Dr. Reddy's Laboratories Ltd

Good day, everyone, and welcome to the quarter four and full year FY26 earnings call of Dr. Reddy's Laboratories Limited. I'm Aishwarya Sitaram, Head of Investor Relations at Dr. Reddy's. Joining us today are members of the leadership team, Mr. Erez Israeli, our Chief Executive Officer, and Mr. M. D. Narasimham, our Chief Financial Officer. Our quarterly financial results have been published earlier today and are available on our website for your reference. We will start today's call with Emian providing an overview of our financial performance for the quarter as well as the year. Following that, Erez will share his insights on key business highlights as well as the company's strategic outlook. We will then open the floor for questions. All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed. Reconciliations to the corresponding gap measures are included in our press release. I would like to remind everyone that the safe harbor provisions outlined in today's press release apply to all forward-looking statements made during this call. Before we proceed, I would like to call on a few housekeeping points. All participants will be in the listen-only mode during the opening remarks. Should you need any technical assistance during the call, please use the chat function in your Zoom application. The chat, however, will not be monitored for any questions to the management. The session is being recorded, and both the audio and transcript will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy's Laboratories Limited and may not be rebroadcasted or quoted in any media or public forum without prior written consent from the company. With that, let me hand the call over to MDN, to present the financial highlights for the quarter. Over to you, Ambien.

Thank you, Aishwarya. Greetings to everyone on the call. It is my pleasure to walk you through our financial performance for the fourth quarter and full year, supply 26. Supply 26 reflected a resilient operating performance, delivering highest ever annual revenues. product-specific headwinds and certain one-time impacts. The underlying base business continued to deliver double-digit growth for the quarter as well as for the full year FY26. At the outset, I would like to highlight a few items impacting the quarter. Number one, a self-stock adjustment or SSA related to lignamide of rupees 453 crores taken as a reduction in revenue. Number two, an additional provision of 114 crores related to potential VAT liability in one of our subsidies included in S&A expenses. Impairment of 135 crores including A R&D charge of 6 crores on account of discontinuation of R&D programs related to CAR-T therapy as part of the portfolio prioritization. Impairment of 93 crores on account of discontinuation of a trial by our partner Immutab of an in-license asset following an interim futility analysis. The full year performance was further impacted by provisions related to potential tax liability of 70 crores as well as the impact of new labour law code in India of Rs. 170 crores. After factoring these items, the adjusted profit before tax was 994 crores for the quarter versus the reported number of 199 crores and for the full year, 6463 crores versus the reported PBT of 5482 crores. Now, I would like to discuss the underlying performance in detail. Margins in this section are expressed as a percentage of the revenues before the impact of SSA unless otherwise stated. For the reported figures, please refer to the respective ending releases. All financial figures in this section or translated into US dollars using a convenience translation rate of Rs. 93.83, the exchange rate prevailing as of March 31, 2026. Excluding SSA, the adjusted revenue stood at Rs. 7,969 crores, which is 849 million US dollars for the quarter. a decline of 6% year-over-year, and 9% on Q2, and at 34,000 purchase growth, which is 3.63 US billion dollars for the full year, representing a growth of 4.6%. The decline was primarily on account of lower linoleumide sales, while the base business excluding linoleumide delivered double-digit growth on year-over-year basis. We expect the base business to sustain its growth momentum in the year ahead. The gross margin on the adjusted revenue base after estimating the ONOS for the quarter was at 48%, lowered by 760 basis points on year-over-year and 615 basis points on sequentially and at 53.5% for the year, lowered by 498 basis points on year-over-year. The decline in margins was largely on account of lower land-wide sales and price erosion in our unbranded generics businesses. The gross margin for global generics was at 51.7% for the quarter and 57.4% for the year as a percentage of its adjusted revenues, while that for PSA stood at 19.9% for the quarter and 17.2% for the PSA for the fiscal on its reported revenues. Given our focus on the cost efficiencies and productivity improvement, we expect the margins to improve and be above 50% in FY27. Excluding one of provisions mentioned earlier, R&A spends over 2,662 crores per quarter, an increase of 11% on Euro years and 1% sequentially. and 33% of the adjusted revenue base, and Rs. 7,435 crores for the year, an increase of 11% on year-over-year and 31% of the adjusted revenues. The increase was primarily on account of ongoing targeted investment to support long-term growth of our branded franchise, namely the acquired NRT Conjugal Healthcare business and branded business. We expect the spend to be around the same level as FI 26 for the year ahead. The adjusted R&D spend for the quarter was 541 crores, a decrease of 26% year-over-year, and 12% on sequential, and a margin of 6% of adjusted revenue. For the year, the spend excluding one-time labor code-related provision was 2,385 crores for FI 26, a decrease of 13% and 12% adjusted revenues. The decrease reflects reduced biosimilars developmental expenditure as a significant portion of investments related to abatacept has been completed. We expect the expense to be in the range of 7% to 8% in the fiscal head. Other operating income for the quarter was 344 crores as against 241 crores in the corresponding quarter last year. and Rs. 763 crores in FY26, as against Rs. 436 crores in FY25. The increase during the quarter was largely on account of divestment of non-core brands in India business for net of Rs. 189 crores. The underlying EBITDA, including other income, stood at Rs. 1,554 crores for the quarter, which is $166 million, a decline of 37% on Euro-US basis and 28% sequentially, and reflecting a margin of 19.5% of the adjusted revenues. For FY26, the EBITDA adjusted one-off was at 8,419 crores, which is $897 million, that is like 24.7% of the adjusted revenue basis. Employment charge for the quarter was 259 crores as compared to 77 crores during the same quarter last year. The higher charge this quarter was largely on account of discontinuation of RTI assets and partner product FD like a more alpha as mentioned earlier. Employment charge for the year 358 crores as compared to 169 crores last year. The net finance income for the quarter was 62 crores. worth Rs. 235 crores during the same quarter last year and Rs. 413 crores for FY26 versus Rs. 472 crores for FY25. The decrease was primarily an account of lower foreign exchange gain in comparison to the corresponding period last year. As a result, the underlying profit before tax was at Rs. 994 crores, that is U.S. dollar 106 million representing a margin of 12.5% and for FY26 at 6463 crores that is U.S.D. 689 million a margin of 19%. Effective tax rate for the quarter was negative of 10.8% compared to 20.8% in the corresponding period last year. While for FY26 ETR was at 22.5% versus 25.4% in FY25, the ETR for Q4 FY26 was lower primarily due to recognition of a deferred tax asset on carry forward losses in one of our subsidiaries and favorable juridical mix for the quarter in comparison to the same period in the previous year. We expect the ETR to be 24 to 25% versus FY27. Profit after tax attributable to the equity holder of the parent for the quarter stood at Rs. 220 crores, which is $23 million, a margin of 2.9% on the reported revenues, and for the year, Rs. 4,285 crores, which is $4.57 million, a margin of 13% before adjusting for one of items mentioned earlier. Based on the company's performance, the board recommended payment of dividend Rs. 8 for equity share of face value Rs. 1. This is equivalent to 800% of the face value for the 800 March 31, 2026 subject to approval of the shareholder of the company. Diluted EPS for the quarter Rs. 2.64 and Rs. 51.42 for FY26. Operating working capital as of 31st March 2026 was Rs. 14,434 crores, which is 1.54 billion US dollars, an increase of 2,920 crores, which is 31 million over 31st December 2025. CapEx cash outflow for the quarter stood at 438 crores, which is 47 million, and 2,302 crores, which is 245 million for FI. Free cash flow generated during the quarter before acquisition related payout was 600 crores, which is 64 million, and 2,004 crores, which is 214 million for FI. As of March 31, 2026, we have a net cash surplus of 3,271 crores, which is 349 million US dollars. Foreign currency cash flow hedges executed through derivative instruments during the period are as follows. USD, $4.62 million hedge using combination of forwards and risk reversal options scheduled to mature by March. These contracts are hedged at rate of 91.37 to 93.46 per US dollar. Ruble, 1.6 billion hedge at a fixed rate of 1.12 per Russian ruble. with maturity falling within the next three months. With this, now I request a raise to take us through the key business highlights.

Thank you, MVN, and good day, everyone. We appreciate your participation on this call today and value your continued interest in our company. During the year, we remain focused on advancing our two-point strategy of strengthening the base business, while investing in our future growth drivers, the cost peptides by similar consumer health and innovation. Our FY26 performance reflected consistent discipline execution of our strategic priority, namely scaling the base business, advancing our pipeline programs, C-Magnus and the Lambataset, and targeted business development efforts to support our growth ambitions while continuing to enhance efficiency across operations. I'm pleased to report that the first quarter, in this first quarter without one of our key products, Lirandulemide, the company delivered an EBITDA margin of around 20% after adjusting for certain items indicated by MVM earlier. Launches of products offering meaningful opportunity, BD and continued cost optimization efforts will take us closer to our aspiration of 25%. For FY26, the adjusted EBITDA margin was in the neighborhood of 20%, consistent with our stated aspirations. Further, the underlying base business delivered double-digit growth in Q4, as well as for the full years of FY26. All geography, besides North America, recorded double-digit growth, while performance in North America was impacted due to linear dolomite sales and one-time shape stock adjustment related to this product. Let me now walk you through some of the key highlights of the quarter. In line of our strategic priorities, we made progress on our key pipeline assets, Simaglutide and Abatacept during the quarter. We are pleased to announce that Dr. Redis became the first company to secure regulatory approval of Simaglutide injection for type 2 diabetes in Canada, reinforcing our in-house expertise in peptide science and complex product development. Likewise, As the first company to receive approval in India for the same product in November last year, we successfully launched our brand Grubeda on day one of market formation upon patent expiry in India. Our oral version of Simaglutide is being approved by the CDSCO in India. We continue to engage with Anvisa in Brazil to address its concern related to our generic Zymaglutide filing and remain committed to making this important therapy available to patients across federal markets subject to approvals. Further, in February 2026, the US FDA accepted for review our VLA for the intravenous IV presentation of Arabatacept by a similar candidate, following its filing in December 2025. Aligned with our strategic focus to bring innovation to patients in India, we forage in hormones replacement therapy segment with the acquisition of Provinova and Sackler Provinova in India. Our partner for the COIAT-302 received fast-track review status. In addition, the operational integration of our required consumer healthcare business in nicotine replacement therapy is now largely complete. On the regulatory front, in March 2026, the U.S. provided the VAI classification power formulation facility, FUSCZ, in Shrikakulam, Andhra Pradesh, following a GMP and pre-approval inspection, PAI, in December 2025. We continue to build on our leadership in sustainability. Dr. Redis was awarded The gold medal for EcoVad is for FY26, achieving its highest ever score of 80, placing us among the top 5% companies assessed globally. During the quarter, we were named by the business world among India's top 5 sustainable companies, ranking first in the Indian healthcare and pharmaceutical industry for 24 and 25. We've been recognized in the leadership category of 2025 Indian Corporate Governance Court card for the third consecutive year. Let me now take you through the key business highlights for the quarter and the full year. Please note that all financial figures mentioned are reported in the respective local currencies. Our North America generic business report revenue of $199 million for the quarter and $1.3 billion for FY26. Excluding one type, shelf stock adjustment, revenue were $251 million for the quarter, a decline of 40% and 26% sequentially at $1.36 billion. A decline... of 21% year-over-year. The decline was primarily on the Continental Zulimite. During the quarter, we added seven new products to our portfolio, taking the annual of total 25 products. We aim to continue to launch Momentum in the fiscal ahead. Our emerging markets reported revenue of 1,806 course rupees in Q4 FY26, reflecting a robust growth of 29% year-over-year and a decline of 5% sequentially, and 6,761 gross rupees in FY26, a growth of 23% year-over-year. The growth was led by new product launches across markets and higher volumes, particularly in the rest of the world, further aided by favorable currency movements. During the quarter, we introduced 49 new products across countries, stacking the FY26 total to 129. Within this segment, our Russia business reported a growth of 8% year-over-year and a decline of 23% sequentially in concept currency terms. Our India business posted revenue of 1,566 crores rupees in Q4-26, delivering a robust double-digit year-over-year growth of 20% and a decline of 2% sequentially. While the quarterly revenues were at 6,219 crores, a year-over-year growth of 16%. This performance was largely driven by revenues from our innovation franchise, new brand launches, price increase, and volume growth. Accurated data as of March 31st, 2026 shows that we continue to outperform the Indian pharmaceutical market IPM with a moving quarterly total growth of 15.2% compared to IPM growth of 11.6% and moving annual total MAT growth of 12.1% compared to IPM growth of 9.9%. Our IPM rank 2.9% for the quarter and 10% for the year. We launched 10 new brands during the quarter and 28 over FY26, reflecting our continued focus on strengthening our domestic market presence. Our European business, which includes our acquired consumer health business in nicotine replacement therapy, posted revenue of $136 million for the quarter, a decline of 3% on year-on-year basis, as well as sequentially, and $542 million for FY26, reflecting an acquisition-led growth of 37% year-on-year. The decline this quarter was primarily on account of price erosion in generics. During the quarter, we launched seven new generic products across the market, taking the full year total to 38, further expanding our European product portfolio. Our PSAI business reported revenue of $101 million in Q4 FY26, resulting in a decline of 10% year-over-year and a growth of 10% sequentially. The decline was primarily on account of lower API volume uptake during the quarter. During the quarter, we filed 48 drag master files globally, taking the total number of filing to 128 for the year. Looking ahead, we remain focused on delivering on our strategic agenda of strengthening our core business while building future growth drivers. Underpinning this strategy is future-ready organization structure aligned to our business model with dedicated leadership across global generics, biologic, consumer health, and innovation. enabling sharper focus, relevant capabilities, and more effective execution across each growth pillar. Within this framework, we'll continue to advance our differentiated pipeline program, such as Immagdotide and Abatacept, drive operational efficiency, and pursue value-accretive inorganic opportunities that support sustainable long-term stakeholder value. With that, I invite your questions as we move into the Q&A sessions.

Thank you very much. We will now begin the question and answer session. To join the question queue, please use the raise hand option available on the bar at the bottom of the Zoom application. If you wish to exit the question queue, you may click on the lower hand option. Persons are requested to not ask more than two questions at a time and to rejoin the queue in case of any incremental queries. I would like to reiterate that the chat will not be monitored for any questions to the management. However, in case of any technical concerns, please do feel free to use the chat option to reach out to us. The first question is from the line of Neha Manpurya from Bank of America. Neha, please go ahead.

Thanks for taking my question. Just wondering on the self-stock adjustment that we had in the quarter, A $50 million number for a product like Reglimit where we knew that patent places coming seems very large. So if you could just give us some color in terms of why the self-stock adjustment was so large given that we knew they are expecting competition in Jan.

We were also surprised by it. it was not part of any arrangement or anything like that. I cannot speak on the details on the relationship with the customers, but it came from them, I guess, certain planning issues or mistakes at their end, and that's the outcome of it.

Okay, understood. And my second question is on summer flow tides. Now that we have Canada approval, I think they've mentioned 12 million unit sales across markets in FY27. It is in your view, what could be the competitive landscape now that Reddy and the second player have gotten approval? When do you expect more players? And out of the 12 million, based on your assessment, what could be the rough breakup between, let's say, Canada and EMs?

So I believe that the current landscape of basically Novo Nordisk as well as the two of us will stay there probably for several months. And then likely that others will come. I believe that the market in Canada Give or take, it's about one-third for what we call public, one-third cash, and one-third what they call private. So it's a kind of public-private cash. So what I believe will happen is that the reimbursement price will go over time, as expected. The launch quantities, at least in a couple of years, should be very, very healthy. Obviously, I cannot tell us, but they should be very, very healthy.

And, you know, given that we have had a setback in Brazil, are we still confident of the 12 million units, you know, sale for SEMA in fiscal 27? Or do you think that would depend on us getting approval in Brazil as well?

So Brazil is part of it. I believe it's still in that number, but the number moved by several months. So if I'm still with the same number, but probably it will have like 12 months that will probably result in summer at the beginning of February 28th as well. Specifically for the next let's say, until the end of calendar 26, I believe that the number is somewhere between 6 to 7 million units.

This is for calendar 26?

No, this is for the markets that will get approval, and Canada will be obviously a big part of it, but it will be, this is give or take the All right.

Thank you so much.

Thanks, Neha. The next question is from the line of Damayanti Kirai from HSBC. Damayanti, can you go ahead?

Hi. Thank you for the opportunity. Continuing on semaglutide, so it is just to clear the 6 to 7 million units which you expect to market, it's by end of this calendar year, right, by 26th.

Correct.

Okay. So can you talk a little bit about your pricing strategy in the markets where you'll be coming in, say, another 12 months? And specifically in Canada, after entry of second generic, how do you position yourself versus Novo Nordisk pricing?

So our list price will be give or take about half. of what normal Nordics will be. So that can be shared because it will be listed. Obviously, the rest is arrangement that we have with the customer that I will not be able to disclose, but let's say it will be the normal arrangement that you normally have. In terms of... I'm not sure I kept the rest of the question. Sorry, I lost it. Can you remind me?

Yes, I was asking about the pricing strategy in all the markets where you intend to come in, say, another 12 months or so, 12 to 15 months.

Sure. So, we believe that all the prices will be, let's say, at the neighborhood of, let's say, $30 plus. Why I'm saying that number also... is because in some markets we are going to work with a partner, and this reflects the net price that we'll have for them. Obviously, they will have their margins. And these numbers may go down if the competition intensifies, but I don't envision it to, in any case, to be below 25%.

Okay, so somewhere $25 to $30 per unit is the price you are working with.

And there will be markets, obviously, that it will be much more than that. But I just wanted to share with you the kind of the neighborhood of the floor area. Obviously, we are planning to have in markets also prices that are much higher than that.

Okay, that's helpful. My second question is on SG&A spend. So, you mentioned next year, sorry, this year, FY27, it could be similar to what we had in FY26. So, just wanted to understand in NRT or some of the initiatives which you had started few years back, you have been spending for last few years, if I may say. So, where you are looking for investing more and this number, do we have any room to take a cut or see any reduction there? So if you can just talk a bit on that part. Thank you.

Sure. So we will have absolutely places that will have less and we'll have places that will have more. But just to address, the NRT is a place in which we will have more At the same time, the growth will weigh more than financing. So the level of profitability of the asset will stay the same and even maybe grow. But in terms of IGN per se, we will have more. We are also launching innovative products in India and in certain emerging markets, and actually we are investing in the marketing of those new products. At the same time, we are putting a lot of productivity activity, Salesforce excellence, as well as additional marketing excellence program. And this will go up. So that's why we said that give or take, in terms of nominal value, should be the same level as sales will go by. In percentage, it will go down. But in terms of... to understand the range of the spend, it will be about be able to take the same range that we have now.

In nominal terms, right?

Yeah. While, of course, the sales will go double digital.

Okay. Thank you. And all the best. I'll get back in the queue.

Thanks, Amir. The next question is from the line of Tushar Manudane from Mootila, Muswal. Tushar, please go ahead.

Thanks for the opportunity. Am I audible? Yes. So, firstly on gross margins, even after adjusting the shell stock, for the quarter it is 48%. While X-linolidomide also we have talked in the past that the gross margin has been 50+. So, is there anything which I have missed as far as gross margin for the fourth quarter is concerned?

So, this quarter is there is a product mix impact that is why it is at 14 percent. We believe our gross margin range is in the range of 50 to 55.

So, what will drive this in the subsequent quarters and are you including semaglutide sales for this gross margin?

Yes, semaglutide sales, of course, and then there is a cost improvement, product cost improvement programs also are on, considering what new products we are going to launch in FY27, including semaglutide, plus product mix. Considering all these things, I think certainly our gross margin will be 50 or above.

I want to make sure that we are planning to launch also products like Sugamades, Usitinib, Sidacliptin, Rimonidin, sorry for my reading, and... Sorry? Yes, so... In addition to that, there are additional key products to do. So the mix of the product, the mix of the market, as well activities that we are taking now on our APIs, we are very confident about our ability to manage the post-management.

And just on these products which you mentioned, sir, so currently U.S. revenue, even after including the temp stock adjustment, it is to $36 million. Yes. So, effectively, maybe 944 million if I normalize that. So, will we sort of grow over and about this X hemagglutite in F-37?

We will absolutely grow in North America X-linandulamide in double digits.

Got it. And just lastly, for India market, if you could just share what has been organic and inorganic growth for the quarter.

It's organic. What do you mean inorganic? We did not license and consider organic or inorganic?

Brands what we acquired is not a significant impact in this quarter. Just recently acquired brands.

Just to clarify we consider if we license a product from China and we are launching it in India as organic. In this terminology it's mostly organic, let's say. Inorganic is neglectable.

Got it. Thanks. Thanks a lot.

Thanks, Pashad. The next question is from the line of Dr. Bino Patiparampil from Ilarra Capital. Bino, please go ahead.

Hi. Good evening. Could you give an update on the status of Genosumab and Orangia, Abatacept?

So, the Genosumab will launch in Europe, and we are awaiting for approval in the United States. Our partner has a deficiency letter that they need to address for the United States. Abatacept The IV was approved for review, so it was accepted. And so it's going after the timelines. I know we are also awaiting an FDA inspection in Batch Puli, Hyderabad, for the same. So the abatis are so far in the right direction. And then, of course, we are working on the sub-Q That will be submitted later and also will be launched later as we discussed in the past.

So the IV is online for potential launch this calendar year?

IV will be likely at the beginning of calendar 27. Hopefully this fiscal, only hopefully this fiscal. That's the plan. But of course we need to see the approval for that. But right now, that's the plan.

Got it. And so, you expected Dinosumab in the U.S. before that?

I don't know. It depends on the ability of Alvos Exocetaprova.

Got it. Second on, you said that you have wound down your CAR-T related investments and taken a write-down. Can you just tell us a bit about what your investment was and why it failed in that area?

No, the investment, give or take, is what we MVMA added. It's 156. 135. 135 CR. That's what we took down. We saw that we have issues with the Clinica, and we decided to kind of deprioritize it at this stage. and we just impair it as an appropriate accounting. But this is give or take what we invested.

Sorry, I got the figures, but my question was more technical. Is it something wrong with the specific product you used or with the technology itself?

I'm not sure I understand the question. It's what we invested in the clinical trials and And getting the products, yeah.

The products, okay. So your product doesn't work, but Karti technology as such?

I don't know what is the end. The product is the Karti, sorry. So I, yeah.

No problem. Thank you. Okay.

Thank you, Vinod. The next question is from the line of Suryapatra. from FedEx Capital. Sunil, please go ahead.

Yeah, thank you for this opportunity. So, my first question is on the biosimilar business. So, what is the sense it is the closure of the, I mean, the fourth quarter of the year and full year data is there. So, just wanted to have sense what is the size of the biosimilar right now and whether it is already a broken even or it is a loss-making. If not, then what is the timeline for the break-even for this disease? So, overall, our global biologic sales is about it is not very high. It is above 100 million sales. So, at this sales, certainly whatever investments we are doing for the development of our other products Pembro also we are with Halwa tech so definitely it's not a break even once we launch about a theft certainly I think post that I think certainly we can see the break even fi29 it is in certainly could be in like I said if everything goes well our inspection everything and we'll be launching in calendar year 2027 That would be like a 5.8. Okay. Okay. Second question was on the NRT. Two things here, observation-wise. So, last two quarters, since last two quarters, we have been seeing a strong growth. Last quarter, it was 25% YY growth. This quarter, it is around 16%. So, what is driving this growth and whether this is sustainable one? And secondly, A fourth quarter, is there any seasonality? Because last year also there was a kind of a sequential decline that we had witnessed for NRT.

So the NRT business is indeed growing more than we expected it to be. So we expect it to be kind of mid-senior digits, certainly more than that. Specifically for the 60%, so there is some impact of the fact that in the transition, some customers take more stock. So it's not fully, let's say, in that respect, sustainable. But I believe that the right place for it is either high single digit or even low double digit. We will be somewhere in this neighborhood.

Okay. Just last one point. What is your experience about the hemagglutide penetration here in India? Because Generally, it is understood that of the target patient population for weight loss application, let us say, the penetration is very low. It is around 2% or even less than 2%. So, what is the trend that you are witnessing here in India in terms of the penetration of hemagglutide?

Yes. So, I do not recall exactly the market share, but so far it is a great launch. Okay. Okay.

So I think our market share is about 10%, more than 10% on a standalone basis. Okay.

In that light, are we talking anything about the growth for the domestic business?

I believe that it will grow, plus in the next coming days we will launch also the oral products, so the combination of both should give us a very healthy growth.

Okay, okay. Okay, yeah, thank you.

And Surya, the next question is from the line of Lavanya Tuttala from UBS.

Lavanya, please go ahead. Hello. Thanks for the opportunity. Just one question from my side. So even after adjusting for SSA, In your sales, sequential decline of 25% QoQ despite having a limited drag limit in Q3 seems quite high. So, am I missing something? Is there anything other which is runoff here?

No, in Q3, we had a little bit sales, right? This little bit sales. Yeah. Yeah. Hence, I think definitely from Q3 to Q4, there will be a natural decline.

So I don't think, we don't see a pattern of loss of market share or price erosion or anything like that. There is, there could be that there were certain, you know, buying patterns with some customers, but overall it's very consistent the way we see it. So the primary difference between the quarters is leaner.

Yeah. Okay. So the one which is adjusted for SSA in Q4, one can consider this as base sales for U.S. from here on. Is that the right way to look at it?

Yeah, I will not come because I don't know exactly the origin of the SSA specifically, but let's say that if you look, there might be some customers that bought a little bit more as per their patterns of acquiring products in terms of dates and stuff like that. But overall, if you look at market share prices, this kind of stuff, it should be about the same.

And also, one, we will be also going to new launches. Today, this is from the existing products, and then going for the rest of the year, we'll be launching, like, 27 new launches overall, for the full year.

Got it. Got it. Thank you. Thank you so much for the opportunity.

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

Yeah. Hi. Thanks for taking my question. So, just one question on SEMA. If you can indicate when you expect approval in Brazil and what are the key market approvals that you're looking at? And, you know, you mentioned, I think, 6 or 7 million units for this calendar year. What's your expectation for the full fiscal year, FY2017?

Yeah, so the additional markets besides, of course, first of all, we are expecting to get approval also in Brazil. We have a partner in Brazil that is also there, and he got also our comment. So we hope to get approval to our clone product. that is there, and in parallel to that, of course, we are seeing approval for our initial submissions. So we will be in Brazil, probably, I don't know, it will be three months delay or four months delay, but that is still the expectations. In addition to that, we have markets like Turkey, and then you have a bunch of relatively high number of smaller markets, that we have a partner that will probably serve in Latin America or in Southeast Asia, because altogether we are planning in this calendar to launch in more than 50 and 12 months in more than 80. So in terms of number of markets, but many of them, we will do it with a partner that will do it for us. So between what we call the B2B, in which we are selling to the partners or selling ourselves directly, we probably will be in a pace of 3 or 4 million pence per quarter. So if you add to that, it will come to around 10 or 11, close to the 12 that we discussed last time, give or take one month. So we are still in the same neighborhood, but with the delay of the few months, it took those approvals.

Understood. And there's one question on U.S. generics, I think. If I heard you right, are you expecting 27 launches? And you actually mentioned a few of those products. It looks like most of them are very competitive. Are there any chunky, large product opportunity in the U.S., you know, outside of Abatacept? that you expect in fiscal 27?

I believe that Bosutilim can be a nice product. And I agree with you about that most of them will be competitive. I fully agree with that. But overall, it should give us a double-digit growth without cleaner.

Okay. Yeah, thank you.

High five. The next question is from the line of Abdul Qadir Puranwala from ICICI Securities. Abdul, please go ahead.

Abdul, you are unmuted now. Okay.

Okay. In the interest of time, we will move on to our next participant and we'll come back to Abdul once he's able to unmute. The next question is from the line of Vivek Agarwal from Citi.

Vivek, please go ahead. Thanks for the opportunity. Just want to understand, out of this 3-4 million pence per quarter, how much of this capacity that you are going to sell directly and how much of the sales you are expecting through partner, partner, etc., if you can help us understand.

Thank you. It's a, if I need to guess, and I must admit that it's not a kind of, calculations at the top of my head, I would say 50-50, give or take, in the neighborhood.

I understood, sir. Thanks. And one question on North America. If you look at, in this quarter, we have done close to $250 million kind of revenues, and it is again a close to pre-development levels, right? So in the last three years, we have launched many products, but all the U.S. revenues haven't moved up much. So is it fair to assume that there is a price erosion in some of the major baseline products in the U.S., and how to look at overall profitability of the U.S. business? Is it still lower than pre-development levels, or is it almost similar? Thank you.

Yes, so first, obviously, in this period of time, there was price erosion. And what it tells is that market share and new products, give or take, covered. I see it as a kind of very low single-digit growth, not flat, but I'm in agreement with you that this market is... not growing as the other markets that we have that are all growing in double digits. Moving forward, this year, again, without Lina, we will see double-digit growth. And going forward, the main growth in the United States will come from biosimilars, consumer health, as well as certain type of IP2s. Over time, the business will improve. diversified itself. But right now, it's a mostly generic product.

Understood. So, the double-digit growth that you are highlighting for this year, that includes SEMA in Canada, right? So, I'm just trying to understand how to look at only the USL. So, what kind of growth you are expecting in the US with X SEMA this year?

Yes. So, it's X SEMA. It's not with SEMA. SEMA is on top.

Perfect. This is helpful. Thank you.

Thanks, Vivek. The next question is from the line of Ashutosh Jha from Boreasmi. Ashutosh, please go ahead.

Hi. Thank you for taking my question. I had two questions. Number one, sir, when you look at the next year, I think you have given the breakup of the course by line items, but given that the base business right now is at call it 19-20% margin, where do you see the overall margin for the business at CMA etc in the next year and the year after versus our target of 25%?

Yes, so we are planning to maintain the base without CMA at around 20%. So this is the plan. And then the CMA is supposed to help us to get more than that. Now it obviously depends how much we will be able to sell in what price and what will be the mix, because I shared already that it will be a range of price that can go, let's say, between, let's say, 30 or 25 to 30 all the way to 70. So obviously there will be a range of prices. But let's say wheat semai should be closer to 25%, but maybe a bit less. Depends on how much semai we will sell.

And, sir, any thoughts on the number of pens that you can possibly sell in F28?

F28, potentially, we will have a lot of capacity because we will be able to qualify. In addition to the current cartridge suppliers that we have today, we will be able to qualify with some capacity of F211. So it can be... Any number. It can be also 40 million also, but right now I don't see a demand for this.

Thank you so much. Those are my questions.

Thank you, Ashutosh. The next question is from the line of Alok Dalal from Jefferies. Alok, please go ahead.

Thank you. One quick clarification. It is on semaglutide in Canada. Has Innovator Novo already introduced an EG in the market? Sorry, can you repeat? Yeah. In Canada, has Novo already introduced an EG in the market?

So, I know that they are offering. I don't know if it was already sold. I don't know the unit personally. I don't have a knowledge for that. But we are assuming that they will have. That's my assumption.

All right. So in that scenario, will it be a three-player market and lead to 75% discount to the innovative product? Is that the way to think?

I don't think so in that way because the market is divided into public, cash, and private. And what you're discussing is absolutely public. So yeah, likely that this will happen. to the public eventually. But I do see it as a mix of market. So we are not planning right now our assumption based on the number that you mentioned.

Understood. Thank you so much.

Thanks, Haru. The next question is from the line of Vishal Manchanda from Systematics. Please go ahead, Vishal.

Hi, good evening and thanks for the opportunity. Could you outline how much would you expect in annual biosimilar sales by FY29?

I wish I could. A broad number? A broad guidance? A broad? Hopefully it will be in the range of half a billion, 600 million, 700 million. Sorry that it's so... But it very much depends, of course, of how Abatacept will perform. It will be the lion's share of those sales.

And would this have margins above company margins? Like, can this be on an entire biosimilar portfolio, can it give you 25% plus margins?

In the case that there will be no competition or low competition, absolutely it will be above the average margin that we have. Right.

And we are on track to file the subcutaneous version this year in Europe and US?

Yes, we are in the US for sure. In Europe, there might be some delay. Okay.

And yes, if you could give the split of sales between IV and subcutaneous in the US by value?

It is. It is 50-50 in US, but whereas in Europe, IV is very less and F is high. Got it. Got it.

And your capex plans for the next two years, annual capex plans?

So, next year would be in the range of 2000 crores, around 2000 crores. Got it.

Okay. And would this largely be on biosimilars or you have other areas?

So biosimilars that are like a product specific investments I think are there and then general capex. Got it.

Thank you.

Thank you very much. So in the interest of time, we'll take one last question from Siddharth Nagandi from CWC. Siddharth, please go ahead.

Thank you for the opportunity. On biosimilars, you had mentioned that your R&D spends would reduce given that the spends toward Abatacept have been completed. You know, going forward, given the draft US FDA guidelines, how do you expect your costs per molecule to behave? How do you see competitive intensity playing out? And, you know, given that you're riding for a lower R&D spend, should we assume this is because of those draft FTA guidelines or is it because the new set of launches post-Batacept and Denosumab will be, you know, much later and therefore the spend will be lower? Yeah, that's one question. On semaglutide, just wanted to get your perspective on how you see dosage forms playing out given that you're also launching oral in India. Do you see oral being unique to India or do you see that having a play in other emerging markets too? And, you know, between the three dosage forms, how do you see the likely salience, say, two, three years out? Yeah, those were my two questions.

Sure. So the R&D, naturally, we, about the set, we paid for a phase three trial, and going forward, we don't anticipate phase three. So obviously, the level of R&D in this area will not be the same. In addition to that, the products that will come in the next coming years in biologics for us will come primarily with partners and less that something that will come in house. So obviously then we share the R&D cost as part of that. And number three, we are becoming more productive. One day we'll discuss it, but we love AI and we love this kind of stuff. And overall, the R&D will have less cost and more output. So this is on the R&D question. On the semaglutide question, definitely we believe that the oral will grow, not just in India, for sure in India, but also in other places. It depends, of course, on how people appreciate the compliance of the oral products. So And as time will go by, also the oral will have probably additional, because that's what the innovator is doing, additional forms, and we will have all of them. So there is a lifecycle management that we are looking, and obviously we are following as well, and we will launch the same as IP will allow us to do that.

So, any thoughts around how do you see the salience between pens, vials, and orals in emerging markets for semaglutide?

I believe that in places that, you know, in the emerging markets, you have countries in which There is a full use of the pens, and innovators fully launch the product in a place that it was done partially, and also markets that not at all. And obviously, the price point for each one of the markets is a bit different. In places with lower prices, we believe that the oral will be more successful than in the lucrative markets, at least the way we look at it now.

Thanks.

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