Dr. Reddy's Laboratories Ltd

Ladies and gentlemen, good evening and welcome to quarter four and full year 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. And now at the conference, Artemis Richa Periwal, Thank you, and over to you, ma'am.

Thank you. Good morning and good evening to all of you. Thank you for joining us today for the Dr. Reddy's earnings conference call covering the quarter and full year ended March 31, 2025. We appreciate your time and participation. Joining us today is the leadership team of Dr. Reddy's Limited, comprising Mr. Iraz Izraeli, our CEO, Mr. M.V. Narasimham, our CFO, and the investor relations team. Earlier today, we released our results, which are now available on our website. We will begin today's call with Ambien presenting the financial highlights for the quarter and the year. Following this, Erez will share his thoughts on the business performance. We will then open the floor for a Q&A session. Please move. that today's call is a copyrighted material of Dr. Reddy and cannot be rebroadcasted or attributed in press or media outlets without the company's expressed written consent. This call is being recorded and both the playback and transcripts will be available on our website soon. All discussions and analysis in this call will be based on the IFRS consolidated financial statements. Today's discussion includes certain non-GAAP financial measures. For the reconciliation of GAAP to non-GAAP measures, please refer to our press release. Before we continue, I would like to remind everyone that the safe harbor of provisions outlined in today's press release also applies to this conference call. Now, I hand over the call to MDS.

Thank you, Rekha. Greetings to everyone, and I hope you're all doing well. I am pleased to present an overview of our financial performance for the fourth quarter and full year FY2025. Fiscal year 2025 was another milestone year for the organization marked by strong financial performance. We achieved record high revenue exceeding US dollars 3.8 billion and crossed the US dollar 1 billion threshold in EBITDA for the first time. Both revenue and EBITDA registered double-digit growth for the year. Please note that all the figures in this section are translated into US dollars using convenient translation rate of 85.43 rupees, the rate prevailing as of March 31st, 2025. Revenue performance consolidated revenues for Q4 FY25 stood at Rs 8,506 crores, which is equivalent to US$ 996 million, reflecting a year-over-year growth of 20% and a sequential increase of 2%. For the full year, revenues were at Rs 32,554 crores, and US dollars 3.8 billion representing a growth of 17%. These results include contributions from the acquired consumer healthcare business in nicotine replacement therapy which added rupees 597 crores in Q4 and rupees 1202 crores for the full year. The overall revenue growth was driven by this strategic acquisition and contributions from our generic portfolio across geographies. Excluding sales of annuity business, revenue growth was at 12% on Euro year for both the quarter and the year and 2% sequentially for the quarter. Gross margins, the consolidated gross profit margin for Q4 was at 55.6%. reflecting a year-over-year decline of 300 basis points and a sequential decline of 312 basis points. The decline was mainly due to reduced manufacturing overhead leverage and higher milestone income recognized in the comparative period. Gross margins for the global generics and PSA segments stood at 59.3% and 26.3% for the quarter. For the full fiscal year, the consolidated gross margin remained stable at 58.5%, consistent with FY24. Gross margins for global generation PSA were at 62% and 27.1% for the full year, respectively. Selling and general administrative expenses. As any expenses for the quarter amounted to Rs. 2,406 crores, which is U.S. dollars to 82 million, marking a year-over-year increase of 17% and remaining broadly flat quarter-over-quarter. Virginia's percentage of the sales was 28.3%, representing a decline of 63 basis points year-over-year and 57 basis points on QOQ. For the full year, Virginia expenses amounted to Rs. 9,387 crores in dollars 1.2%. 1 billion, up by 22% year-over-year. This increase is primarily driven by recently acquired NRT business in the consumer healthcare segment, investment in other commercial activities and higher prices impacting logistics costs. We continue to maintain disciplined cost structure while strategically allocating resources to strengthen existing business and expand into the new growth segments. Recent and development investments, R&D remains a key pillar for long-term growth. We continue to enhance our internal R&D efforts with strategic external collaborations for innovation assets. R&D expenditure for the quarter stood at Rs. 726 crores, US dollar 85 million, representing year-over-year increase of 6% and quarter-over-quarter increase of 9%. As a percentage of revenues, R&D investment was at 8.5%, lower by 118 basis points EUR and higher by 57 basis points sequentially. Full year R&D investment was Rs. 2738 crores, USD 320 million. Reflecting a year-over-year increase of 20%, the investment largely focused on building differentiated pipeline, spanning small molecules, biosimilars, complex generics including peptides and novel oncology assets. Other key financials, impairment loss is 77 crores in Q4 and Rs. 169 crores for the full year. The impairment pertains to certain product-related intangibles from main portfolio and other product-related intangibles forming part of the company's global generic business in India and Europe due to adverse market conditions. Other operating income is Rs. 247 crores in Q4 versus 66 crores for the same quarter last year and Rs. 436 crores for the full year versus Rs. 420 crores in FY24. Q4 increase is primarily an account of reclassification of foreign exchange gain related to foreign operations from FCTR. The full form of FCTR is foreign currency translation reserve. Post divestment of support manufacturing facility. The net benefit to P&L on account of FCTR reversal after adjusting CV rent cost and other one-time cost is Rs. 121 crores. Earning EBITDA, EBITDA for the quarter was 2,475 crores, US dollars 290 million, registering a year-over-year growth of 32% and quarter-over-quarter growth of 8%. EBITDA margin was at 29.1%, an increase of 267 basis points on year-over-year and 160 basis points sequentially. For FY25, EBITDA stood at Rs 9,213 crores, U.S. dollars 1.1 billion, reflecting euro growth of 11%. The annual EBITDA margin stood at 28.3, down from 29.7 in FY24, reflecting a decrease of 143 basis points. Finance income and profitability. Net finance income was 235 crores in Q4, versus 102 crores crores in previous year and 472 crores for full year as compared to 399 crores last year. Higher Euro a year income is due to net foreign exchange gains. Profit before tax was Rs 2,005 crores in USD 2.35 million in Q4, up 25% Euro a year and 7% QQ. PBT for the year was Rs. 7,678 crores and in terms of $899 million for the full year, a Euro year growth of 7%. PBT margin was 23.6 for Q4 as well as for FY25. PBT includes 89 crores for the quarter and 101 crores for the full fiscal from the NRT portfolio. Effective tax rate was 20.8% for the Q4 and 25.4% for the full year. ETR for the quarter is lower due to reversal of previously recognized tax provisions pertaining to prior years and FCETR transferred to the income statement is not subject to taxation. The full year ETR is higher than the previous year mainly due to the reversal of previously recognized deferred tax assets related to land indexation and the recognition of previously unrecognized deferred tax assets on operating tax losses compared to the period ended March 31st, 2034. We expect the ETF for FY26 to be similar to the current fiscal year. Profit after tax is attributable to the equity holders was 1594 crores. In dollars, 187 million in Q4, up 22% Euro a year and 13% QQ. Translating to margin of 19%, full year profit after tax was at Rs. 5,655 crores, reflecting Euro a year growth of 2% and margin of 17%. Earning per share stood at Rs. 19.1 for the quarter and Rs. 68.1 for the full year. Based on the company's performance, the board has recommended payment of dividend of Rs. 8 per equity share of face value of Rs. 1 each. This is equivalent to 800% of the face value for the year ended March 31, 2025 subject to approval of the members of the company. Cash flows and balance sheet operating working capital as of March 31, 2025 stood at Rs. Rs. 12,590 crores, a reduction of Rs. 192 crores compared to December 31, 2034, primarily driven by improved receivable management. Capital expenditure was Rs. 767 crores for the quarter and Rs. 2,699 crores for the full year. Free cash flows for the quarter was Rs. 1,110 crores and for the full year Rs. 1332 crores for the full year before acquisition related payouts. At the event, the company maintained net cash surplus balance of 2454 crores. Post-NRP acquisition payout in September, foreign currency cash flow hedges executed through derivatives instruments as of March 31, 2025 are as follows. An amount of US$786 million has been hedged using structured derivative contracts maturing over the course of the next financial year. These contracts provide a minimum production rate of Rs. 80, Rs. 85.9 per US$1. while retaining the potential for upside participation in the event of U.S. dollar appreciation. An amount of Ruble 2,500 million has been hedged with a minimum production rate of Rs. 0.91 for Russian Ruble. These contracts are scheduled to mature within next three months. With this, I now request Ares to take us to the key business highlights.

Thank you, MVM, and a very good morning and good evening to everyone. Dr. Redis delivered another year of robust performance, marked by highest ever annual revenues and profits. Fiscal year 2025 was characterized by double-digit growth across all business segments. During the period, we continued to strengthen our core generic businesses while investing and building our three strategic growth areas, namely consumer health, innovation, and biosimilars. Our efforts remain focused on driving operational efficiencies, strengthening our pipeline, and enhancing organizational capabilities. In parallel, we execute on value-accretive inorganic initiative to complement our organic growth in alignment with our stated strategic objectives. I would like now to highlight some of the key financials for the fiscal year. as well as important updates from the fourth quarter. One, we sustained momentum and delivered healthy double-digit revenue growth of 20% Q4 and 17% for the full fiscal year. EBITDA margins remained resilient, exceeding 29% for the quarter and closing the full year at over 28%. Return on capital employed ROCE reached 27.7%, underscoring our continued focus on capital efficiency and value creation. We concluded the fiscal with a net cash surplus of $287 million, thereby enhancing our financial flexibility to support future growth initiatives. Our biosimilar strategy progressed this quarter to key strategic partnerships. We secured exclusive commercialization rights for the daratumumab biosimilar candidate from Henlius in the United States and Europe, reinforcing our oncology portfolio. We signed an agreement with BioThera to commercialize ustekinumab, and Goli Mumumab biosimilar candidates with a primary focus on Southeast of Asia markets. The US FDA also accepted the filing of our partner, Denusumab biosimilar, making a key milestone in our advancement within regulated biosimilar markets. The phase integration of our newly acquired nicotine replacement therapy NRT business is moving forward as planned. The United Kingdom was successfully integrated at the start of the month and we are on track to complete the integration of the Nordics in the next phase. We are demonstrating our commitment to bringing innovation to India and improving healthcare access through strategic partnership. We extend our collaboration with Sanofi to introduce Bayfotus, which is a novel drug for preventing RSV. In partnership with ALK Abelo, we launched Sensimum, an immunotherapy product for house dust that might induce allergies. We commenced participation in the Government of India General Ashwadi program with one of our products. We divested our manufacturing facility in Louisiana, United States. On the regulatory front, our APM manufacturing facility, CTO2, located in Bolaram, Hyderabad, received a VAI status from the US FDA following a successful GMP inspection conducted in November 2020. We continue to deliver industry-leading performance and sustainability, earning multiple recognition for environmental, social, and government ESG initiatives. Our eco-buddies improved to 73, positioning us among the top 15% of the company assessed globally. We were also honored with Climate Action Program 2.0 Degrees Award by CII in the highest resilient category within the light manufacturing sector. We recognize in the leadership category on the Indian corporate government, Scorecard 2024 by institutional investor advisory services. I will now walk you through the key business highlight for the quarter and the full fiscal year. Please note that all figures referenced in these sections are presented in the respective local currencies. Our North America generic business generated revenue of $418 million for the quarter, reflecting a year-on-year growth of 7% and a sequential growth of 4%. For the full fiscal year, revenue stood at $1,727 million, representing a 10% increase over the previous year. This performance was primarily driven by increased volume in key products and successful new product launches, partially offset by price erosion. This quarter we launched seven new products, bringing the total for the fiscal year to 18. We expect this launch momentum to continue into April 26. Our European generic business reported revenues of 140 million euros for the quarter, reflecting a year-on-year growth of 142% and sequential increase of 4%. For the fiscal year, revenue stood at 395 million euros, representing a growth of 73% compared to the previous year. Our strong performance, driven by contributions from the NRT business, higher base business volumes, and gains from new product launches, health offset pricing pressures. Excluding the contribution of the NRP business, European generic business recorded a year-on-year growth of 29% and a quarter-on-quarter growth of 11% in Q4 and a full-year growth of 15%. This quarter, we launched 10 new generic products in Europe, bringing the total for the fiscal year to 39%. Our emerging market generic business reported revenues of 1,398 Indian CR in Q4, reflecting a year-on-year growth of 16% and sequential decline of 3%. For the full fiscal year, revenues stood at 5,477 core rupees, representing a year-on-year growth of 13%. The performance was mainly driven by higher volume and new product launches partially impacted by unfavorable forex. During the quarter, we launched 26 new products across various emerging market countries, bringing the total for FY25 to 85 products. Within this segment, our Russia business posted a year-on-year growth of 27% in constant currency for the quarter, although it experienced a sequential decline of 17%. On a three-year basis, the Russia business recorded a growth of 24% in constant currency terms. The India business recorded revenue of 1,305 crore rupees in Q4, reflecting a double-digit year on a growth of 16% and 3% sequential decline for the quarter. For the full fiscal, the revenues were 5,373 crores rupees representing a 16-year annual growth. Excluding the contribution of the in-licensing vaccine portfolio, the business recorded a 6% growth in Q4 and for the full year, driven mainly by successful new product launches and favorable pricing. According to IQVIA, we have maintained our position as the 10 largest player in Indian pharmaceutical market, IPM, and have marginally outperformed the IPM with a moving annual total MAT growth of 8.4% compared to the IPN growth of 8%. In addition to the Sanofi and Nestle portfolio, we have launched 23 brands during the fiscal. Our PSAI business recorded revenues of $112 billion. a million in Q4 in FY24, reflecting an year-over-year growth of 13% and sequential growth of 15%. For the full fiscal year, revenue stood at $401 million, representing growth of 12% compared to the previous year. The growth was primarily driven by increased volume contribution from new API launches and growth in our contract development and manufacturing organization, CDMO Business. During the quarter, we filed 52 drug master files, DMFs, including seven for the United States, bringing the total number of filings for the year to 111. We remain committed to investing in our pipeline to drive future growth, further supported by strategic collaboration, focus on innovation. Our R&D investment for the quarter amounted to 726 scores, reflecting year-over-year growth of 6%, with growing emphasis on complex assets such as GLP-1 and biosimilars. Additionally, we completed 95 global generic filings, bringing the total for the fiscal year to 249. In FY2026, we'll continue to expand and strengthen our core businesses, drive value through portfolio management, grow our presence in consumer health care, innovative therapies, and biosimilars, leveraging our commercial footprint, and explore value acquisitions and partnerships, and maintain financial discipline to build a foundation for sustainable future growth. And with that, I would like to open the floor for questions and answers.

Sir, shall we open the floor for questions? Yes, please. Thank you very much. Participants are requested to ask not more than two questions at a time and to rejoin in case of incremental queries. Ladies and gentlemen, you may press star and 1 to ask a question. The first question is from from Bank of America. Please go ahead.

Hi, thanks for taking my question. My first question is on tariffs. Given you speak to the policymakers and customers, what is your sense on the extent of tariffs or to what level the tariffs could be implemented or genetic? Could it be in the API? Could KFNs be included? And the second part is, given that Redis does not have any manufacturing in the U.S., What are the mitigation factors that we are looking in case status is implemented for genetics?

Thank you. First, obviously, I wish I knew when and how much status will come. We are preparing ourselves for the scenarios and we obviously are watching carefully the information as it will come. At this stage, the main effort is to ensure sustainability of supply. So the main activity as we speak is to work closely with our customers and see what is the need in terms of inventories, future inventories, as well as new product demands, identify products that may have supply disruption, and try to help them to We are all waiting to see what will be after this, the new policies, and accordingly we will address us. If it's the API, if the country of origin will be based on API or pharma, I don't know. Most of the people that ask believe that it's for API, but we need to wait and see for formal communication in that respect. As for production footprint in the U.S., I don't think that at this stage the generic industry is having a short-term issue here. As a company, we would love to have a footprint in the United States. It just has to be the right asset. We are always looking for an asset, but we are not going to do At this stage, specific activities to build footprint is more, if the right opportunity will come to us, we will be more than happy to engage it.

Based on your composition with customers, would they be open to absorbing an impact of any potential tariffs, depending on how much it is, or what's your sense of who bears the burden in case of a tariff?

My sense is nobody wants to absorb the tariff. At least I did not find any player that said, yeah, I would love to absorb it. I think what will happen is there will be a certain adjustment period in which people will have to work together to see what to do with it. So it is primarily about... working together. What I want to emphasize is that under any scenario, we will not create a shortage of supply or supply disruption to the U.S. market. This is very, very important to us. We want to stay in the United States for many years, and that's something that was also clarified in all of our discussions with our customers.

Understood. My second question is on our cost base. And then, you know, given that our cost base has ballooned quite a bit, you know, even though our margins are great, as we look at a rev limit lift three quarters out, you know, how much flexibility do we have to actually, you know, reduce this cost, you know, once rev limit goes away? You know, so just trying to get to how we get to that 25% margins. I know you have a lot of products, et cetera, which have come through, but from a cost perspective, How much flexibility do we have from an R&D and HGN perspective to reduce costs?

So, you know that I think the patent cliff will happen in January 2026 based on our current modeling. continue to have, I suppose what we have guided is like a sales double digit growth and then EBITDA ROC 20% or above at this point of time.

But in terms of R&D and SG&A cost, would it still be, you know, at similar levels?

Yeah, R&D and SG&A will be in a similar zone. I think SG&A now is like somewhere 28% of the sales, R&D 80% would be in the similar zone.

So, yeah, the main way to do is we are planning to just go faster, the sales and the expenses. This is one mean, and we have the levers to do that in all the relevant markets, as well as, obviously, using... So if you want, I'll just put the levers that will allow both the growth as well as the... The margins, first we are planning to grow the basin. We are planning to grow the basin significantly faster than the expenses while using all kinds of productivity measures on the cost. It's not a cost cut. It's all kind of productivity measures. And of course we are planning to have some nice products that are coming up, both sea as well as the biosimilar that will come, and BD. We are planning to continue to do BD, and we are engaging with quite a few opportunities. So the combination of all of this, I believe that will help us to grow, cover also from the potential decline because of lenadolamide, and to keep our margins.

And when you say double-digit growth, I assume the limit.

Yeah, we believe that in FY26, a double-digit growth is possible, as well as maintaining demand.

Okay, thank you so much.

Thank you. Next question is from the line of Dr. Kunal Damesha from Aquari Group. Please go ahead.

Hi, thank you for the opportunity and good evening. The first question on the gross margin which has kind of changed quite a bit dramatically on the QOQ basis, and you highlighted the reduced operating leverage. But as far as I see, our revenues have grown. So I kind of fail to understand how the operating leverage has kind of worked other way for us. So if you can provide some more color on that, that would be great. That's my first question.

Yeah. Thanks, Kunal. Here, like a one-off cost in this quarter, are they a part of the manufacturing overheads as per our... policies, that's where it's impacted adversely. Like in the report plant, we have just had a cost. That is a one-time cost, and it impacts the part of the manufacturing overhead. And similarly, the second, just I articulated earlier, this is compared to the Q3 and the Q4, our outlicensing income. is lower, that will have a direct impact on the gross margin that's where like a 300 basis points is lower in this quarter. We believe this should be like a one off and then we'll go back to our normal levels.

Can you please quantify the severance cost one time impact for this quarter?

That is not, we may not give, but it's not a very small amount. It's not what I'm just saying. Maybe if I have to say out of 300 basis points of manufacturing overheads, this is a one plus another, our accounting provisions also, overall it has impacted 0.8% of, out of 80 basis points out of 300 basis points.

That's a severance cost. And then maybe another 50 basis points.

It is not the severance cost alone. There are other costs also.

Okay. 80 basis point is one off. And then the proprietary product milestone not coming is incremental to that 80 basis point.

Yeah, that is the one. And then like a little bit on the inventory also, there is a overhead. Overall put together, I think that all happened in one quarter. That's why you see there is a 300 basis point.

Sure, sure, sure. And just a related question, if I look at the NRT business, the PVT margin between the two quarters has a meaningful delta of around 500 basis points. So is there a seasonality and when we look at this business on a full year basis, how should we kind of think about this business? Because based on two quarters, really difficult for us to understand.

So overall, for this business earlier, we also spoke on our EBITDA margin in the zone of like a 25%. this and because i don't know why the fluctuation between the q3 versus q4 there are a lot of integration costs i don't know that's where it's impacted otherwise when you are modeling the ebitda you can take it at like a 25 percent okay sure and uh one question for erase if you could provide uh update on our glp1

or let's say genic semaglutide amino product across various market and also the Abatacept product?

Sure, so we are gearing up to launch it during the calendar 26. In all the markets the IP landscape will allow us to launch. So this is still intact and we are progressing nicely in our preparation for that. As for our data set, so far so good. We are close to, we are deep into the phase three, and so far it looks like the timelines did not change. We are planning to submit the product somewhere at the end of this calendar year. end of 25 to be ready to launch the IV immediately after patent expiration and the same for the sub-Q which will become a year later because of patent related issues. So once the IP landscape will allow us to launch it, we will do so far so good.

Right now it's phase three, which is currently going on, right?

Yeah, the phase three is going on and we are planning to submit by the end of this calendar year, by the end of 25.

Perfect. Okay, I have more questions. I'll join back with you. All the best.

Thank you. Next question is from the line of Madhav Marda from Fidelity. Please go ahead.

Hi, good evening. Just a follow-up to the previous question. Could you help us Maybe understand the sizing of the generic Samad Lutai opportunity for us in markets such as Canada, Brazil and the other larger EMs where it goes off within next year. You know, we obviously have invested in capacity for generic Samad Lutai. And what we understand looking at penetration rates in, let's say, Canada, we look severely under-penetrated because supply was short and obviously it was a much higher price point. So as some of this product or supply comes through and prices go down, how do we see the volumes expanding for this product, let's say, in Canada and Brazil? If you could give us some sense there, that would be great.

Yes, so naturally, Canada is one of the markets that will open early. And what I think the people from large is that exclusivity. that will be finished in the beginning of January of 26. The product, to the best of our knowledge, based on the marketing report, is growing nicely. And at least according to Acurbia and the financial reports, the market price is around $1.8 billion. which suggests that it's around, give or take, 10 million pence. I may show, of course, give or take. So it's a very nice market. The CAGR is big, somewhere between, in some report I saw 28%, in another report I saw 39%. It's a very, very high level of growth, so naturally. And when we saw the the prevalence of the disease versus the use. Compared to other markets, it looks like that in Canada there is room for growth also quantity-wise. So it's an interesting market. And once the IP landscape will allow us to launch it and assuming approval, we are planning to go. We see ourselves as one of the companies that have the opportunity to be first or among the first in Canada. We are planning to do the same in India, in Brazil, and the other markets in accordance to, of course, to whatever the IP landscape will allow us.

Thank you. So the 10 million pens that you mentioned, that's the Canada market size today, right? Did I understand that right?

Yeah, what I quoted to you, the numbers that I mentioned, are from the relevant reports about Canada.

So that's what I was trying to understand, that this is at a much higher price. So would you have any sort of sense in terms of this 10 million pence, can this... Given that if you look at the obese population or the diabetic population in Canada, the size of the potential market can be maybe three to five times. Could you give us some sense of how the market could grow?

I heard five times, but my knowledge is not different than yours. They probably read the same report. The prevalence is still high. The use relatively to the prevalence is still low. If it's three, four, or five times, I don't know eventually what will happen. But clearly, that it is going to be an important product for Canada, and obviously we are very keen on it.

Thank you.

Thank you. Next question is from Land of Amai Chalke from JM Financial. Please go ahead.

Yeah, thank you for taking my question. The first question I have, there is a gross margin drop, but there is also reasoning given that there was a price erosion and one of the reasons for the gross margin drop. So is it possible for the management to give us some understanding what is the U.S. business price erosion for the year? and how the U.S. business has done for the year for FY26, excluding revenue.

So this gross margin, the price erosion is like on Euro-year basis. And in U.S., I think the price erosion is very stable. That's what we have put it in the press conference. We do not see any challenges even. In fact, the price erosion is like a much lower as compared during FY25 as compared to FY24.

Sure. And the U.S. beef business, how it has done for the year? It has grown? How it has performed?

The U.S. business grew. It grew very, very nicely. And it's primarily due to The usual new launches, market share gains, and just to make sure that in addition to what Ambien said, the price erosion that was in the U.S. was relatively low primarily as most of the product kind of, I believe, exhausted the potential of the price erosion. So it's normally when there is no price erosion in the United States, it's not always a good sign. But in our case, it was a very low single digit price erosion within the fiscal.

So the second question I have on the revenue, in FY26, I understand that Jan would be when the exclusivity is ending. But if we consider the quota-related quantities which we would be booking before the Jan, how the distribution we should expect to happen over the next few quarters? Is it evenly distributed, or do you think that the first half of FY26 we should expect revenue sales to be booked?

So, obviously, it's in accordance to the demand of the customers. But likely that we will finish what we can sell a few months before January in order to make sure that our customers will not be with the goods on the shelf in order to avoid price shelf adjustments. So likely that we will stop a few months before that.

Sure. Just last question if I can squeeze in. We spoke on Canada market related to semaglutide. However, traditionally we have seen a generic capturing the branded market where the prescription is typically marketed by the innovators. However, here the market is severely underpenetrated. Do you think there would be any need for you to market the product even despite being a generic?

We believe that the demand from the customers will be strong enough that we don't need to market the product or introduce it to the market. What I believe can happen is that as the product will be much more affordable and some of the use is without reimbursement, so I believe that it will create an additional demand. But no, we are not planning to actively market the product as a brand. Sure. Thank you so much. I will join back.

Thank you. Next question is from Lanoff Bino from Lara Capital.

Please go ahead. Hi. Good evening, Al. Following up on revenue, are you seeing any significant price erosion in revenue as of now compared to six months back?

So there is a phycerogen. There is also increasing quantity, so it's a combination of both. I will not be able to tell you exactly the amount, as you know, but yeah, there is a certain level of phycerogen.

Okay. And just to reconfirm what I heard earlier, I believe you said that for financial year 26, you can do a double-digit growth and maintain the EBITDA margin at the same level of FY25. Did I hear that correct?

Yes, that's what I said.

Okay, okay. And once the revenue eclipse happens, which may be FY27, the margins may settle down back to your long-term target range of around 25 or so. Is that how we look at it?

Yeah, so we always said that the 25% is indication for the place that we feel comfortable to be, giving enough total shareholder return, but also allowing us to invest in the future. So we will continue to aim for that amount. It may fluctuate from quarter to quarter. Sometimes it will be above, sometimes below. But yes, we are planning to be in this neighborhood also in the future and post the linoleumide era.

Understood. And one last question on CapEx. So this year's CapEx was, I think, more than double the previous year's level. Where has it mainly gone to? And for next year, what's the level we should look at?

So, largely these major CAPEXs are going in two fronts. One is for the peptides, both to create an infrastructure for both APA and formulations, and also to create the biosimilar facilities. Largely, these two are the major investment or driving factors. Apart from that, Suddenly, it seems like we are in a complex molecule journey. Then there is a product-specific investment as well. So that's where I think it is overall capex. And then you're asking for FI26. We believe at this point of time would be in the similar range for FI26 as well.

Got it. Thank you.

Thank you. A request to all the participants. Currently, I have two questions at a time. And we join the queue for a follow-up question. Next question is from the line of Krishnendu Saha from Quantum Mutual Fund. Please go ahead.

Yeah, hi. Can you hear me? Hello. Thank you for taking my question. Could you talk about the Indian... Krishnendu, sorry to interrupt you, but you are losing your audio.

Can you come in a better resolution area, please?

Can you hear me?

No, sir. Sir, the line for the participant dropped. We'll move on to the next participant. Next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.

Thanks for the opportunity. So for the Europe market, the F525 was a great year. If you could sort of elaborate on the growth prospects for this region, XNRT as well, for 26, 27 maybe.

I agree with you. Europe is a growing area for us. We are planning to grow by, first of all, we are expanding to more countries. We are launching more products, primarily leveraging the pipeline for the United States. We are going to launch biosimilars in Europe, both rituximab, bevazumumab, and after that, denosumab and labacacept. And we are planning to, obviously, to grow the NRT business. So, indeed, Europe is going to be an important growth area for us.

Got you, sir. Sir, as far as semaglutide is concerned, because it can be manufactured using biological route as well as synthetic route, if you could share in terms of at least the initial countries like India, Canada, would they be okay to approve the synthetic route and the competitive dynamics would be different if that happens or you think the competitive dynamics would be similar even if it is approved either through a synthetic route or a biological route?

Yes, so we believe that the synthetic route can be approved for the injectable, for the pens. And the semi-synthetic route is going to be used for the oral product. And that's what we are planning to do. Synthetic for the injectables and semi-synthetic for the oral.

So, likewise, the price erosion basis competition will be higher for synthetic group?

It, of course, depends on how many people will launch the product in each one of the markets. So, it's not so much because of the synthetic versus non-synthetic. It depends who has access to capacity, at least at the beginning, and who is going to obtain approval. So in terms of competition, I believe that in some of the markets, they may have some advantage for those that will have, at least for a short period of time or longer period of time, depends on the scenario, less competitive, maybe less players that will play in the market. And thereafter, it will be very competitive because many companies... are having this product and they will compete on market share. At the same time, the product will grow. So we are preparing ourselves for the scenario in which we believe that we have a chance for relatively limited competition, but as well as prepare ourselves for the scenario of high volume, low price, very competitive landscape, and we are gearing for both.

May I request you to come back, please? Okay.

Thank you. A request to all the participants. Please restrict to one question for the participants or the management considers all the queries from all the participants. Next question is from the line of Abdul Qadir from ICICI Securities. Please go ahead.

Thank you for the opportunity. So my first question is on your India business, where you talked about 6% growth, excluding the vaccine business. So how should we see this portfolio ramp up happening next year? Any areas where you think, you know, the growth was a little lower this year, and then next year, you know, how should we model this business for?

So you're going to see similar growth overall, and for India also next year. So we are planning to grow, this year we grew 16%. That kind of range of growth you're going to see also in FY26. Indeed, we highlighted, I want to emphasize that although we highlighted the inorganic versus organic, but I want to highlight that most of our growth in India will be inorganic. We are licensing products, we are acquiring products, we are introducing innovation So it will not be by spreading necessarily only the big brands, although, and I will refer to it in a second, but primarily by producing products that have better standards of care. Having said that, most of our big brands from the past grew up with double digits. There are two areas in which we did not do as well. This is in cardiovascular art. as well as GI and we have a mitigation also plans for those primarily by adding more marketing resources as well as addressing the product and introduction of life cycle management. So overall with the new products, innovation, big brands. Dealing with those big brands is not well. We believe that we'll have a high level, high double digit growth in India next year.

Got it.

And so my next question is with regards to the recent updates coming from the U.S. in terms of a certain concession on the regulatory front to being offered by

the U.S. agencies as well as they're talking about, you know, increasing the intensity of surprise inspections for plants based out in India and China. So, you know, we'd love to hear your take on, you know, these developments coming from the U.S. market.

Yeah, so it's not new. Just this year, the inspection that we had in CT03 and CT06 were unannounced inspections. Our facilities are ready for it. This was always the guidelines in the United States for years, and it's unannounced. So all of our facilities are ready for that. That actually is the guidelines for a while. And it will require people that are not ready for that maybe to upgrade their systems, but we are ready for it.

Thank you. A request to all the participants, please restrict to one question per participant and rejoin the queue for a follow-up question. Next question is from Lionel Suryapatra from Phillip Capital. Please go ahead.

Yeah, thanks for the opportunity, sir. My first question is on the R&D spend front. What we have seen in the last two year period, sir, there is a kind of a back-to-back around 20% kind of growth annually. on the R&D spend front that we have witnessed. So could you give some visibility about the kind of work that we would have done on the pipeline build up front and the likely investment on those front on the R&D side going ahead and what build up that we would have created so far as the future pipeline or the GORU growth pipeline for us?

So here, suppose the R&D investments have been increasing in biosimilars, like, let us say, in phase three. Suddenly, the investments are high. And then, in case of our generics, we are continuously focusing on all the GLP-1s. I think these are all the complex molecules and require a lot of investment. And it is also earlier spoken, this about except once we file it, the revenues start in calendar 2027 or somewhere. So you will just see the revenues from all the efforts, what we are doing now. Certainly a little later. It is not very far off, I think, but definitely in the near term, I think you will see some of the products, I think, will start showing up the revenues. Okay, on the complex... Sorry to interrupt you, Surya.

Can I request you to come back, please? Thank you. A kind request to all the participants. Please restrict to one question per participant. Next question is from the land of Shashank Kumar... Shashank Krishna Kumar from MK Global. Please go ahead.

Hi. Thanks for taking my question. Just wanted to check with respect to Revlimid, given the import alert that has been issued to Wired Press facility. So could you see any meaningful benefit particularly in the first half this year or is it largely a non-event given that there are volume restrictions in place?

I don't think there will be any impact on us. Thank you.

Thank you. Next question is from Leno Srikanth from Nuwama. Well, please go ahead.

Hi, thanks for the opportunity. In the Canadian semi-glutide market, there are four players who are filed. If you can talk about our approval timelines, and do you think that all the four players would be there in the Canadian market when the opportunity opens up?

I obviously don't know who would come or who is not, but we are planning to be there at the date that the market will be open. And the approval timeline for us? The approval timeline will actually be a little bit before the date. So somewhere in the end of this calendar. Okay, thank you.

Thank you. Ladies and gentlemen, we'll take the last question from the line of question. Indus Saha from Quantum Mutual Fund, please go ahead.

Yeah, hi, can you hear me? Hello, can you hear me? Yeah, yeah. Just quickly, when I look at the European revenue for us, I found that UK has grown up very faster. Is it because we started selling NTR out there and the NTR number which you give out, 1,200 crores, can I double that just to get the whole revenue for the full year? And the last question on revenue, when we speak to NACO, they say that June, September could be a better quarter for us in FX26. Does it hold true for us also? That's it. Thanks.

So you know I cannot share numbers or guidance on the Revilamed, so I can only say, like we always do, that it's going to stay meaningful product for us. As for the UK, I'm not sure I got the question. It is primarily due to relatively high level of launch of new products, plus we launched the Bivazumab, also in United States, sorry, in United Kingdom. So the combination of both allowed us to go in the UK.

And the NTR, the run rate of 1,200 crores, is it that we simply double that? Is that what the number we get for the full year, 25 to 26?

Could you just repeat your question?

If I, the number of NTR, which we, nicotine, which we have for the H2 is around 1,200 crores. So if I double that, is it the number which I get for the full time or I have to put it up? Yeah, yeah.

Certainly, give or take.

Give or take, that would be the range. And when we start selling in the UK all by ourselves, it will be next year, is it?

Yeah, yeah, currently also we are selling in UK and then going forward also we'll continue to sell in the UK. But when, what the numbers we are reporting for UK, without consumer help.

Right, and if I just can squeeze the last thing. On the GLP last launch, like, which happened in the US after Teva, all these truth seekers have come in. Do you think the scenario could be the same when it happens for Shema when it launches in the US? I think the Biocon just got an approval or they've launched. So... Is it possible that the market will still be, there are a lot of fighters, but could it be that you'll see players like Victoza, or it'll be, what, large players, a number of players out there?

Which product you're talking about? Simaglutide in the U.S. will be in 2033. Sorry? Liraglutide? Liraglutide, Victoza, or Saxenda? I have a question for you.

What I'm trying to understand is the number of players in Victoria are very less, even after Tebas come in and Naidu is gone. Do you think the same amount of players, because the large number of fighters for SEMA in Canada and India and all, do you think everybody will get an approval and there will be a large number of players? Or like with the GLP Wittens in the US right now, Victoria are the only C4 players. How do you think the landscape will be on the competition part? That's what I'm trying to understand.

We believe that the land scheme of semaglutide will be very competitive. It could be a situation at the time of launch or around the time of launch, there will be people that may get later the approval or have later access to the supply chain. And so it will evolve. And those players that may come before and be there on day one may gain kind of a first launch advantage. But overall, it's going to be, we believe, a very competitive market, and we are preparing ourselves in terms of cost, supply to high volume, low cost type of a product all the time.

Thank you, Krishna Hindu. Participants, we'll take one last question from the line of sign, Mukherjee from Nomura. Please go ahead. Sai and Mukherjee, may I request you to unmute your line and proceed with your question?

Hello?

Yeah, am I audible?

Yes, we can hear you now. So the line for the part has been dropped. With this, I now hand the conference over to Ms. Richa Periwal for closing comments.

We appreciate you joining us for this evening's talk. If you have any further questions or require clarification, please feel free to reach out to the investor relations team. Once again, thank you on behalf of Dr. Reddy's Laboratories Limited.

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