Dr. Reddy's Laboratories (NSE:DRREDDY) Q2 2027 Earnings Call

0:00 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.V. Narasimham, we call M.V.N., 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. 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.

0:47 Reconciliations to the corresponding GAAP 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 out 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 on your Zoom application. The chat will not be monitored for any questions to the management. This session is being recorded, and both the audio and the transcript will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy's Laboratories. 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 MVN to present the financial highlights for the quarter.

1:43 Over to you, MVN.

1:44 Thank you Aishwarya. Greetings everyone and thank you for being with us today. It is my pleasure to take you through our financial performance for the second quarter of FY27. The business reported a 1.5% year-over-year decline in revenue while EBITDA margin was at 20.6% for the quarter. Excluding Linlamide in North America, the underlying base business maintained its growth momentum Delivering Double-Digit Growth All financial figures in this section are translated into USD using a convenience translation rate of Rs 95.83, the exchange rate prevailing as of September 30, 2026.

2:33 Consolidated Revenues stood at Rs 8,671 crores, which is USD 905 million, a decline of 1.5% on year-over-year and a growth of 7.4% on sequential basis. Strong underlying base business performance across key businesses, except Europe and API, driven by new product launches and favorable forex movements, helped mitigate the impact of lower linoleumite sales. Consolidated gross profit margin was at 52.1%, an increase of 562 basis points sequentially, and a decrease of 254 basis points euro-year.

3:19 The euro-year decline in margins during the quarter was largely on account of lower aluminumite sales. As a reminder, margins in the preceding quarter were adversely impacted by a provision for inventory and other costs associated with semi-glutted API-related challenges. The reported gross margin for Q2-FI27 was 56.2% for Global Generics and 11.8% for PSI. The SNA spend was at 2808 crores, an increase of 6% year-over-year and a decline of 3% sequentially, accounting for 32% of revenue. The year-over-year increase was primarily driven by higher personal costs following annual increments, adverse forex movement, as well as elevated freight costs due to supply chain disruptions arising from the Middle East crisis. The R&D spent was at Rs 524 crores, down by 16% year-over-year and 9% sequentially, accounting for 6% of revenues and primarily reflecting lower developmental expenditure in the generics as compared to the previous year.

4:33 The EBITDA, including other incomes, stood at Rupiah 1783 crores, which is US dollar 186 million, a decrease of 614 basis points year over year and increase of 806 basis points sequentially, reflecting a margin of 20.6% of the revenues for the quarter. The profit before tax was at rupees 1,228 crores representing a margin of 14.2%. Effective tax rate for the quarter was 25.6% compared to 22.2% in the corresponding period last year. The ATR for the quarter was higher primarily due to an adverse jurisdictional mix for the quarter in comparison to the same period in the previous year.

5:26 Profit after tax attributable to equity holders of the parent for the quarter stood at Rs. 9.5 crores, which is used on 97 million, a margin of 10.7% on revenues. Diluted EPS for the quarter is Rs 11.1. Operating working capital as of 30 September 2026 was 14,650 crores, which is 1.53 billion USD, an increase of Rs 297 crores over 30 June 2026. CAPEX cash outflow for the quarter stood at Rs 186 crores which is USD 19 million. Cash flow during the quarter was 171 crores, which is 18 million. As of 30th September, we have a net cash surplus of 2,502 crores, which is US dollar 261 million. Foreign currency cash flow hedges executed through derivative instruments during the period are US dollar 229 million hedge using combination of forwards and risk reversal option. Scheduled to mature by March 2027, these contracts are hedged at a rate of 93.03 to 95.54 per USD. With this, I now request Erez to take us through the key business highlights.

6:52 Thank you, Indian. Good day and thank you for your continuing interest in our company. I apologize for my voice. I hope it will stay consistent. We remain consistent in our strategic priorities of delivering double-digit growth across geographies and sustainable profitability. A true strong execution in our core businesses, progress on key assets, continued productivity improvement, and disciplined investment in future growth drivers, both organic as well as inorganic. During the quarter, the underlying business, that is excluding linoleumide in North America, continued to perform well, delivering a double-digit growth overall, as well as across North America, emerging markets, and India.

7:44 We achieve an EBITDA margin of 20.6%, supported by the strengths of our base business and our continued efforts to drive productivity. Subject to successful validation, we expect to reload Simaglutide Void directly, as well as to our partners in November 2026, consistent with the timelines communicated earlier. We also remain focused on advancing Abatacept and other conflict generics as they move through the regulatory review process in the coming quarters. Let me now walk you through some of the key highlights of the quarter. We partnered with Takeda to bring India's first approved dengue vaccine, we call it Q-Denga, to the private markets in India in the first half of 2027.

8:38 We expand our collaboration with Gilead Science to enable access to an investigational once yearly Lenacapavir for HIV prevention in 120 countries. In collaboration with the Gaurpi Foundation, we secured approval for zolifloxacin and antibiotic use in gonorrhea treatment in Thailand within six months of USFD approval. We received USFD approval for Rituximab Biosimilar, which will be commercialized in the US through our partners Fresenius Cabi. We launched Nivo Lumab in India, marking our entry to biosimilar immune oncology in India. Both Rituximab and Nivo Lumab are developed and manufactured in-house. Generic Simaglutide is now approved in 10 countries across Latin America, Africa, the Middle East, as well of course as Canada and India. Our CDMO business under Origin Pharmaceutical Services generated revenues over $100 million in the last 12 months.

9:50 We continue to receive global recognition for commitment to sustainability, Finance Asia Awards, a silver medal in the best large-cap company in India category, as Asia Best Companies 2026, reflecting strong endorsement by the Asian investor and analyst community. CRI SIL ESG score to 73 out of 100 from 66, becoming the only pharmaceutical company in the leadership category. Let me take you through the key business highlights for the quarter. Please note that all financial figures mentioned are reported in the respective local currencies.

10:39 Our North America generic business reported revenue of $264 million for the quarter, accounting for 29% of our overall revenues and reflecting a decline of 29% year-on-year and a growth of 12% sequentially. The decline is attributed to Linandulemite sales versus last year. The underlying base business, excluding Linadulemite, continues to deliver strong double-digit growth, driven by new product launches. During the quarter, we launched six new products, including the first-to-market launch of Sugamadex injection. We remain on track to launch additional products, including complex injectables, during the year.

11:25 Our branded franchise comprises India, Emerging Market and Consumer Health Business in Nicotine Replacement Therapy, or NRT, together accounted for 53% of our overall revenue and continue to provide a strong foundation for stable margin for the company. Our emerging market business recorded revenue of 2,059 crores rupees, accounting for 24% of our overall revenue and flagging a robust growth of 34% year-over-year and 12% year-on-year. New product launches across market including acquisition coupled with favorable currency movement drove growth during the quarter. We introduced 27 new products across countries in Q2 FY27.

12:14 Our India business revenues were 1,851 Kros Rupees, accounting for 21% of overall revenues and consistently delivering a robust double-digit year-on-year growth of 17% and 8% sequentially. Kros was driven by recent launches including acquired brands along with price increases and higher volumes. According to Acuvia September 2026 data, our IPM rank improved to 8 for the quarter and 9 for the year. We continue to outperform the Indian pharmaceutical market IPM with moving quarterly total growth of 21% versus 14.7% for IPM and moving annual total MAT growth of 19.4% versus 13.2% for the market.

13:05 Four of our brands feature in IPM top 50 new launches and we launch four new brands during the quarter. Our European business, which includes NRT, posted revenue of 127 million euros for the quarter, accounting for 16% of our overall revenues. Revenues declined 6% year-over-year and 3% sequentially, on account of price erosion in generic. Partially offset by revenues from new product launches, growth was further affected by the continued impact of the operating model changes post-NRT integration as highlighted last quarter. During the quarter, we launched six new generic products across market.

13:52 Our PSAI business reported revenue of $88 million, accounting for 10% of the overall revenues. Revenue declined of 19% year-over-year and 3% sequentially, primarily on account of lower API volume uptake. Our CTMO business delivered a double-digit growth this quarter. During the quarter, we filed 28 drug master files globally. We remain committed to improving the health of our business and to delivering consistent growth and sustainable margins. As we continue to strengthen our core business, we are also investing in a future growth driver across peptides, biosimilar, consumer health and innovation. Our focus remains on progressing key products such as Imagglutide and Abatacept, driving operational efficiency and pursuing targeted inorganic opportunities to support long-term growth and shareholder value. With that, I invite your questions as we move into the Q&A sessions.

14:58 Thank you very much, Erez. We will now begin the question and answer session. To join the question queue, please use the raise hand option available by the bottom of your Zoom application. If you wish to exit the question queue, you may click on the lower hand option. Participants are requested not to ask 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 Manpuria from Bank of America. Neha, please go ahead.

15:46 Yeah, thanks for taking my question. My first question is on SEMA. I think you mentioned that we are on track to resume SEMA in early November. Erez, I think you had given us a volume guidance last time when we announced the disruption in supplies. Two questions on Sema. First, is the resumption happening with our own API? Is it the same partner that we're using? And second, given what has happened in Canada with the one player which is already there, how confident are we of meeting the guidance that we've given for Sema?

16:29 So I'm very confident and the confidence is based on orders that we already have and we just obviously need to supply. The main issue was with our ability to scale up the API. This problem is solved and we shipped all the necessary API to our partner. We still need to have the results of the validation. So this is still pending, but I'm confident that it will be successful. And then we are ready to launch. Most of the quantities will go to Canada and some of the quantities will go to Latin America, primarily to Latin America and a little bit to Africa.

17:19 Understood. And my second question is on the gross margin improvement that we've seen in the quarter. MBN, if you could give us some color in terms of, you know, what's driving this gross margin improvement? And is it fair to assume that as Hema comes through, you know, this is the bottom in terms of gross margin and gross margin should only improve from here?

17:43 Yeah, they had just as we Guided earlier, we want to be gross margin in the range of 52.55. That's why this quarter what we see 52.1. This improvement from last quarter to even this quarter is a combination of the new products and the business mix. That's where I think we will be in this zone, certainly in the coming quarters as well. And your assumption is correct? Yes.

18:11 It will only go better from here? Yeah.

18:14 Understood. Thank you so much.

18:18 Thanks Neha. The next question is from the line of Dr. Kunal Dhanesha from Akhwari. Kunal, please go ahead.

18:29 Hi, thank you for taking my question. First one on the one cash flow line item on other assets and liabilities, there is a large change that has happened around 1370 crore. So MBN, could you please help us what is driving that?

18:48 So this is the one where this SSA claim what we had, I think there were the payments have happened this quarter. That is one change and then other balances due to various operations. But that is the biggest one. Remember $50 million what we have provided in the Q4 during this H1.

19:13 Okay, so the cash flow has happened now. Okay, great. Thank you. And, you know, just continuing on the gross margin front, or the other way to look at is there's a sequential improvement in US revenue, a meaningful improvement, right? So, Would you be able to split between the new product launches driving that and the volume improvement in existing product or pricing improvement? How should we think of the delta in US business and the similar driver and approximate split for the gross margin improvement on a QOQ basis?

19:54 So certainly like a new products what we have launched in So Kunal, the main driver

20:25 The driver is actually the business mix because now the businesses that are relatively with high profitability, meaning India, EM and the NRT, all of them are much more profitable than the average, went to 53%. So this is one contribution. The second is what Ambien said, that the US is more profitable because of the contribution of the new product. The combination of both gave that. And the last, we did not increase expenses. Expenses are essentially flat this quarter. And so if you grow the sales double digit and you don't increase the cost, it obviously leads to this margin improvement.

21:17 Sure, and lastly from my side, would we have also seen some drag from the raw material price increase and given the oil prices are high The chemical prices are also high. And then how should we look at that cost line item from the second half perspective? Do you think that quarter two is when we have seen most of the increase or quarter three, quarter four, we can see some drag?

21:48 So here, just I think this because of the war, I can say increases what we have seen in the KSMs. and then the second one is solvents and the third is like a logistics flight outwards what we are exporting metal from India to all other countries. So we have seen the increase on the three fronts and then overall it has an impact close to 100 basis points on the EBITDA. So we believe that is already part of the gross margins and then we believe I think this trend will continue for Q3 and Q4 as well.

22:29 I don't anticipate additional growth unless of course there will be, you know, as much as we can predict additional geopolitical issues. But with our limited understanding, if it will stay the way it is now, we are in the same place.

22:47 Sure. I have more questions. I'll join back the queue. Thank you and all the best.

22:51 Thanks Kunal. The next question is from the line of Damayanti Kirai from HSBC. Damayanti please go ahead.

23:01 Yeah, hi, good evening everyone. It is a clarification on semaglutide resumption. So you mentioned you have already started supply of API to your partner, fill and finish partner. However, what is remaining is the validation. So I actually am not clear. I thought like validation will be done and then you will supply to your fill and finish partner. So can you just help us understand this?

23:30 Sure. So you do validation as we had to come back and basically tweak the process on the API. Then you do validation of the API. And then when you ship it to our partner, Then you know and you need now to do validation on the drug products using that API. This is a process that takes about three weeks and so far give or take all the activities are on time and that's why it took us to November from the first place. So far it is in hydration but you have basically validation in each stage of the scale up of the process.

24:17 Sure, that's helpful. And other point on semaglutide, as you mentioned, so far it's approved in around 10 countries. So didn't you secure for more approvals in other market while you are trying to resolve the API issue or you want to go after semaglutide? After you resume the supplies in the existing or approved market, so how do you plan? Because you mentioned you'll be targeting to launch in more than 70 countries across the world, right?

24:49 Yeah, the right number is now 89 markets. But it's just that all the markets that the process started, we did not stop. The scale-up issue has nothing to do with the regulatory process, and we don't require any amendment to the file or anything like that, so everything continued. And all the approval we got was according to the process in each one of those respective countries, and this will continue. Some of the... Approval in some other markets got delayed because of the scale up as we needed to ship them samples of the products and those samples will be now sent to these places so we will continue with the process for all the other markets as well.

25:38 Sure. And my second question is on your NRT, the nicotine business. So flat performance for last two quarters. And you mentioned it was due to change in the business model. So when we should see recovery in NRT business?

25:59 So last year, or last quarter, if you recall, we had to carve out from Helion. So it means that Helion used to do it and we gave them certain margins for handling the business. The new business model, it means that now we are selling it either by ourselves or through distributors, but the payment to Elion is not there anymore. It means normally, in this respect, less sales, but more profit. So what I can say about it, the comparison year over year will be until we will finish the year, I think we have two more quarters like that. In general, the business is doing well.

26:44 It will grow in the same way that you saw until now, somewhere between a high single digit to maybe even double digit. And the profitability is way above the expectations that we put in the business model. So we are very, very pleased with this one.

27:06 Sure. Thank you. I'll get back in the queue for more questions.

27:10 Thanks, Damayanti. The next question is from the line of Tausef Shaikh from BNP Paribas. Tausef, please go ahead.

27:21 Good evening and thanks for the opportunity. First question about the goal date is set for December. Is there any incremental update that you would like to share with us, especially from the Bachubali plant?

27:34 Yes, so the plant went for the inspection. We're still waiting for the IR to come. and the goal date is indeed December 22nd and we are hoping for an approval. It's obviously in the end of the US FDA.

27:55 Okay, that's helpful. On the R&D expense, which seems lower compared to YY and Q&Q, what you have mentioned is an account of lower spend on global generics. How do you see this trend going ahead? Shall we assume this is of new base now?

28:09 So this quarter is R&D is low absolutely all right and then coming quarters what we believe our R&D is going to be in the range of seven to eight percent.

28:21 Okay that's helpful I will get back in the queue.

28:24 Thanks Tausef. The next question is from the line of Madhav Marda from Millennium. Madhav please go ahead.

28:34 Hi, good evening. Just one question. If I understood right, during the initial remarks, you mentioned about like one or few complex injectable launches in the second half of the year. Could you just clarify, like, if you could share some more views on, you know, that product? Did I hear that right? That we have some complex injectable lineup yet?

28:55 Well, we'll talk about it more when we get closer towards the end of the year. But yeah, we do have a few interesting products in our pipeline. We've already spoken about that. We've done a bunch of launches. We want to continue with that momentum.

29:09 Yeah, but I'm kind of careful to promise because, you know, I got burned in the past when dealing with the approval of Complex Generics. Some of you have been with us for many, many years and you remember that. But let's say we have some exciting products ahead.

29:30 I remember in 2022, we had done the analyst meet in Bombay. I think that time we had shared names of a few products. Is it from that list itself? You'll have disclosed 4-5 products in the pipeline, right? You will know by the end of the year. Okay, fine. But it's a meaningful product for the US market, is that right?

29:51 These are meaningful products, yes.

29:54 Okay, got it. Thank you.

29:56 Thanks, Madhav. The next question is from the line of Forum Parekh from Bank of Baroda Capital. Please go ahead.

30:10 Thank you for the opportunity. My first question is on Europe Business X of NRT. So the growth seems to be declining there probably because of Germany. So how should we look at it? I mean NRT is also now flattish because of the change in business model. and EXOF NRT also it's declining which is taking a toll on the Europe business. So can we expect it to go back to double digit?

30:43 Yeah, it will. First of all, the NRT will grow. The NRT is growing and obviously that part will positively impact also the relevant part of Europe. Absolutely, you are correct about the performance of this quarter. The next quarter should be better. Let's say the NRT I'm expecting, again, either high single-digit growth or even double, depends on certain scenarios. As for Europe, I'm expecting growth, but it will not be significant growth this year.

31:27 Sure, and on XRT, how should we look at growth ramping up?

31:34 XNRT Europe, you mean? Yes. It should grow, probably single digit this year.

31:44 Okay, that's helpful. My second question is on SG&A cost. Here also the contribution has come lower to 26% versus earlier trend of 29%. So would this be the new sustainable number to look at?

32:04 Yeah, so overall, just want to clarify our SG&A percentage is 32%. and just as you know here we've also spoken the cost productivity what we are doing is now that is coming visible. So even coming quarters also at least in this year coming you may not see like a significant changes to this number. It's going to be at this level around here and there I think small changes. I just want to reiterate to take the opportunity

32:38 We believe that the level that we agree and we discuss it all the time, actually with all of you, is sustainable. We think that the 20 plus, we're actually aiming for the famous 25% that we are always discussing, EBITDA, and this will continue and we are planning to consistently continue to deliver on this number.

33:04 Sure, thank you. And last question is on the India business. So we have done good and IPM growth also is inching up in double digit and is likely to sustain at current levels for the remaining year. So can we expect current run rate of 17% to be the growth rate for the year?

33:32 It's going obviously to stay a high level of double digit. It may be a little bit less or a little bit more, but we are in the right neighborhood.

33:42 Also, we want to be our growth, want to be like higher than the market growth at a few basis points.

33:50 Sure, that's helpful. Thank you.

33:53 Science Forum. Participants are requested to restrict the number of questions to two to ensure that everyone in the queue gets an opportunity to interact with management. The next question is from the line of Prakhar Nema, who's from BNY Mellon. Prakhar, please go ahead.

34:15 Firstly, thanks for the question. Thanks for taking these questions. So what is the company's strategy for expanding the biosimilar business through, you know, within research and development and partnership? So could you please share some light on this?

34:30 Sure, we are going after both. So we are naturally leveraging our batch pulley facilities as well as additional facilities that we build. In parallel to that, we are We are talking to partners around the world and we are trying to license product in which we don't have in our own pipeline, in our own internal pipelines.

35:15 And we have it whether globally or for specific regions. So both will continue.

35:22 Perfect. Thanks. And one more question. So what the revenue we can expect for the next three to four years?

35:30 It depends on the success of our data set. Thank you so much. Thanks for taking my questions.

36:00 The next question is from the line of Abdul Qadir Puranwala from ICICI Securities. Abdul, please go ahead. Abdul, you've been unmuted.

36:25 Just move on, then I'll be coming back.

36:28 Abdul, we'll come back to you. The next question is from the line of Vishal Manchanda from Systematics. Vishal, please go ahead.

36:40 Hi, good evening and thanks for the opportunity. On Rituximab, would it be possible for you to share where are we in terms of market share in Europe?

36:53 We have a single digit of market share in Europe.

36:58 Low single digit or high single digit?

37:01 Low single digit.

37:04 Any timelines and any guidance as to where we can be, maybe a year or two years down the line? And do we have the capacities there?

37:14 So indeed we were constrained by capacity. We should be better once we will be able to and more qualified capacity for that. And at the same time, we're talking about the product with the high level of competition. So I will not expect a significant change because of that.

37:42 Okay. And second, your JV Entity in China got a first generic approval for a drug called Icotenib in July. Is that contribution part of your numbers in the current quarter or will this come in subsequent quarters?

38:03 So we are recording our share of the, so we are not recording the sales, we are recording our share of the profit of that. So it's part of the profit and our share in that which is 51%.

38:19 So this would be part of the share of profits from JV? Correct. So have we kind of started selling this and have we ramped up to our full potential and are we the only generic here or there are other generics that have entered?

38:34 To the base of my knowledge, we started. I don't really recall about the competition.

38:41 Okay. And just one final one on Abetacept. Once we get the approval, how long can we take to get listed on the formularies? Will it be like six months or we can start getting market share quickly post approval?

38:57 So the ramp up, like you said correctly, will be after six months after we'll get all the codes and all the registration. But we can initially sell smaller quantities from day one. So expect that the launch will be upon approval, but the ramp up will be correctly after six months.

39:21 Got it.

39:22 If I can ask one more, on Sema, if you can guide on where generics are in terms of market share in Canada as on date?

39:31 As of date, there is only one generics in Canada. I don't remember their market share. But let's say that the Canadian market will love to get us big.

39:46 Got it. Thank you.

39:49 Thanks, Vishal. The next question is from the line of Surya Patra from Phillip Capital. Surya, please go ahead. Surya, you've been unmuted. Okay, while Surya joins back in, the next question can be from the line of Dr. B. Lopati Parampil from Alara Capital. B. Lopati, please go ahead.

40:25 Hi, good evening to all of you and congratulations on a great set of numbers. A couple of clarifications. I see from the footnotes this Vendam Austin deal and some milestones in Russia, which is part of revenues. Where is it included in the revenue breakup? Is it part of US revenue and Russia revenue respectively?

40:46 It is in the sales line.

40:49 And Ben Damastan is in the US revenue and the milestones are in the Russia revenue. Am I right?

40:55 That milestone of Russia is part of the EM.

41:02 Okay. Second, what is this Bentham Astin deal about? What was the logic behind sending the product rights, selling the product rights?

41:13 Which one? Bentham Astin Outlicensing.

41:15 Yeah, that's where I think here we thought a partner will get overall as a deal and then we get a better economics. That's why we have given these rights to the partner.

41:30 Got it.

41:33 In the quarter, I see that the finance income is significantly lower versus 290 crore last quarter and kind of similar numbers in previous quarters. This quarter is only about 90 crore. So is there any reason why the finance income is so much lower?

41:51 So here, what the exposure we have on the balance sheet, the Forex, especially the movements, I don't know, from June to September of the ruble spot rate is, I think, significant variance. I think that has given this P&L debit, I think, in this quarter as compared to the Q1.

42:14 Sorry, in this quarter, it is lower compared to Q1? Yes, yes, yes.

42:19 Okay, okay.

42:20 I'm sorry, one last question. What would be the capex for the full year? Because the first half I have seen is much lower than your typical one.

42:28 Earlier we have guided around 1800 quotes. My view, it could be a little lower, but definitely I expect around 1600 to 1700.

42:40 Thank you. I'll join back with you.

42:42 Thanks, Dino. The next question is from the line of Amlan Das from J.P. Morgan. Amlan, please go ahead.

42:55 Sorry, I just wanted one clarification on the Apatacet scenario. So, apart from the IV indication, we also heard from the previous calls that for the subcutaneous indication, you expect an approval in the US in 4QFI28 and in the non-US markets for both indications in 1QFI28. So, do the timelines remain consistent or has there been a change in this?

43:20 Consistent. We stay consistent with it, yeah.

43:26 Okay, thank you. Thanks for that. And the non-US market is also roughly 1 billion USD for the reference trucks. So how do you expect the ramp up in the non-US markets for you for a better set?

43:42 We believe that the European market is a very important market for this. And it's going to be launched A little bit after the United States, but the Europe is, we believe, is a significant market.

44:01 Okay, and lastly, for these markets, the manufacturing would be done in Bachchapalai itself, right? Correct. Okay, thank you. Thanks for the opportunity.

44:12 Thanks, Angan. The next question is from the line of Dhara Ganatra from UTI Pension Funds. Dhara, please go ahead.

44:25 Am I on again?

44:27 Yes, we can hear you.

44:30 Thank you so much for taking my question. So I had one question largely from the India market perspective. What we have seen in the last two years is that IPM growth has been in single digits, high single digits and in the last six odd months or last three odd months what we have seen that the growth has accelerated versus the last two years the growth was more driven by pricing this time around there's a lot more volume growth so both for Dr. Reddy and for the industry what do you think is changing and what is the outlook for the second half of the year and going forward.

45:08 One thing that changed significantly is obviously the launch of Simaglutide and the GLP-1 product. This is a significant addition for volumes. The second one is that you have more new products like us, innovative products that are coming to the market. So, in general, this is the main contribution. I believe that if you take the GLP-1, you'll get either close to the single digit or too high. I did not do the math, but this is the main contribution, I believe.

45:55 Okay, so you don't see any smaller players vacanting the market or you know slow down in trade generics or that sort of that would be driving the IPM growth?

46:07 I don't. The main at least the way I see also that The main growth for us is in the places in which you have those utmost demands. For us, it's primarily the innovation. The branded generic, those that we are investing behind are doing well. The rest are doing like in the market, like normally, mostly driven by prices.

46:33 Sure, thank you. We're going to try and see if Abdul can join us now. Abdul, can you please unmute yourself? Abdul, you've been unmuted. Okay, looks like this continued technical issues at his end. The next question will be from the line of Vivek Agarwal from Citi. Vivek, please go ahead.

47:20 Thanks Aswariya. My question is on Abhata sir. So just trying to understand what can be the fair market share of your biosimilar in the US let's say once the product is there across the formularies even one year down the line. Because we have seen in lot of biosimilars that sometimes the market share remain range bound Thank you.

48:11 At least at the moment, assuming that we'll get approval, we are alone. So in terms of competitiveness, it's us and the innovator. It's a medical benefit product in the United States. So the sensitivity to the price and to market share is not as big as in pharmacy benefit. I know you know that well. I believe that a fair market share can be any number from 15% to 25%. It depends, of course, on the success of the launch. We need also to add that once the sub-Q will come to the market, it's obviously going to add to the market share, which will come later.

49:00 We are talking about February 28th. So this is Give or Take. So it's primarily about the sweet spot between market share and prices.

49:12 Just a clarification, this 15-25% is the entire about ourselves market you are talking about or only the IV version?

49:22 Initially it will be on the IV and it could be that there will be some movement on that but we will start with the IV and the sub-Q will come in February 28.

49:36 Understood. And in terms of confidence on approval based on your discussion with the FDA, so would you like to assign any kind of probability how comfortable you are based on your discussion with the agency, type of queries, etc. So what kind of the chances that you have in terms of approval or is there any possibility of getting CRM in December and approval may get delayed by two months, etc.?

50:01 You know, I'm 33 years in this business. We feel good about the product. We feel good about the inspection. We feel good about the correspondence with the US FDA. We want and are preparing to launch in December. If you ask me, is there a chance that we'll get a CRL, there is a chance. I don't want to, you know, Obviously, none of us want it, but there is a chance.

50:42 Understood. The second question was on the US generic business trajectory. On a quarter-on-quarter, we have seen improvement. And a part of the improvement is also being driven by some of the products which may face competition. in the incremental quarters Q2 and Q3. So, just want to get your understanding how we should look at the US numbers with the North American numbers on quarter on quarter. Is there any possibility of dip in 3Q, 4Q or you can maintain the current trajectory even going forward in the second half?

51:18 So, for the US, we have, one we discussed is Abhata said, The other is obviously Simagrotide that are going, it's not the US, but it will going to be including in the North America sales and also those complex generics that are on paper. So if we will have that or the combination of that, we will actually grow versus the current state and for sure sustain it. Yeah, I believe that the numbers are sustainable. Naturally, we have Botoceni. Botoceni, obviously, after the six months, that SKU, we have one SKU that has 180, that will obviously go down. I don't think it will impact significantly, so that we will be able to absorb without a problem.

52:15 So overall, I'm optimistic, but it obviously depends on our ability to be successful with those products that I mentioned.

52:25 Understood. Just last question on margins because the reason I also asked question on the U.S. business sustainability that in the coming quarter, you are also indicating, alluding that the R&D spend is also expected to go up, right? So I'm just wondering if R&D spend goes up, some of these products like Bosutoneep comes down and in this quarter you also had some impact of My List on Incomes, etc.

52:51 So just trying to understand from where you are getting confidence that you will be able to maintain close to around 20% kind of pensions in the second half.

52:59 First, we know our numbers. So I'm sharing that confidence against. We will reach that and it will even go higher. The reason that we feel it, first of all, is the growth that we see in EM, in India. With the consumer health as well as the United States. Second is the way we control the expenses. So indeed R&D, we will have more, but we will have on the other expenses less. And we are planning to continue to do that. So it's primarily the mix, the growth, and obviously the continued launch of new products.

53:45 For me, by the way, 20 or 21% is not impressive. We always say that we want 25%. We are recovering from lenadolamide, and that's what we are going to be. But I said it also before, now I think people believe me, we will have... The next question is from the line of Tushar Manodane from Motilal Oswal. Tushar, please go ahead.

54:31 Thanks for the opportunity. Just one question from my side. What kind of price erosion we have seen in case of Sugama Decks post launch?

54:41 I don't recall the price.

54:43 There is no price. I think whatever we have initial contract signed, I think it's getting continued. I think the product launch. That's probably versus the innovator.

54:53 I don't remember.

54:54 Maybe I can get back to you on this later, Sushant.

55:01 That's it from this. Thanks for the opportunity.

55:06 The next question is a follow-on question from Kunal. So next question is from the line of Dr. Kunal Damesha.

55:17 Hi, thanks for the follow-up. Just one on the Abatacept sub-Q filing. Where are we in that process?

55:27 We are supposed to submit it, if I remember correctly, in February.

55:33 February of 2027 Sure, sure. And another one on the Complex Zendix launch that we are basically looking forward in the second half. Are these or that product particularly is, you know, we are dependent on the IP outcome on those launches or is it more just the approvals? Approvals, every approval. And are these Para 4 filings?

56:19 Thank you. Launch and approval situation for now.

56:25 Sure, sure, sure. And lastly on Abarthcept, you know, you suggested that the ramp up will happen, you know, a couple of quarter later as we get included in the formulary. But just one, you know, when we launch, what kind of infra, commercial infra do we require, you know, especially for the US market and when do we start the build out of that?

56:52 So we started to do it already three years ago, so the main framework of the sales and marketing in North America is already there. We will hire a couple of more sales teams, so the team that will cover certain geographies, this is still pending, but the lion's share of the team is there.

57:19 Sure, so there is not much incremental cost related to that.

57:22 No, not much.

57:24 Perfect. Thank you and all the best.

57:31 Thanks, Kunal. The next question is from the line of among which from Astute Investment Management. Aman, please go ahead.

57:55 Yeah, good afternoon team. Am I audible? Yes, yes. Yes, my questions are on the semaglutide side. First, given we expect the validation to be completed by November, Where are we in terms of launches in other big markets like Brazil and Turkey in terms of approval timelines and launch timelines? Any rough estimate?

58:26 Brazil likely in Q4, the beginning of Q4 and the rest of the markets So we are going to launch in all the smaller markets either in the end of Q3 or at the beginning of Q4 and this is primarily the timelines from the time that We finish validation and we start to sell batch by batch. Some of it may come to the markets in Q3, some will come in January. So all of it will be in that time frame. Some in December, some in January.

59:11 Sure, that helps. Second question is, you've talked about we are still adhering to our guidance of 6 to 7 million devices this year. What are the latest estimates say for next 1 to 2 years, 528 and 29, where do you see this number?

59:28 It obviously depends on the success of this 6 to 7, but like I mentioned in the past, the run rate of 12 to 15 million pence that we discussed in the past. It's still my estimate. But obviously, it will fluctuate as we understand better the markets once we'll get all the approvals and we'll understand the competition in each one of the markets. So right now, take it as a very tentative number. But this is what we are preparing for, let's say, the 12 months from April.

1:00:02 You had mentioned this number last time also. I just want to understand, are you more positive on the number or slightly negative, that point?

1:00:12 I did not change my attitude. It's because we need to see the success of the NMR picture that we will take, as well as the success NMR picture of our partners. So I don't have any additional information. Right now it's the same, consistent with what we discussed in the past.

1:00:34 Thank you for answering the question.

1:00:36 Thanks, Amman. In the interest of time, we will take one last question from the line of Shahin Mukherjee from Nomura. Shahin, please go ahead.

1:00:49 Yeah, thanks for taking my question. Just one question on the PSAI segment, the growth has been muted for a while. So how you see that growth playing out? You also mentioned the CDMO revenues at 100 million plus, if you can give a color, some color on The nature of this revenue, is it generics or innovation related? And also the new contract that you signed, when you expect that to kick in, is that meaningful? And any other CDMO contracts that can be added over the next year or so? Thank you.

1:01:25 No, thank you, Sayan. So on the CDMO, I believe that the growth trajectory will come. It's a combination of growth and discovery, what you call innovation. So this is growing in double digits. We have also certain contacts with big companies in which they want to transfer their production We have several of these projects and as well as a normal CDMO, meaning that we are doing a project for phase 3, phase 2 for innovative companies. I believe that this business should grow and should reach Two to three times of these numbers in the next three to four years. This is still our plan. I believe that we should get there.

1:02:22 On the API side, part of it is that our older products have less demand. And part of it is because most of our launches and most of our activities are done more as a B2B of a Finnish product. This is actually going well. Part of it we are recognizing as part of PCI and part of it we are recognizing as part of the relevant EM or North America. So overall the B2B is actually growing. The API merchants part of it is declining because most of the product, the peptides and this kind of stuff, people prefer to buy the finished goods rather than to buy the API.

1:03:12 Thanks, Erez. Thank you.

1:03:16 Thanks, Chaim. That was the last question. Thank you all for joining us today. We value your time and participation on this call. If you have any further questions or need any additional information, please do feel free to reach out to me. With that we conclude today's earnings call. Thanks everyone.

1:03:33 Thank you.

1:03:34 Thank you.