables and some increase in payable. Our capital investment during the quarter stood at Rs. 292 crores, which is US$35 million. We generated healthy free cash flow during the quarter of Rs. 1,975 crores, which is US$239 million. Consequently, we had a net cash surplus of Rs. 3,401 crores, that is US$411 million, as at the end of the quarter. As of 31st December 2022, foreign currency cash flow hedges in the form of derivatives for the US dollar are approximately US dollar 351 million, largely hedged around the range of rupees 80.3 to rupees 83.3 to the dollar, ruble 2975 million at the rate of rupees 0.9661 to the ruble, Australian dollar 1.8 million at the rate of rupees 56.20 to Australian dollar, and South African grand 34 million at the rate of rupees 4.81 to South African grand maturing in the next 12 months. With this, I now request Erase to take us through the key business highlights.

Thank you, Farag. Good morning and good evening to everyone. I hope you and your loved ones are keeping well. I am glad to report that we continued with a strong financial performance in the current quarter, as well as with record sales, profit, and cash flow generation. We made good progress in our productivity journey, which allowed us to remain competitive and grow in our markets. We have been able to identify several new business opportunities, which refer to us as a Horizon 2 business, and have started building this. We have also made good progress against most of our ESG goals. Let me share with you some of the key highlights of the current quarter. One, strong revenue growth driven by continued traction in U.S. and Russia markets. Second, high cash generation leading to net cash surplus of more than $400 million at the end of the quarter. Three, significant progress made for biosimilars. completion phase three clinical studies for etuximab, and completion of phase one clinical studies for tocilizumab. Let me cover business-wise key highlights in a bit more details. Please note that all the references to the number in these sections are in representative local currencies. Our North America generics business recorded sales of 375 million for the quarter, with a strong growth of 51% year-over-year and 7% on sequential basis. Sequentially, the sales continue to grow in the U.S. market with a positive traction seen in both base business and recent launches, including Sorafenib, Sapropretin, Adofluoride, and Linalytumide. While contributions from leadomide capsules may fluctuate from quarter to quarter, we expect it to remain meaningful over the next few quarters. In this quarter, we launched five new products and expect the launch momentum to continue during the balance of the year. Our euro business recorded sales of 51 million euros this quarter, with a year-on-year growth of 8%, and sequential quarter decline of 2%. During the quarter, we launched 11 new products across various countries within Europe. We expect to continue with the growth momentum in the rest of FY23. Our emerging market business recorded sales of 1,310 crores rupees, with a year-on-year growth of 14% and sequential growth of 7%. Within the emerging market segment, the Russia business grew by 29% on a year-to-year basis and 8% on a quarter-to-quarter basis in constant currency. This strong growth was supported by higher sales of biosimilar products in Russia. During the quarter, we launched 29 products across various countries of the emerging markets. We expect this business to continue the growth momentum during the balance of the year. Our India business recorded sales of 1,127 crores rupees with a year-over-year growth of 10% and sequential decline of 2%. During the quarter, we launched two new products in the Indian markets. We are creating several growth engines for India business for Horizon 1 and Horizon 2, which includes ramping up internal portfolio, collaborations, innovation, and inorganic opportunities. Our PCAI business recorded sales of 95 million with a year-over-year decline of 2%, however, a strong growth of 18% on sequential quarter basis, contributed by an improvement of the volume pickup. This business is starting to show signs of recovery and we expect this momentum to continue in the coming quarters as well. We are progressing well on our pipeline products. The number of filings in several of our key markets have been improving. The ANDA and drug master filings are expected to significantly improve during Q4. We are evaluating several inorganic opportunities across businesses in line with our strategy. We believe all of this will lead to several growth opportunities for us both in the short term as well as in the long term. I am confident that we'll be able to continue the growth momentum supported by a strong cash position, focused management team, and robust governance and processes. Within this, I would like to open the floor for questions and answers.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Colonel Damesha from the query group, please go ahead.

Yeah, good evening and congratulations for the great set of numbers. So the first question on Revlimid, I think I missed your comment when you said the Revlimid event could kind of fluctuate on a quarter to quarter basis. But is there any kind of outlook that you are providing for, let's say, quarter four and FY24 in terms of the quantum, relative quantum vis-a-vis quarter two and quarter three, what we have seen?

So we cannot share as part of the agreements that we have, but that's what I said. What will determine the size of the opportunity is, of course, the timing of the orders that will come from the customers. That may vary from month to month or quarter to quarter. But overall, the product will continue to be meaningfully contributing to our business success. And we are very confident about it. Okay.

And is it kind of fair enough to assume that the contribution is expected to increase next year?

We cannot share guidance in this respect because it's part of the agreement. That's why I'm sharing what I'm able to share at this stage.

Sure. And second question on, you know, while we have shared that our capital deployment priority is kind of, you know, India followed by the branded markets and likewise. But I think we are generating significant cash flow and we have not seen any activity on that front. So is there a basic timeline which you are looking at to deploy this cash or else you are considering any other options about returning this to shareholders?

We are engaging in the multiple business opportunities and naturally we'll be able to share that when we sign the deals. Like we discussed in the past, we knew that this is coming and we knew the type of capital that we are going to create. So for us, it's well within our plans and our strategic plans. The priorities will continue to be similar to what we have discussed in the past. We want to engage it in business development, which is not a shopping spree or big deals, but rather complementary deals that will enable our strategy and create capability of brands that we don't have or areas in which we can create more meaningful contribution to our both all stakeholders, customers, shareholders, et cetera. The second is to continue to invest in both Horizon 1 and Horizon 2 and CapEx and R&D. That's the use of the money. We believe that we will have a good use of it. Sure, I'll join back the queue. Thank you.

Thank you very much. Next question is from the line of Damian Tikerai from HSBC. Please go ahead.

Hi, thank you for the opportunity. My question is on India business. So although year-on-basis you have seen good growth, healthy growth, but sequentially it has declined. And what we have seen in some market databases is that Dr. Reddy's growth has been lagging against the broader market growth. So how should we see growth outlook for your India piece, given it's one of the most important segments for you? And what will be key growth drivers from here on?

The main growth will come from investment in differentiated products and specialty products and collaborations that we are working. So we are planning to introduce a lot of innovation in India, and we are building it. In addition to that, we will continue to focus on the brands that we believe can contribute in short terms but much more in the long term. And we will continue also to invest in the capabilities to market it in the most productive manner using all the relevant digital tools and the ability to maximize the return on the investment. We are going to see also in India continue diversions of the brands that we are not planning to invest behind. if we believe that the returns that will come from those diversions will be more than what we will get if we continue to market it. So in that respect, we are well within our strategy. And maybe the results here and there will fluctuate per brand, but overall I'm very confident that we'll be top five as per the target that we shared with you long ago. Sure.

And in the acquired Wakaat portfolio, which you have done some time back, are the results in line with your initial expectations, or do you think you have further headroom to see better sales for some of the top brands?

The Wakaat products served and are serving us very well. I'm very happy with these acquisitions. It already exceeds our expectations.

My last question is on Russia business. So this has been very strong quarter, which you mentioned there were biosimilars which contributed. So should we assume this to be sustainable sales or this is driven by some one-time pickup and we might see moderation from here on?

Yes. Russia will continue to be strong for us. Quarter-wise, it will fluctuate. This quarter is the timing of the bids with the government on their signals, for example. So unlikely that we will see that in the other quarter. So it will fluctuate. But overall, we are going to see in the local currency growth and as related to As related to the protection of the ruble, I think we have a very, like we proved this year, we have a very good protection on the ruble itself. So we are, I'm optimistic from even with the scenarios that there will be a significant devaluation of the ruble.

That's helpful. Thank you very much. I'll get back in the queue.

Thank you. Next question is from the line of Surya Badra from Phillips Capital. Please go ahead.

Yeah. Thank you, sir. Thanks for the great set of numbers. Just on the rev limit side, if you could share something more on the kind of visibility in terms of, like, it seems that first two quarters or in the last two quarters, whatever number that we would have generated, It seems that we have already achieved around 5% or mid single-digit kind of volume share in the product opportunity. So considering that, is it fair to think that fourth quarter and first quarter possibly could be a relatively lower number that we could see from Revlimid?

I cannot share any numbers about it.

Okay. But Sir, could you give some sense about, let's say, in terms of the volume share, whatever that is fixed for the first year, how different the volume share number would be for second year?

Again, it's not because I would love to share, but I can't. We have an agreement, and I have to honor the agreement, so please bear with me on that. Okay, sure, sir.

Then, sir, the extended question relating to this, that, see, the cash flow generation, what we are witnessing, so considering that, so the near-term priorities, could you share the near-term priorities that you would be having? Because what I have seen that you have already indicated that you are likely to be or you are likely to remain active in terms of inorganic growth. as well as the R&D spend also rate, if I see, it has just moved on along with the kind of ramp up in the revenues. So considering these two things, what priorities that would be there for us in the next 12 to 15 months or 18 months period going ahead?

So as we have discussed in the past, Our priority is productivity in the short term, so it means to grow what we call Horizon 1, which is meaning the current business that we have, including investment in those productivity, investment in our portfolio, in the ability to get some of those complex generic faster to the market, some of those biosimilars faster to the market. As well in Horizon 2, building those new businesses that will give us the growth in the future. As we shared in the past, we assume that we will be able to generate enough cash and enough profit to finance for those activities. And so far, it is going well for us. The extra cash that we will have, we will use for business development and for investment in capabilities in the business, especially digital mechanization automation and artificial intelligence. and in line of what we have discussed. So I say the broad guidance remains the same. We are comfortable on a long-term basis with the 25% EBITDA and the 25% ROCE, double-digit growth and no debt. This continues to be the guidance that from time to time will be above it, like this year. From time to time will be below it, like some couple of quarters ago. But overall, I think it allows us both to be a very healthy company and to grow very, very well. And we have a potential upside even to exceed these numbers. But so far, we are very much into that. That makes you actually forgot a quarter, but if you see... Our record for the last few years, we are very much where we said we were going to be.

Sure, sure. So then the revenue, U.S. revenue, excluding Treblimid, if you consider, we have seen this year as a kind of a, although we maintained the revenue run rate, excluding Treblimid, but there were challenges, and a couple of our key products also witnessed competition from others. largely from Indian players only. So for this revenue piece, could you give some sense that, okay, next year, what is the visibility that you are having? Are you likely to see the sustained competition and all that impacting the business or some sense about growth that you can indicate for the U.S. business excluding revenue?

Next, in FY24, we are planning to launch at least 30 products, give or take, and we are planning to continue the growth that we saw in the last couple of years. So we indicated that we believe that a baseline of 6% growth Not 6%, but single-digit growth. 6% was the past. Single-digit growth is likely to happen, and maybe more than that. And from time to time, we'll have a product or products that will create much better growth than that, like it happened to us in the last couple of months. And those products at a certain point in time also will go down with erosion and other will replace them. So overall, the trend is growth. In addition to that, we believe that once Horizon 2 will kick in, also the U.S. will grow in double digits. But this is in a later stage towards, you know, five, six, seven years from now. So... Now, it may fluctuate because of price erosion. It's hard to predict the market share. It's hard to predict. So, unfortunately, I don't know what will be quarter on quarter, but absolutely we are planning to grow in the United States. Okay.

And is it fair to believe, sir, that next year we will see a kind of a meaningful ramp-up in the kind of a spin towards Horizon 2 growth plans? versus currently?

We don't like to ramp up spend. We are planning to spend in accordance, in a very disciplined manner, in accordance to our goals. At the time, we indicated that we are going to have more expenses, both at the CNA as well as the R&D, but within the range of profitability that I mentioned in the past. So we will be able, with our growth, and our cash to finance the investment, it will not be extra and a decrease of the profit. Sure, sir. Okay.

Thank you. Wish you all the best.

Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Prakash Agarwal from Access Capital. Please go ahead.

Yeah, hi. Thanks for the opportunity. Good evening.

Just wanted to understand, one is the industry level question. So we've been seeing a lot of USFD issues going to the next level. And we've been hearing that there's a volume distribution that is happening to the large Indian and global players in the US generic side. Are we seeing that happening to us also? Are we getting some volumes for our base business? Would that be correct to understand it?

We do have a growth in volumes. I cannot attribute necessarily for that. The growth that at least we are facing is from activities that we initiated primarily. Naturally, we are watching carefully all the results of all the inspections that are happening in India and outside of India. So far for us, knock on wood, All of our plans are operating and in full compliance. Okay, okay.

And with that kind of volume gain, et cetera, do you think there's some improvement in pricing on base business or it still remains mid to high single digit for the base portfolio?

I'm not aware of any, let's say, special phenomenon that can indicate bottom price or quantities as related to that.

It remains a similar trend.

Maybe marginal, maybe.

Okay, okay, fair enough. So would it be fair to say that, you know, the incremental growth, you had some approvals and launches for sure, but with the, you know, the price erosion, it nets off and the incremental sales momentum is coming from this product itself?

I believe that our growth is coming because we are giving better service to our customers, and I appreciate it. Okay, okay.

And last one on the capital allocation. We have seen some companies being successful in late-stage innovator-led programs. Are we thinking about it? In the past, we had done 505B2, and then we moved to self-sustaining and selling those assets. So what is the plan for both these, I mean, if there is any plan on both these strategies?

We are not planning to come back to the 55B2. We worked hard to get out. Horizon 2 contains activities that are differentiated by design. We are talking about 11 spaces in India and a couple of spaces outside of India, energy market Europe, as well as the United States. We do have NCE as part of our origin discovery, especially in the area of cancer. We do have activities in cell gene therapy, in therapeutic management, in OTC, in pharmaceuticals. as well as in other innovation of go-to-market. This is part of the Horizon 2 that we share, but not 505. Okay, lovely.

Thank you, sir. Thank you, and all the best.

Thank you. Next question is from the line of Samir Besewala from Morgan Stanley. Please, go ahead.

Thank you very much, and good evening, everyone. The first question is on government grant. Looks like in 3Q you did 43 crores and first half some 240 crore odd. So I guess your product mix is not changing that much. So what's driving this?

So the grants are, obviously we file the applications as per the government scheme, Samir, and it depends on the eligibility of the products and the sales that we are making. So depending on the underlying numbers, the grant is recognized. So it's obviously something that will continue, but we'll structure it from one quarter to another. Okay, so fair enough.

I get that. But is the product mix changed so much? Yes. The products which were eligible, you didn't do, you know, those sales in three?

Yeah, product mix changes. And the sales level of various products also changes. So that determines the incentive.

Okay. Okay, cool. And the second question is on biosimilars. You clearly have focus on that. But if I look at your pipeline, I mean, first of all, good job on Rituxan for phase three. But to succeed in this market, you need good five, ten products, a fairly vibrant pipeline, several products in phase three type of situation. So can you talk a bit about it? How will you make a mark in this space?

If you recall, we decided at the time to skip the products that will be with the patent expiration until 2027 because we felt that will be laid to the market. And we have a pretty robust portfolio for the patent cliff that is after that, even larger number of what we've just said. We kept Rituximab as it was already there. We are already selling it in 27 countries. And by having the US FDA approved, it will allow us to sell it in many more countries, and we have also agreement with the third party on the US market. Rituximab also will bring the US FDA, and we will be able to approve the relevant site from GMP point of view. So to your question, we are committed. We are committed to even larger number of molecules than that. And over time, we are going to see it. And in accordance to the relevant data, we need to launch the product. But we are absolutely going to play by similar to be a significant player, especially in emerging markets.

Okay, got it. And one final one is on Icosupply. It's been some time that we are stable at 14, 15% market share. So what's the outlook on this?

We'll continue to try our best to gain as much market share as possible. It's fluctuating according to decisions of customers.

It's not about supply chain or raw material issue?

No, no, no issues. This was sold a year ago.

Okay, got it. Thank you so much.

Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Kunal Ramesh from my query group. Please go ahead.

Thank you for the follow-up. So I think on the biosimilar products that we have got the good trial data, etc., Do we have the existing capacity which can support, you know, let's say fair market share in this product, or would we need to invest more? And if yes, would it be the same facility where we would seek expansion, or it could be a greenfield facility?

We are investing in capacity for the last five years and continue to invest. You're invited to see our facilities in Batchbooling. They are growing every year. Yes, we have enough capacity to capture a market share globally.

And what would be our current biologics capacity, reactor capacity in total in terms of kiloliters and the gross block related to it?

I don't remember the kiloliters, but we can produce, let's say, many, many hundreds of kilos if needed.

And in terms of our cost structure, would you have benchmarked our cost of production versus, let's say, Korean and Chinese players and where we stand versus them?

We believe that we are very competitive in terms of the cost structure. Part of it is because the technology we are using, part of it is the the attrition that we have on the product and part of it is the fact that we are in India and leveraging the economy of India.

Thank you.

Thank you. Next question is from the line of Prashant Nair. From Ambed Capital, please go ahead.

Hi, thanks for taking my question. My question is on the PSAI business. So we've seen a recovery here. Is it fair to assume that the disruption in this business is behind us and this will continue to normalize as we go forward? And the second question is on the gross margin side again. This used to be a mid-20 percentage gross margin business in the past. Can it still get to those levels or would it settle a bit lower?

I believe that it should go there, and we are in the right direction to be there. And I also believe that the challenges that we faced in the last 18 months or so are behind us. And like I mentioned, we do see very good signs of recovery, and there is still room for improvement also on that side, which I believe that we will achieve.

Yeah, thank you. That's a good one.

Thank you. Next question is from the line of Sion Mukherjee from Nomura. Please go ahead.

Yeah, thanks and good evening. Eris, can you update us on China filing and, you know, how the business is doing? And when do you expect, you know, meaningful traction in revenues?

So we continue with the process. It's going well. Amit can help me, but I think we are talking about 14 products.

Every year now, we have started filing more than double digits. Double digits filings have started. As we speak, we have about 20 filings pending approval. In the next few years, going by this run rate, obviously there will be 40-55 being over the next 3-4 years so typically after filing it takes 80-24 months for a product to get approved so last year we got like approval for 4 products this year we expect similar rate and going forward even it to become better and better So all, I think, statistics are working as we have expected, and the sales also should start picking up faster. So we are already growing in double digits, but that can start growing faster, maybe somewhere second half of 24, 25 onwards.

Second half of FY24?

Okay. FY24 we should see growth, FY25 even more.

Okay. And it is also on Russia. I mean, I know this quarter is good. You had a biosimilar contract. But in general, the market dynamics, are you seeing more traction for Indian companies in terms of procurement by the government or market demand in general? I'm just looking at how should we think about constant currency growth in Russia and from a slightly longer-term perspective, maybe over the next couple of years?

I don't see anything special as related to company or country. Everybody, in that respect, to my opinion, are waiting to see how events will unfold in the country. And to the best of my analysis, people did not leave the markets And so it's not the growth that's coming because others are leaving. It's a real growth that's coming from the consumption of people. So the way we are looking at it, as part of our products, our OTC, which have seasonality to them, the biologics have different seasonality that are related to the timing that the government is procuring it. And the RX products are very much having the same demand over there. So, so far, it's behaving very normal to what we see, and our growth is attributed primarily to our productivity and not to external events.

Okay. Okay. And one last question, if I can. For India, you know, adjusted for the acquisition, SIDMUS, et cetera, can you share how the organic growth has been? And I think a couple of quarters back, you know, you indicated SIDMUS to be a big drag on your gross margins. Now with, you know, the patent of how should we think about the situation on that product?

So this product will be profitable for us. The cost structure will be better in the future. And the brand is well accepted by the community. It's actually number one in CHF as we speak. And we are going to continue to see growth in India in all the places in which we are focusing. So like we indicated, I'm expecting India to continue to build up a digital course also in the future. And on top of it, we will see both inorganic move, investment in collaborations and diversions. So all of these movements will happen in India also in the near future as well as the longer term.

Okay, and can you share the growth number adjusted for acquisition and divestments, just to understand the organic growth in India this quarter?

And we look at the entire business as a portfolio, so we don't analyze including and excluding acquisitions. I think overall we have reported a growth of 10%, and as Ray said, we are confident that we will be able to continue to drive growth in India, given the various growth levers.

Okay, thank you.

Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Smith from RDA. Please go ahead.

Thank you for the opportunity. Is Amitza still a meaningful opportunity for us as sales are declining and few companies have already discontinued the product? Sorry, your voice is not clear. Can you repeat the question? Is Amitza still a meaningful product for us? Sales are declining. Hello? Which product is declining? Amitza.

The voice is breaking, so we cannot get the question. Can you repeat this?

Is Amitza still a meaningful opportunity for us? As sales are declining and few companies have already discontinued the product.

Yeah, so we have launched this product in the US, I think in quarter one. I think there are a significant number of players, if I'm not wrong, about 8 to 10 players have launched. And the price erosion, I think, has been fairly decent. So we are having a decent sales, but it's not a very large product for us. Okay, okay. We are doing good.

Okay. So my other question is on Seldelda.

Seldelda?

Yeah.

Seldelda?

Seldelda.

Sorry to interrupt you. Smith, may I request you to speak through the handset, please? Your voice is not coming clear.

Okay, I will turn back to you.

Thank you. Next question is from the line of Prakash Yadarwal from Access Capital. Please go ahead.

Yeah, just a quick follow-up. Just trying to understand, you know, the smaller strengths where we had exclusivity, when is the competition expected to come for unlimited? The voice is breaking up. Something is wrong with the line. We can't hear you well.

Can you repeat the question, please?

Sure, sir. Am I audible now?

Yes, please.

Yeah, I'm just trying to understand when are we expecting competition on the smaller strength for Revlimid where we have exclusivity?

We had exclusivity for 180 days. So therefore, if they won 81, probably people would come.

Okay. And would that be a decent, meaningful contributor to the run rate, whatever run rate we are doing on development sales, or these are the small shares?

Your voice is breaking. Could you just repeat the question again, please?

I'm asking, would that be meaningful contribution in the overall sales, development or US sales, or is it just small shares?

I cannot share information per SKU. Like I mentioned before, indeed, exclusivity will go in this period of time, and the product will continue to be meaningful to us. Sorry that I cannot share. I understand.

Sure. No, if you can repeat what you said, it will continue to grow.

It will continue to be meaningful to... Okay, lovely.

Thank you so much.

Thank you. Next question is from the line of Rahul from IFL Securities. Please go ahead.

Yeah, hi, sir. Sir, can you provide an update with respect to some of these complex US generic assets which you had disclosed during your analyst meet last year? So when do you expect launches for these complex assets to begin for us in the US market? Given one of your peers recently indicated that market formation has begun for a product regarding us on.

Yeah. We also have approval of this product. So I think it is linked to the IP. So as it allows us, we have a settlement also with the innovator. So after the settlement comes, we will be able to launch.

And for your broader questions, we are very much on track of what we shared, and also we are planning to launch complex products that was not shared in this meeting. So the pipeline of complex product is robust and getting better.

Sure, sir. So any timelines which you can share in terms of products like octreoid or liraglutide or teriparatide, when do you expect these launches to begin? So would these launches be over the next 12 to 18-month period or beyond that?

No, so specific timelines we're not sharing, Rahul. So some of these products, we are saying some of these products are under development. And obviously, the launch is linked to both IT scenario as well as we being able to secure the approval. So while some of these should start coming to the market, maybe FY25, FY26 onwards, but that is what we believe. We do not have any firm timelines because all these are linked to both approval and IT.

Okay, sir. And this mid-single-digit growth which you are talking about, the U.S. portfolio on an extra limit basis, so that essentially will be driven by these 25-30 launches which you are talking about?

Again, I know you are putting with and without the product. We are not looking at it this way. By the time that price origins will come to this product, it will be naturally part of the base. So we are not looking at the market with and without. And absolutely, these products that we mentioned will be part of the journey of the growth in the United States. And from time to time, because of the nature of such a product, we will see blips that will be much more than the single digits we discussed. So we are reiterating that we will see a growth on the continuous basis. And from time to time, we will see our side. Sure, sir. Thank you. That's it from my side.

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

Yeah, thank you for taking my question. Just the first one is on this recent launch by Amazon in the U.S. for this RX Pass, right? So they have started a subscription-based, you know, $5 per month. for the most common, like 60-odd generic medicines. I know it was launched only yesterday across the entire United States, but any early thoughts on, you know, how the supply chain could potentially change, you know, given that if they start making meaningful progress, is the uninsured or the out-of-pocket population, is it significant, you think? Because it doesn't seem to include Medicaid, Medicare. So just one of your initial thoughts just on the industry development.

So initially, it's definitely at the channel that was not there before. And it will be impactful, I believe. And over time, whatever is not covered, I believe, will be covered. So it's a process that's likely to happen. It will make... the retail more competitive and it will be, there are both opportunities as well as things that will complement to the industry. And so we also saw this kind of stuff that is happening in other countries, but let's say as initial thought, it's primarily I see it as another channel that we can use.

Got it. We now know that at least Amazon doesn't directly deal with manufacturers. They probably go through the existing supply chain. But do you foresee or have you seen examples globally where somebody like that directly deals with manufacturers? Or you think those kind of business models can't evolve?

I believe that there will be also direct interactions with the manufacturers, yes.

Got it, sir. Thank you. And my second question, just on some of the commentary around the SG&A, in your press release, you've talked about one-off expenses in the SG&A, both, I think, sequentially and YY. So what are these? And, you know, is it, if you could quantify or qualify, please. Thank you.

The AG&A is used for either supporting our brands or supporting our capabilities, especially as related to technology, digital, et cetera, as well as the ability to launch new products. The AG&A will grow as related to both Horizon 1 and Horizon 2, but there will be more growth that will come from the sales. that will support it. So I see that's why I kind of said that it's all about the margins. And that's why I reiterate that we are still committed to the same margins that we committed in the past.

Elif, I was just referring to just the one-off expenses. Just the one-off expenses is what I'm wondering what it is. Yeah, approximately it would be less than 100 basis points of sales, approximately. And what is it, Parag? What is it for? I don't think we can disclose the nature of this. This is something in the normal course of the business, but it's not likely to recur.

Got it, yeah.

Thank you and all the best. Thank you.

Thank you. A reminder to all the participants, you may press star and 1 to ask a question. The next question is from the line of Sayan Mukherjee from Nomura. Please go ahead.

Yeah, thanks for the follow-up. Just one clarification. It is on the commentary on the U.S. business when you talk about single-digit growth. What I understand is, you know, you have been talking about this even without Revlimid before. So let's say before Revlimid kicked in, you were doing, let's say, $250 million a quarter or $1 billion a year. So is that the base we should take for next three, four years, you know, to see single-digit growth, and there would be volatility around that due to Revlimid? Is that what you meant, or you are saying that on this larger base that you have, you can grow single-digit in the U.S.?

I believe that we can grow even on the current base. Okay.

And just to follow up on, you know, you talking about 30-odd products launches, you know, How many of them you think would be complex, you know, and is there any improved visibility over the past, you know, year or so based on your FDA interaction that you have more clarity on these launches next year? And basically, if you can give some color on the quality of launches versus this year, is it going to improve, remain the same? If you can give some color on that.

If I'm not taking into account linoleumide, the quality of the launches will be better. And some of them will be bigger products, some of them smaller. In terms of pipeline of complex products or products that can be very big, this pipeline is growing up as we speak. We are working very hard on it. I believe that we'll have a very, very interesting pipeline in the next three years of complex. I don't know exactly what will be the launch date of each one of them, but it's a very interesting portfolio.

Okay. Thank you. That's helpful. Thank you.

Thank you. I now hand the conference over to Ms. Richa Periwal for closing comments.

Thank you, everyone, for joining us today. If you have any follow-up questions, please reach out to the Investor Relations team. Thank you.

Thank you very much. On behalf of Dr. Reddy's Laboratories Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.