Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good day and welcome to the quarter three FY25 earnings conference call of Dr. Reddy's Laboratories Limited. 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 touchtone phone. 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 Q3 FY25 Earnings Conference Call. We have with us the leadership team of Dr. Reddy, comprising Mr. Iraz Izraeli, our CEO, Mr. M.V. Narasimham, our CFO, and the investor relations team. Earlier today, we have released our results and the same is also posted on our website. We will kick off today's call with Ambien taking us to the financial highlights of the quarter. This will be followed by Erase sharing his thoughts on business performance, post which we'll open the forum for Q&A. Please note that today's call is a copyrighted material of Dr. Reddy and cannot be rebroadcasted or attributed in press or media outlet without the company's expressed written consent. This call is being recorded and the playback and the 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 Statement. The discussion today contains certain non-GAAP financial measures. For a reconciliation of GAAP to non-GAAP measures, please refer to our press release. Before I proceed with the call, I'd 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 MDN.

Thank you, Richa. A warm welcome to all. We continued our growth trajectory and delivered consistent results with a double-digit top line growth and steady margins. While continuing to invest in our R&D, innovation and commercial capabilities, this is the first quarter of consolidation of the acquired nicotine replacement therapy business and this resulted in delivering at again highest our quarterly revenues and EBITDA in Q3 FY25 for the company. Let us look at the financial performance of the quarter. For this section, all amounts have been translated into US dollar at a convenient translation rate of rupees 85.55, which is the rate as of December 31st, 2024. Consolidated revenue for the quarter stood at 8,359 crores, which is US dollar 977 million. a growth of 16% on Euro-year and 4% QOQ. This includes revenues from the acquired NRT business of Rs. 605 crores. Excluding NRT revenues, the underlying growth is at 7.5% on Euro-year basis and a decline of 3% on QOQ. Consolidated gross profit margins stood at approximately 59% for the quarter, an increase of 19 basis points over the same quarter of the previous year and a decrease of 91 basis points sequentially. The year-over-year increase was primarily on account of improvement in product mix and manufacturing overhead leverage, partially offset by price erosion. Gross margins for global thinwicks and PSAI were at 61.3 and 28.6 respectively. The LV&A spend for the quarter was 2412 crores, which is US dollar 282 million, an increase of 19% year-over-year and 5% on QOQ basis. The year-over-year increase was primarily on account of recently acquired NRT business, investment in the new business initiatives, building the capabilities and the higher logistics costs due to increased freight rates. The SMA spent as a percentage to the sales was 28.9% and was higher by 82 basis points on Euro rear and 15 basis points QF2 basis. The R&D spent for the quarter was rupees 666 crores, which is US dollar 78 million. An increase of 20% on year-over-year and decrease of 8% on QOQ. The continued investment in R&D was primarily towards development of complex generics and biosimilars. The R&D span was at 8% of the sales and was higher by 25 basis points on year-over-year and lower by 110 basis points on QOQ basis. We expect the investment to be in the range of 8.5% to 9% for the full fiscal. The EBITDA for the quarter, including other income, was Rs. 2,298 crores, which is US$ 269 million, an increase of 9% on euro-year basis and flat QOQ. The EBITDA margin stood at 27.5% and was lower by 176 basis points on euro-year basis and 95 basis points q2 basis the net finance expense for the quarter is around 2 crores as compared to net income of 96 crores for the same quarter last year primarily on account of unfavorable forex impact and lower interest income post nrp acquisition consideration payout as a result Profit before tax for the quarter stood at Rs. 1,874 crores. That is US dollar 219 million. EBT as a percentage of revenues was at 22.4%. This includes profit before tax from the acquired NRT business of Rs. 1.24 crores. Effective tax rate for the quarter was at 25.1%. Versus 24.5% in the base quarter. We expect our normalized ETR to be around 25%. Profit after tax attributable to the equity holder of the parent for the quarter student. Rupees 1,413 crores, which is US dollar 165 million. A growth of 2% on YY and 13% QOQ. this is at 17 percent of revenue reported eps is rupees 16.94 the eps has been derived on the increased number of shares for the stock split and after non-controlling interest operating working capital as of 31st december 2024 was rupees 12 782 crores which is usd 1.4 uh an increase of Rs 716 crores which is US dollar 84 million over 30th September 2024. CapEx cash outflow for the quarter stood at Rs 709 crores which is US dollar 83 million. Negative cash flows for this quarter was 209 crores which is US dollar 24 million. We have a net cash surplus of Rs 1,603 crores which is US dollar 187 million as of December 31st, 2024. Foreign currency cash flow hedges in the form of derivatives are as follows. US dollar is hedged through structured derivatives, US dollar 285 million for the next quarter at 83.9 and 681 million maturing over the next financial year with minimum production rate of rupees 85.7 to the dollar which also allows participation when use is strengthened. Ruble 1,903 million with a minimum production rate of rupees 0.9 to the ruble maturing in the next three months. With this, I now request Ares to take us through the key business highlights.

Thank you, MDN, and very good morning and good evening to everyone. We have delivered another steady quarter with a double-digit top-line growth and EBITDA margins of 27.5% and a internal capital employed of 28%. We remain committed to our stated strategy of strengthening our core generic business while also investing in our future growth drivers, primarily in three areas, consumer health care, access to innovative products, and biosimilars. We are focused on driving productivity in research and development, scaling our manufacturing and commercial capabilities, and leveraging our market access to capture opportunities while operating efficiently. Following the completion of acquisition of the nicotine replacement therapy business in September, we are now focusing on its seamless integration, which will happen in phase manner starting April 2025. During the transition period, the seller, Elyon, will provide distribution and related services across all markets. And Q3 FY25 is the first quarter of consolidation of NLP business financials. Let me take you through the other key highlights for the quarter. One double-digit growth in revenue at 16%, with EBITDA margins at 27.5%, ROC at 28%, $188 million of net cash short loss. We launched Toripalimab, the first and only immune oncology drug approved for the treatment of nasopharyngeal carcinoma and Eloxibitac, a first-in-class drug to treat chronic precipitation under the bread name Bixibab in India. These launches are in line with our strategy to address the issue of availability and accessibility of affordable innovation in India through in-house and collaborative efforts. We also made progress on our biosimilar journey. We secured the marketing authorization for Bixibab in the UK, and the Nusumab has been filed in both US and Europe. On the regulatory front, in November, the U.S. FDA completed GMP inspection at our facility CTO2 in Bolaram, Hyderabad, and issued a form for a trees with seven observations. We have responded to the observation within a stipulated timeline. We have integrated sustainability in our business operation and continue to recognize for our focus efforts in ESG. We replaced five globally among pharma companies assessed in the 2024 S&P Global CSA with ESG score of 79 out of 100. We continue to be members of the DGCI World Index for the second year in a row, along with the DGCI Emerging Markets Index for the ninth year in a row. MSCI ESG rating has been upgraded to A in December. We continue to feature among NIFTY 100 ESG sector leaders. Further, Science Magazine named Dr. Reddy is in the top 20 global pharma and biotech employers for the third consecutive year. Now let me take you through the key business highlights for the quarter. Please note that all reference to these numbers in these sections are in respective local currencies. Our North America generic business record revenue of $401 million for the quarter, which was flat on year-to-year basis, with sequential decline of 10%. The benefit from volume growth and new launches was offset by price erosion, resulting in the year-on-year growth. Sequential decline was on account of lower sales from few products including Rina Dulemat. We launched four new products during the quarters and we closed the full year within 15 to 20 launches. Our European generic business segment includes NRT Financial from the quarter. Europe recorded revenues of $234 million this quarter, a strong yield growth of 142% and sequential growth of 114%. Excluding the NLT, the segment recorder recorded a yield growth of 22% and a fuel growth of 5%. We gained from the growth in our existing products and new product launches, which more than upset price erosion. During the quarter, we launched a total of nine products across markets. Our emerging market business recorded revenue of 1,436 crores rupees in the quarter, with annual growth of 12% and decline of 1% on sequential basis. Year-on-year growth was on account of new products, launches in Russia and the rest of the world markets, and was further aided by higher base business volumes. We launched 20 new products during the quarter across various countries of the emerging markets. Within this segment, the Russia business grew by 20% year-on-year basis in cost of currencies. India business recorded revenue of 1,346 gross in Q3 with a double-digit year-on-year growth of 40% and sequential decline of 4%. We benefited from the growth in our board portfolio, including in licensed vaccine portfolio and new launches. We launched six brands this quarter. After IQVIA, our IPM rank continued to be a 10, and we outperformed the IPM with MQT growth of 10.3%, while IPM growth was at 7.4%. However, excluding the in-license vaccine portfolio, growth was at 5%. While many of our brands out-informed their respective categories, selected brands in cardiac and gastrointestinal therapy areas witnessed a slower pace of growth. We are poised to return to the market-leading growth in these therapy areas in the coming quarters. Our PCI business recorded revenue of $97 million in Q3 of FY25, a year-over-year growth of 3% and sequential decline of 3%. The year-over-year growth was primarily on account of new product launches and improved volumes. We filed 23 drug master files globally this quarter. We invested 8% of our revenues to strengthen our R&D capabilities. Our R&D investment this quarter stood at rupees 666 crores and we are increasingly focusing on developing complex generic pipelines including promising GLP-1 assets and biosimilars. We are also building and commercial capabilities, and investing in new technologies to capitalize on growth opportunities. We have made 53 global generic filings during Q3 of FY25. We remain committed to sustainability, quality, and operational excellence. We continue to invest in the three areas of strategic focus, which are consumer health care, innovative products, and biosimilars. We build a solid foundation for future growth. Our strategic investment in R&D, recent acquisition, and CapEx put us in a position of strength in this journey. We are excited about the opportunities ahead and remain steadfast to drive sustainable growth. With 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 one on their touch-tone phone. 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. Participants are also requested to ask not more than two questions at a time and to rejoin the queue in case of incremental queries. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Kunal Damesha from Macquarie, please go ahead.

Hi, good evening and thank you for the opportunity. The first one on the India business So we have grown at around 16% year on year. But if we just look at the core business, how that performance has shaped up. And we have also mentioned that there is some weakness in cardiac and gastrointestinal segment, lower volume pickup. So is it transitory in nature or is there something more to be taken into account there?

Yes, so indeed, if you take out, so all the other categories will outperform the market and actually all of them will decide these two segments. As for both of them, there are solutions in terms of, let's call it, the actual execution of the way we do sales and marketing, as well as the product performance per se. Specifically to gastro, I have no doubt that it will come relatively soon. Cardiovascular may take additional quarter as we need some more adjustments to do. In both cases, we are investing more in both businesses in order to grow them faster. So we are very much focused on that. Other than that, the business in India did pretty well.

Sure, sure. It is one more question on our biosimilar foray now. We have already filed Rituximab, now with Dinosumab also filed, but with partner. So if you could throw some light on the economics here for Dinosumab and, you know, In terms of, let's say, eventual launch, can we assume that this would be the second product after it took CMAB and then followed by another one, Abatacet, is the way we should look at?

Yes, that's how we should look at it. So the Nusumab is actually supposed to facilitate our Abatacet launch because the two products are going for the same segments and Gibraltar takes to the same... a type of doctors so it was also the strategic rationale of why to license the product we wanted to create the team and the capability in the marketplace to be able to then gain more or faster market share on a matter set so this was also the rationale in terms of timelines normally in the us It takes about 12 months, give or take, for approval. So as we submitted it in December, give or take, this is where we should expect a launch. In Europe, it's a bit slower. We submitted in October, so likely we normally take around 14, 15 months to get all the approvals. So that's also where the time that we are supposed to launch the NOSU map. And yes, it will be after Iqbal in Yod.

Sure, sure. And with your permission, last one for MVN. The 1240 million rupees of NRT PBT that we have suggested, would it include any allocation of interest expense or just the amortization? Only amortization. No interest. Okay, okay. Thank you and all the best. Thank you.

Thank you. The next question comes from Neha Manpurya from Bank of America. Please go ahead.

Yeah, thanks for taking my question. It is on the US business. You mentioned that a few products have seen moderation, quote-unquote, including Revlimid. With Revlimid, we understand there's lumpiness, but what is the reason for the decline in the base business, excluding Revlimid? Because, you know, have we lost market share? Is the pricing erosion higher than we were expecting, any color there?

So nothing major happened. The products that were declined were the famous products that we got at the competition, like Dicostepan and Suboxone. The stuff that the competition entered some of them nine months ago, some of them six months ago. So there was a certain competition. This happened also before. Nothing major happened per se. Against that, most of the growth that compensated for it was primarily market share. Less about new products and more about market share.

Just to get this correctly, we have lost market share in some of these products and hence the decline. So this is the new base we need to work with. Is that understanding right?

It's a combination of market share and prices.

Understood. Okay, got it. And my second question is, you know, on the consumer healthcare business, on the NRT transaction. You know, given that Halyon is still running the business for us till the time, you know, the integration happens, how should we look at, you know, investments in the business and the ramp up in the NRT, you know, pool? Would that happen only after the integration is done? Is that fair to assume that in the next 12 months, the focus would be naturally integrating and then probably the business would go into investment phase?

No, we do have an agreement with them on investments and increase of even investment in certain areas. This is a business that actually is now gaining momentum. It is growing actually for the second year in a row. And we want to continue that momentum. So there is a certain agreement of gross to net, how much market expenses we should put at a time. Once, of course, the market will come to us, we don't need to pay that fee anymore to Elion. So it will save that amount of money that we are paying a certain amount of money for the services are giving us as we speak and it will allow us of course to accelerate this process in terms of priority absolute integration is a priority but also to grow the business so to grow the business to build the capabilities to there is a lot of innovation that was not done there and to introduce it The real growth will come post this integration, but we are going to invest more also in this 12 to 14 months that we are going to get the time that we'll get those markets. We are not waiting for them.

Okay. And that investment will flow to RPNL in the SG&E cost. That's a fair assumption?

Yes. Yes, absolutely.

Okay. Thank you so much.

Thank you. The next question comes from the line of Amir Chalke from GM Financial. Please go ahead.

Yeah, thank you so much for taking my questions and congrats to the management on good second numbers. So first question I have is on Simagrutide. We understand that Reddy is one of the players who have filed for the Canada market when the patent expiry is expected somewhere early next year. At present, there are two to three players for this market. By the time we would be launching this product in this market, you expect the players to increase or what would be the competitive scenario at that point of time. Also, if you can also explain Canada market, how similar is it with respect to U.S.? ? when it comes to price realization, market share gains, etc., how easy or difficult it is to gain market share in Canada particularly, because we have seen in case of Revlimid, there were a few players who had filed for this product even for Canada, but ramp-up had not been very encouraging. So if you can give some color on the Canada market with respect to Sema Group, unfortunately.

Sure, I'll do my best. First, the product, if I recall correctly, in January 26 is where the patent expiration will happen for Zempik. And this is the product that the generic version of it is expected to be launched. People will get approval. I believe we are positioned well to get approval for that period of time. And naturally, it is a very important market for us. Normally, between the time that you submit the product to the Canadian authorities until you get the profile, it's 12 to 14 months. So people will have to, if they want to be in January of 26, they have to already file it to be there on time. Anyone that filed after the date likely to get approval only after that. So what you're going to see is probably sequence in which people will get approval and we hope to be the first one in the pack. And of course, but for that we need to get the approval. Second, it's a product that although possible, but it's not easy to make the API and it's As you know, you need to make the auto-injector, the pen, and it requires a capacity to align for debt. The way you take market share in Canada is in that respect similar to what you are familiar in the United States or in the UK in which you are collaborating with the main distributors and the retailers to gain market share. share this product. In this respect, you should look at it like it's a retail product and that's probably what you do. The reimbursement mechanism in Canada is different. Every product that is coming is taking by load the reimbursement price down. So in terms of the pricing versus the reimbursement pricing, naturally the more competition we have, the price will go down accordingly. This is very normal in Canada. So potentially it could be that in the earlier time it will be more of a limited competition and of course it will intensify over time as more people will join and the reimbursement price will go down. But to put a scenario, you know, time will tell who will get approval, who will not get approval. At least we believe that we have a good chance.

Let's see. Sure. And one more question related to semaglutide. Considering there is too much demand, which is expected to be there when the generic player enters this market all over the world, I believe there is still, from the supply point of view, there would be a constraint in terms of both API as well as the pain assembly lines. So how are we going to ensure that our execution would be better there? Are we blocking some of this capacity, both in the PIN as well as API side? How are we going to keep that thing in check?

We are working on this project, including capacity, for the last 10 years. It's not that 10 years ago we knew that the product would be that big. This is obviously information that came over time. But if you see the level of R&D and CapEx, you can assume that a big portion of it went for this activity. By the way, it's not just the API. It's the API for both the synthetic as well as the semi-synthetic. It's about both internal as well as external options for manufacturing. It is about having the access to the relevant devices. We are working it for quite some time. And indeed, not everybody will have to be able to cater with this magnitude. I agree with it. But I'm assuming that the product is so attractive that eventually it will be a very competitive marketplace. But at least in the initial days, people will have to build a certain level of capacity and market access to make things, to make it happen. I just want to make sure that with full transparency, it's not just about specific markets like Canada, There are about 80 markets that can be opened for 2026 because the product is in demand in all the markets in the world, but certain markets in which the innovative product does not even come to it, we believe that it's also a nice opportunity in its own merit.

Sure. This last question on the SG&E spend, I believe because we have revenue opportunity at present, which is giving us good cushion to spend more, there is a good amount of discretionary spend which is happening at present. So is it possible for the management to give some visibility on how much the spend is discretionary at present which could reduce post-revenue or you think because the hemagglutide kind of possibilities are that it might continue.

So, let me take it. I mentioned it in the past, we feel very, very comfortable with 25% CDB, which allow us to, and we mentioned it in the past, allow us to give a great return on the to the shareholders as well as allow us to invest enough in the system. Absolutely, we took an advantage of the fact that we had a few years of generic revenue and we absolutely took it to invest more. With this money, we used to buy the LRT business. With this money, we took more CapEx, we see we have much more CapEx. The investment that we mentioned before was Simaglutide, which was part of it. Now, in the case, which I believe will be, that the activities that we mentioned of growing the base, as well as the productivity, as well as the big products like Simaglutide, as well as BD, will allow us to grow, which I believe that this work will happen. We will continue to invest also further into the future because we're also building those engines not just for the immediate future like 26 and 27, but also for 28 or 29. We are planning to be in the neighborhood for quite some time. If we will not have this money, absolutely we have the ability because a lot of our expenses are discretionary, especially in R&D. We will absolutely adjust our expenses closely. And so that level of the philosophy that we want to stay profitable, it's important to us.

Sure. Thank you so much. I will join you.

Thank you. The next question comes from the line of Bino Pathiparampil from Ilaria Capital. Please go ahead.

Hi, good evening. A couple of questions from my side. Did you get some color on IN-Sucrose filing that you have done or do you expect approval in time here or soon?

So we filed it actually a long time ago. We recently got a SCR on the API side, which we are planning to address. We thought that it would continue to launch in the coming months. This right now will be delayed because we need to answer this year.

Got it. Second on Batterset, some of your competitors have tried in the past, but it seems it's a difficult product and some of them seem to have given up. What gives you the confidence that your product can see through the FDA approval process?

We had a very successful phase one. And so far, normally when you pass phase one, you have a good chance to of course be very successful in phase three. Also, so far, the rollout and the The fact that we even finished to roll out all the patients is very encouraging. We did it in actually very, very good timing. We have a very, we believe in our clinica, and I hope that we will be able to submit sometime next year.

Got it. And last one question, if I can, on lenalidomide. Going into FY26 in 4Q, that is in Jan 26, the kind of settlement with volume restrictions are coming to an end. So how should we look at lenalidomide? Will it continue a rough quarterly estimate smoothly till 3Q of next year and then drop off? or do you think it will get contented in the next year?

I don't know exactly how the quarters will be because this is a decision normally by the customers. It's not that we are planning this way. We are serving the customer in a way they want to be served. But yeah, we likely that we will not sell in this level of pricing, let's say post somewhere in September, maybe October of calendar 25. Now, what exactly, how it will work, I don't know. But post that period of time, unlikely that it will come because of the normal, you know, what we call shelf adjustments, shelf adjustments, stuff like that. So give or take until that period of time, you should see similar behavior of the product as you saw in the last couple of years.

Got it. Thank you. I'll turn back to you.

Thank you. Participants are requested to ask not more than two questions at a time and to rejoin the queue in case of incremental queries. We'll move on to the next participant. The next question comes from Surya Narayan Pathra from Phillip Capital. Please go ahead.

Thanks for the opportunity, sir. First question is on the NRT portfolio acquisition. See, while we have indicated that the SENA cost this quarter had seen a kind of uptake post this acquisition and integration, and even after that, the PVT percentage of NRT portfolio around 21% looks interesting. So how to think about the profitability of this acquired asset going ahead? Because current quarter is anyway, is seeing the support of Allion. And simultaneously, we have also thinking about spending more on building the portfolio and franchise. So while it looked interesting in terms of the profitability compared to our base business so going ahead how should we think in terms of the synergy benefit at the margin and profitability level for this acquired asset it should continue to be profitable so so we we absolutely want to finance

the additional investment could grow and we are planning to keep it profitable. There is no plan to now to go for, let's say, two, three years of investment and then take it from there. The idea is to indeed spend more, but to keep it in the, for sure the 20 plus digits on EBITDA should continue on this asset.

Okay. My second point is on the Nestle JV and the domestic business put together. I'm asking this question. How long that we will take for the Nestle JV to really contribute meaningfully to the growth of the domestic business? That is one. And the second part of the domestic business question is how While we do anticipate this is the business segment, it should be growing the fastest among all of the business segment for Dr. Reddy over the next few years. But right now it is not even matching the industry growth momentum. So how should one think and what will start contributing incrementally to the anticipated so that it can reach the anticipated growth rate?

So the question on Nestlé, this will absolutely going to take time. The reason for that is that we need to bring the products to India and we need to invest behind brands that are not today recognized in India. So it's not that you're investing behind something that is already known. And that's, I'm sure you know well, it takes time to build brands that both Nestlé and us are very much in line with that. By the way, so far, the business is going even ahead of expectations. So I'm very happy about it. But in terms of significant contribution to the growth, it will take a couple of years. As for your comment about the India business, I mentioned it with the previous questions. Actually, the business is doing well. We do have two segments. that underperformed. We mentioned it also, the GI and the cardiovascular. We have a plan to bring it back, but the business is actually doing well. What we believe really will drive the business, I'm saying it for quite some time, actually for quite some years, we believe very much in introducing innovation to India rather than the generics. I strongly believe, I'm emphasizing also today, that the brand is generic, growth will decline over time because of various reasons that we discussed in the past. And I believe that the right products to bring to India are the technologies that are addressing unmet needs that are in perfect protection. And that's what we are building on. I am very, very proud I believe in what we phrase and very committed to what we discussed in the past, we are going to grow and become top 5 in India. Okay.

So the momentum accelerated growth will be seen in the domestic side starting next year onwards or it is 27 onwards?

No, we are growing also today. We are doing it both organic and inorganic. We are growing in 15-60%. For me, growth is everything. and we are growing faster than the market. The market is growing 7% and we are going to grow about 15%. This will continue. This will continue. What we do not take into account at this stage because of valuation is, of course, major acquisition. That we discussed in the past. Right now, this... At least the multiples of India were too high for us and we are trying to do it organically. This is why it's taking more time. But we are very bullish and India is a very, very important focus market for us.

Okay. Even the vaccine portfolio should see an expansion.

May we request you to return to the queue for the questions? Yeah, yeah. Okay. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to one per participant. You may join back the queue for follow-up questions. The next question comes from Damayanthi Kirai from HSBC. Please go ahead.

Hi. Thank you for the opportunity. It is my question again on semaglutide. So what kind of addressable market you are looking at outside of the US? You mentioned a lot of markets will open up starting 2026. And with the kind of capabilities which you have built on API or on the device front, what kind of market share you are looking for yourself?

So the markets will open in a certain sequence. In 26, the most notable markets will be Canada, India, Brazil. The 80 markets that we are discussing are primarily markets in which there was no patent protections. These are markets in primarily emerging markets like in Asia, Africa, Latin America, much smaller markets in Asia, but accumulate-wise and demand-wise, it can add very nice growth to that. We are working both B2B and B2C. We have global partners in which they are licensing our products that have great presence In those markets, in some of them, we are going to do it by ourselves. So it's a combination of selling API, selling finished loads, and, of course, marketing as a product. And we are going for all the products, Zempik, Wycobee, and the oral products. So overall, it's something that will come in multi-markets. This specific product, as you know, U.S. and Europe will come later into the game.

Okay, but any size indication which you are targeting, say, for the bigger addressable markets?

It's hard to tell markets here because we don't know yet, you know, who's going to compete in which one of these markets, etc. But naturally, in all the markets that we will be first, we have a high expectation of performance, obviously, from the market, but... Any number that I will indicate to you will be wrong. Time will tell. It's not a clear idea. We really don't know.

Okay, thank you.

Thank you. The next question comes from Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Yeah, thanks for the opportunity. Sir, just on the timeline to file the product, I missed in the comments, if you could repeat.

Time-lapse 2.5, sorry.

About the same, biosimilar.

So if everything will go right, we should submit it in December of 2025.

December of this year.

December 2025.

Yeah.

Got you. So... And then assuming 12 to 15 months timeline to the regulatory review cycle, right?

Like the Muslim said, inshallah. We hope for the best. Normally it's about 12 months, so let's hope. But let's say for both of you, January of 27 will be a great timeline if we can achieve it.

Understood. And will this product be manufactured completely in-house, as in drug product as well as drug substance?

Correct. We will make both DS as well as DC.

Sorry, I didn't get your comment. We will manufacture?

You are correct. We will make both drug substance as well as drug product.

Understood. And just one more if I may squeeze in with respect to semaglutide, while the addressable market size seems too difficult to highlight, but broadly, given that X North America market, let's say Canada, India, Brazil market, can this product do as much as Revlimid has done for us in North America?

I wish. First of all, the product has the potential to be big, but we need to see what will be the prices, what will be the market share, etc. But there is a potential for something significant. Like I mentioned before, it's not product replacing one product. The growth A post-revelement will come from four elements that I mentioned. So first of all, the growth of the base products. We have about 30,000 CRs that is growing up in digital-based business, including, of course, the new products that will be launched. They are not the big ones. Second one, we discussed, we are aligning our expenses to the relevant revenues that we have. And we are creating that level of productivity as well. Number three, we have those special products, like Simanglo, Tizen, and Abacus. And number four, we have BD. We are all the time bringing BD. So all four elements will grow up. It's not one silver bullet. We highlighted specifically the Sima at the time because of the timing in which it's probably going to affect. And I'm happy that you guys picked it up But it's not that CIMA will replace the new development. It's all the business leaders will have to grow, and this should allow us to continue to grow the company also post the arrangement of the development.

Got it, sir. Thank you.

Thank you. The next question comes from Sion Mukherjee from Nomura. Please go ahead.

Yeah, hi, thanks for taking my question. So just one question on semaglutide. Is the oral formulation available for launch in 2026 in India and the other emerging markets, or it would just be injectable and oral would come sometime later? If you can highlight the timelines for different formulation.

Oval will come later. In some places, there are also patents on the oval and the formulations. So in most of the markets, it will come between 12 to 18 months after those entries. But we are planning to be day one in all the places that we can with this product.

So in calendar 2027, you will see all launches?

In some markets, it can be 27. In some markets, it will be 28.

Okay, thank you.

Thank you. The next question comes from the line of Forum Parikh from Bank of Peroda, Capital Market. Please go ahead. Ms. Parikh, your line is unmuted. Please proceed with your question.

Yeah. Am I audible now?

Yes, you're audible. Please go ahead.

Yeah. Thank you for the opportunity. My question is on the European market. So X of NRT, the European market has grown at 22%. So how sustainable is this growth rate going forward? And if you could explain the reason for this kind of growth. Thank you.

First of all, it is sustainable. We are launching products. So the main, of course, is the normal. We are the various leaders primarily in five countries that we are operating. So today we are working primarily in five. But we are expanding also to five more. And so it's a combination of new products, volume growth, the product that we launch in your market. So it's absolutely sustainable.

Sure, thank you.

Thank you. The next question comes from the line of Anubhav Agarwal from UBS. Please go ahead.

Yes, thank you. Two questions. One is for MVN sir. Just trying to understand the selling expenses in this quarter. So do they include any selling expense for NRT or they don't? Yes, it includes the NRT business HG&E. So just trying to understand this HG&E. Sequentially, December over the September quarter, selling expenses excluding amortization is up like 50-60 crores. Whereas NRT itself should have selling expenses of 150 crores plus. So what else has gone down that net increase of only 50-60 crores per hour? So if you look at just maybe to recap our last quarter discussion, I think there was one exceptional expense of stamp duty was among 52 crores was there in the previous quarter. And this quarter, we have full NRT expenses. So if you look at them, I think you'll get the right match.

Okay, sure.

Second question is on, you guys have already mentioned that you have two good products in the US. You talked about IronCircles has a CRM API. What about the other? Is there any query or inspection or anything pending for it or do you still expect the approval for the other product in China?

So there were no other queries that came recently. As for inspections, yeah, we do... Expect inspections in all the sites that were not inspected for quite some time. So we do have about five or six sites. I need to count that we should see inspections. Of course, those inspections will come at the time that the FDA will choose to do. But there is no pending activities. So the rest is business as normal, if you wish.

Sorry, my question was very specific to a product. So you guys have mentioned two approvals. One you talked about iron sucrose, second is another product. Do you still expect approval of the other product anytime now? Or is that pending from a query or anything else?

I don't know which other products you are referring to, but I'm expecting approval of 50 to 20 products in the U.S. in addition to iron sucrose. Sorry, Arif, you mentioned the last quarter. We just mentioned because answering your question, we got to see afterwards.

Okay. Thank you, Arif.

Thank you. The next question comes from Vishal Manchanda from Systematics. Please go ahead.

Hi. Thanks for the opportunity. Hope I'm audible.

Yes, please.

So on a better sense of timing, whether you will be filing both the IV and the subcutaneous in December 2025?

The answer is yes, we do, but the time of launch is not the same because there is an additional patent on the subcutaneous, which takes us, if I remember correctly, to the beginning of 2028.

So subcutaneous will be beginning of 2028.

This is what we believe is the time to enter the market as there will be our IP people.

Right. And second, on the Semaglutide filing in Canada, are there any device patents that can block your version as a substitutable version to the innovator copy?

We don't think so.

And is your device identical to the innovator device or you have a different device?

We have a great device. Sorry? We have an amazing device. Okay.

And just one final one, whether we should expect your SPLA expenses to stay at current levels, 28% or so going forward? Yeah, around this level. 28%. Yeah.

Okay, thanks. Thank you. The next question comes from Shashank Krishnakumar from MK Global. Please go ahead.

Yeah, hey, thanks for taking my question. First one was just wanted to get your sense on the broader US biosimilar landscape, given that our incremental investments are being directed toward biosimilar We're increasingly seeing PBMs launching their own private labels. I think starting this year, several Humira biosimilars will also face formulary exclusions. So how do you see the overall U.S. biosimilar landscape shaping up, given that there are several products in the pipeline?

So I'm assuming it's more of a strategic question. So first of all, a lot of products, if you go... You know, it will come gradually, but for the next decade, it will be all patents, many, many products, and many biospecific as well. So in that respect, it creates an opportunity. Second, there will be absolutely products that will be more crowded, and therefore very high level of competition. And we will have a product that will be less crowded. in that respect. Absolutely, we are going to see private level, we are going to see all kinds of phenomena related to paying for the products. So we are preparing for a very competitive landscape. And like I mentioned in the past, we are not going to hold that we select certain products that we believe that we can make the difference and can add value to the respective market. We are trying to go for limited number, but with hopefully less competitions type of a product. And hopefully we will be right in the way we selected. So far, I believe that the product starting from a butterfly meeting this criteria.

Thanks. That's helpful. And secondly, just had a question on DFT29. Are we also eligible for sales-based royalties here, given that the product has not been approved? Yes, we do. Thank you. That's it from us.

Thank you. The next follow-up question comes from Vinopathy Parampil from Ilaria Capital. Please go ahead.

Hi, just a quick housekeeping question. One, the depreciation and amortization rate, is this quarter a good benchmark to project it forward? No, this quarter's amortization includes NRT business amortization. It will continue. So this rate is a stable rate to look forward to. Okay, second question. The Russian currency has depreciated. Have you hedged the currency and for how long? So we have both, I think, we do cash flow and the balance sheet. This quarter we have a little bit impact, I think, because of the ruble volatility in the balance sheet on the cash flow hedges, I think, as per our policy. We don't cover 100%. We cover some extent, and then we are not losing any value. OK. This quarter, Russia reported revenue in INR will be roughly at the current market rate of rubles, right? Yeah. This quarter, I think if you see constant currency and INR both 19% and 20%, not much difference. Both INR and rubles.

Thank you.

Thank you. The next follow-up question comes from Surya Narayan Pathra from Phillip Capital. Please go ahead.

Yeah, just a clarification. Thanks for this. In case of the semi-glutide opportunity, what is the level of integration that we are having in terms of our manufacturing capability to the level of advanced, intermediate, intermediate levels, or it is API and the formulations?

So we are fully integrated for all the stages of the API. We are making the websites from the basic building blocks, as well as the formulation. We are buying the device.

And it is for both solid state as well as liquid state, as you mentioned, the entire value chain that you said? The entire value chain, yeah. Okay. Sure, sir. Yeah, thank you. Thanks for this.

Thank you. Ladies and gentlemen, we have to take that as our last question for today. I now hand the conference over to Ms. Richa Periwal for closing comments.

Thank you all for joining us for today's evening call. In case of any further queries or clarifications, please get in touch with Aishwarya or myself. Thank you once again.

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