Dr. Reddy's Laboratories Q1 25/26 Earnings Call Transcript

Quartr
Provided by Quartr
July 23, 2025

Key Takeaways

  • Positive Sentiment: We delivered 11% YoY revenue growth to ₹8,005 crores and an EBITDA margin of 26.7%, exceeding our 25% aspiration.
  • Negative Sentiment: Consolidated gross margin dipped 350bps YoY to 56.9% due to generic price erosion and weaker operating leverage.
  • Neutral Sentiment: SG&A spend rose 13% YoY to 30% of sales, driven by strategic investments in consumer healthcare and the NRT–Nestlé JV.
  • Positive Sentiment: Our biosimilars pipeline gained traction with a partnership for pembrolizumab and a Phase II abatacept readout expected in Nov ’25.
  • Positive Sentiment: We aim for semaglutide approval in Canada by Oct–Nov ’25 for a Jan ’26 launch, targeting 10 million pens capacity for FY27.
AI Generated. May Contain Errors.
Earnings Conference Call
Dr. Reddy's Laboratories Q1 25/26
00:00 / 00:00

Transcript Sections

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Richa Periwal
Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories

Good morning, good evening, and a warm welcome to all. Thank you for joining us for doctor Reddy's q one FY twenty six earnings conference call. We truly appreciate your time and participation. Joining us today are members of the leadership team, mister Erez Israeli, our CEO, mister MV Narsimham, our CFO, and the IR team.

Richa Periwal
Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories

Earlier today, we released our quarterly financial results. These are now available on our website for your reference. We'll begin the session with MVN presenting an overview of the financial performance for the quarter. Following that, Erez will provide his perspective on the business highlights and the strategic outlook. We will then move to the Q and A segment as mentioned by Ashwarya.

Richa Periwal
Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories

Before we proceed, please note that today's call is the proprietary material of Doctor. Reddy's laboratories and cannot be rebroadcasted or attributed in any media or press outlet without prior written consent from the company. This session is being recorded, and both the replay and the transcript will be made available on our website shortly. All commentary and analysis during this call are based on our IFRS consolidated financial statements. In addition, the discussion may refer to certain non GAAP financial measures.

Richa Periwal
Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories

A reconciliation to the GAAP measures is provided in our press release. We would also like to remind you that the safe harbor provisions as detailed in today's press release apply to all forward looking statements made during this conference call. With that, let me now hand it over to MVN to present the financial highlights for the quarter.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

So thank you, Richard. A very warm welcome to all. Thank you for taking the time to join us today. I'm pleased to to walk you through our financial results for the first quarter of FY twenty six. The The quarter began on positive note marked by a steady double digit revenue growth.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

We delivered an EBITDA margin of 26.7%, modestly head of our aspiration of 25%. The inclusion of our consumer health care business contributed positively to to top line momentum. All financial figures in this section are translated into US dollars using a convenience translation. 85, seven four. The exchange rate prevailing as of June, thirtieth two thousand twenty five.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

Consolidated revenues for the quarter stood at $8,005.45 crores, which is 997,000,000 US dollars, a growth of 11% on year over year basis and remaining flat on a sequential basis. This performance was driven by steady performance across most markets with the exception of the of our US Genex business. Consolidated gross profit margin for the quarter was 56.9, a decrease of three fifty basis points year on year and an improvement of one thirty four basis points sequentially. The year over year decreases in margins was largely attributable to price erosion in generic segment, particularly in and lower operating leverage partly balanced by a better product mix. Gross margin for Global Generics and PSA were at 60.913.2%, respectively.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

Lower business margins in PSA reflects seasonal weakness and under recovery of overheads. The SG and A spend for the quarter was rupees $2,005.65 crores, which is in US dollars $299,000,000, an increase of 13% year over year and 7% on a sequential basis. The year over year increase was primarily driven by strategic growth oriented investments in consumer health care business of NRT and the Nestle, a JV for Nutraceuticals portfolio. Both businesses represent strategic growth drivers, necessitating focused investment to unlock and sustain their long term potential. Other s and d expenses remain well managed and broadly flat on year on year basis, reflecting discipline in cost control across core operations.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

Consequently, s and d expense accounted for 30% of the sales during the quarter, was higher by 44 basis points on year over year and one seventy three basis points on quarter quarter on quarter. The r and d spend for the quarter was rupees $6.24 crores, which is US dollar 73,000,000, remaining broadly flat on year over year basis and declined by 14% sequentially. We continue to make targeted investments in our complex generics, API, and biosimilars pipeline to support long term growth. The r and d spend was at 7.3% of the sales for the quarter and lower by 76 basis points on year over year and one twenty three basis points on quarter over quarter. For the full fiscal, we expect the r and d investments to be in the range of seven to 7.5% of the sales.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

EBITDA for the quarter, inclusive of other income stood at rupees $2.02 $7.08 crores, which is US dollar $266,000,000, an increase of 5% on year over year and decline of 8% on q o q basis. That q o q decline was primarily driven by higher resident lower other income on relatively flat revenue base. The EBITDA margins stood at 26.7% as was lower by one forty nine basis points on year over year and the two forty three basis points on q o q basis. The net finance income for the quarter is around rupees $1.57 crores as compared to 84 crores for the same quarter last year. As a result, the profit before tax for the quarter stood at 1,905 crores.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

That is US dollars $222,000,000. PPT as a percentage of revenue was at 22.3%. Effective tax rate for the quarter was at 25.9% compared to 26.04% in the corresponding period last year. We expect the normalized ETR to remain around 25% for the full fiscal year. Profit after tax attributable to equity holders of the parent for the quarter stood at rupees 1,419 crores, which is $166,000,000, A growth of 2% on year over year and decline of 11% on a q o q basis.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

This is at 16.6% of revenues. Diluted EPS for the quarter is, rupees, 17.04. Operating working capital as of thirtieth June two thousand twenty five was rupees $13,003.20 crores, which is $1,550,000,000, an increase of rupees $7.22 crores, which is $84,000,000 over thirty first March two thousand twenty five. CapEx cash outflow for the quarter stood at $6.83 crores, which is $18,000,000. Free cash flow generated during the quarter was $4.33 crores, which is $51,000,000.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

As of 06/30/2025, we have a net cash surplus of $2,009.22 crores, which is $341,000,000. Foreign currency cash flow hedges executed through derivative instruments during the period are as follows. US dollar $648,000,000 has been hedged using structured direct contracts scheduled to mature over the next financial year. These contracts provide a minimum production rate of rupees 86.13 per dollar while also allowing participation in the event of dollar appreciation. Ruble 3,700,000,000.0 hedged at a fixed rate of one, per Russian ruble with maturity falling, within the next four months.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

With this, now I request Erez to take us through the key business highlights.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Thank you, MVN. A very good morning and good evening to everyone joining us today. We appreciate your time and interest. Our performance in q one highlights consistent performance and steady progress of our strategic agenda. We delivered a double digit growth in our base business, advanced critical pipeline programs including semaglutide and abatacept.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We remain focused on optimizing structural cost and driving operational efficiencies. We are also consistent with our strategic priority as we scale our presence in consumer health, innovative therapies, and biosimilars. Overall, our results were broad based except some softness in The US generic market. Let me now walk you through some of the key highlights from the first quarter. Revenue grew by 11% reflect reflecting a sustained business momentum and consistent execution.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We delivered EBITDA margin of 27%. The ROCE for the quarter was 22%. We closed the quarter with a net cash shop loss of $341,000,000 reinforce our strong balance sheet position. Our biosimilar business gained momentum this quarter to a strategic collaboration with Albo Tech for the co development, manufacturing, commercialization of pembrolizumab, a biosimilar to Ketotra. The phase integration of the acquired nicotine replacement therapy, the NRT business is progressing as planned.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Following the successful integration in The UK and Nordics, are now preparing onboard additional markets, Canada, Australia, and other selected countries across Western Europe in the next phase. During the quarter, the US FDA inspected the Middleburg API facility in New York and issued a form, for a trace with two observations. Following our response, the site has been classified as VAI. The agency also conducted a GMP inspection of sit at CTO 5, our API facility in in in Mira, Laguda, at Telegana, and issued a form for entries with two observation. We have submitted timely response in line with our regulatory requirements.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Last week, US FDA conducted GMP and pre approval inspection at our FTO 11 formulation facility issue issuing curriculum under Pradesh resulting in four forty three with seven observations. We will respond with it the required timelines. In recognition of our sustained commitment to sustainability, our carbon disclosure project CDP rating for 02/2024 was elevated to an a in the climate category, making us the only pharmaceutical company with this call and placing us among the two top 2% of the of any companies globally. We are also retain our leadership status in the water and supply engagement categories, reflecting our consistent performance across key environmental dimensions. Let me take you through the key business highlights for the quarter.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Please note that all financial figures mentioned are reported in the respective local currencies. Our North American business generated revenue of $400,000,000 for the quarter, a 17% year on year decline and 4% decrease sequentially. The softness in the market was primarily due, to price erosion in selected products, primarily linadolamide as well as timing of procurement of this product, by certain customer. During the quarter, we launched five new products and expect a pickup in the launch momentum in the remainder of the fiscal year, which is expected to support recovery and drive growth in this segment. Our European generic business delivered revenue of $131,000,000 for the quarter, making it 124% year on year, both a 6% sequential decline.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

The year on year performance was primarily fueled by the contribution from the acquired nicotine replacement therapy portfolio and the new product launches, which provided a offset to some pricing erosion. During the quarter, we introduced 13 new generic products across European markets, further strengthening our portfolio and reinforcing our growth trajectory. Our emerging market business reported revenue of INR $14.00 4 crore in Q1, reflecting a 10% year on year growth and flat sequentially. Growth was primarily driven by higher volumes and further support by new product launches. During the quarter, we introduced 26 new products across multiple countries, reinforcing our commitment to expanding access and deepening market prices.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

With this segment, our Russia business delivered a seventeen year on year growth and 2% sequential increase in constant currency terms, underscoring its continued momentum despite macroeconomic challenges. Our India business reported revenue of INR $14.71 crore rupees in Q1 delivered double digit year on year growth of 1113% in sequential increase. This performance was primarily driven by contribution from new product and pricing. According to IQVIA, we continue to hold our position as the 10 largest player in India pharmaceutical market and have outpaced market growth with move with moving annual total growth of 9.2% compared to IPM of 8% growth and MQT growth of 11.2% versus IPM a growth of 8.6%. During the quarter, we launched five new brands including two innovative assets, Bayfotos, which is a a RCV vaccine, and the protocol Sensimium in q one further strengthening our domestic portfolio and reinforcing our growth momentum.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Our PSAI business reported revenue of 95,000,000 in Q1 FY twenty twenty six, registering for year on year growth while experiencing a 14% sequential decline. The business momentum is expected to pick up in the coming quarters, positioning us to return to a double digit growth trajectory for the fiscal year. During the quarter, we filed 12 drug master files. We remain committed to strengthening our pipeline as a key driver for future growth, while actively pursuing a strategic collaboration to accelerate innovation and expand our capabilities. Our r and d efforts remain concentrate on complex generic high impact like GLP one group and biosimilars, which are center central to long term value creation strategy.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

During the quarter, we completed 11 global generic filing. As we move, to the fiscal year, our focus remains on strengthening our base business, advancing key pipeline assets like cemaglutide and abatacept, building commercial, strength in regulated market and improving efficiency and cost structure. We are actively exploring strategic partnership and acquisitions to diversify and strengthen our portfolio. These efforts reflect our commitment to agility and disciplined execution in a very dynamic market environment aimed at delivering sustainable value for our stakeholders. With that, I will welcome your thoughts and questions as we move into the QA session.

Operator

Thank you, Arias. 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 your Zoom application. If you wish to exit the question queue, you may click on the lower hand option. Participants are requested to not ask more than two questions at a time and to rejoin the queue in case of any incremental queries.

Operator

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 Ahmed Chalked from JM Financial. Ahmed, please go ahead.

Amey Chalke
VP & Sector Lead - Healthcare & Pharmaceutical at JM Financial Ltd

Thank you for the opportunity. I hope I'm audible. So the first question I have is on The US based business. Is it possible to give some guidance on how it has performed quarter on quarter, whether it has improved or gone down directionally, and how the base business is expected for the FY '26 as well for the use.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Tell me there was maybe something with the mute button or something. Can you just repeat your question, please? Yeah. Go ahead.

Amey Chalke
VP & Sector Lead - Healthcare & Pharmaceutical at JM Financial Ltd

Yeah. I wanted I was asking, The US based business, how it has performed q one q basis, whether it has increased or decreased directionally. And, for FY '26, what is our outlook for The US business?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So the base business in The US was yeah. The base business in The US decreased. It's primarily timing. So I I will say, I don't see anything relative special.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

There were some key product, especially Suboxone, in which there were a kind of orders that move from a quarter to quarter. I will not give too much importance to it. Overall, the best business, the way I see it's going to be flat to double, single digit growth that we normally, are discussing. It's, of course, depends on the success in some, product launches that we are going to to be. Most of the decline that you see q on q was attributed to Elena Dulimantes.

Amey Chalke
VP & Sector Lead - Healthcare & Pharmaceutical at JM Financial Ltd

Sure. Thank you so much. And the second question I have is on the Revlimid. So going ahead, you expect some pickup in coming quarters before going down from q three, or you expect the similar trajectory for Revlimid for upcoming quarters as well?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So, you know, we are not discussing specific number on this product, but, it is important people will know. Naturally, we are trying to avoid, shelf price adjustments. So what you should anticipate is one more quarter give or take in the range of what you have today and, relatively much less in q three. And after that, some leftover, and that's it.

Amey Chalke
VP & Sector Lead - Healthcare & Pharmaceutical at JM Financial Ltd

Sure. Just last question if I can squeeze in. On on semaglutide launches in the ROW nonregulated market, when should we expect that to happen?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So the in the what you call our w, most of the this most of these launches so we are prioritizing the capacity that we have to launch in Canada. So assuming that this will happen, the launch in the rest of the countries during calendar twenty six, 87 markets overall, most of them are small. The key will be, India, Brazil, Turkey, and products like that, will be, after March. Canada has an opportunity, like we discussed many, many times, to be before that.

Amey Chalke
VP & Sector Lead - Healthcare & Pharmaceutical at JM Financial Ltd

So thank you so much. I will join back.

Operator

Thanks, Ahmed. The next question is from the line of Neha Manfuria from Bank of America. Neha, please go ahead.

Neha Manpuria
Neha Manpuria
Senior Analyst at Bank of America

Yeah. Thanks for taking my question. My first question on The US pipeline, you know, North America. You know, obviously, we have SEMA that we'll that we'll probably get to know, in the near term. One, if you could tell us what timelines we need to watch for SEMA and for Canada, particularly.

Neha Manpuria
Neha Manpuria
Senior Analyst at Bank of America

And second, other than that, the single digit, you you know, know, growth that you're talking about, does that include any high value launches in the second half that we should watch out for? And I'm asking this because we also saw PAI inspection, you know, for the Shikakalan facility recently.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So we we I'll start with the last part. Any believe that we will get a BI. The the observation that we got, to my opinion, are addressable, and we should expect the BI from that. On the on the timing of semaglutide, we are still planning and gearing to get approval of the product somewhere, between October to November.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

And if this will happen, we, we can launch the product at the time of the loss of exclusivity in the January, and that's what we are giving ourselves to do. As for the as for the rest of the as to the rest of the products, with this analysis that I that we made, meaning that I tried to give you how I see the trajectory of the year. We did not take into account a very significant, let's say, out of the order launch. We are planning to launch about 20 products in The United States, but none of the, let's call it, the sophisticated products. We learn from experience, and I'm trying not to give I I look with them as an upside.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So it could be upside to that trajectory that that we see. Another thing on on CEMA, just to make sure that people have the complete picture, We are having two assumptions as related to Canada. One that from IP perspective, we'll be able to make and ship the product to Canada, which is a country without a patent. And second, that we will get approval in that period of time. Obviously, if these two assumptions will not happen, it may change the trajectory of c maglotide.

Neha Manpuria
Neha Manpuria
Senior Analyst at Bank of America

Okay. Thank you so much, Iris. And then on another question for you. I will if just looking at the gross margin trend for this quarter, you know, given a quarter where we've seen a fair bit of erosion in Revlimid, they still managed to improve gross margins. If I were to think about the year, you know, how should we think about gross margins, you know, particularly going into fiscal twenty seven?

Neha Manpuria
Neha Manpuria
Senior Analyst at Bank of America

And, historically, you've also mentioned that SG and A cost will be in the 28%, you know, of sales range, but, obviously, it's tracking higher. So is it fair to assume that, you know, this is the new range for SG and A cost, the closer to 30% mark that we have reported in this in this quarter?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

So let me first thanks, Neha. And as far as gross margin is concerned, I think at least for this year would be in the similar levels and because there could be higher sales from the base businesses in the branded markets and other POs. And that's where I think for this year and next year is, like, clearly, I just don't want to give you any number at this point of time range also. Like, this definitely, once we launch in the semaglutide, we can model it. That's where it is, I think, we can see.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

As far as SG and A is concerned, I think, we even further by, on the full year basis, it should be in the zone of, like, a 28 to 29% zone, not like a 30%.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

What I just want to make sure, Dania, if we successfully launching semaglutide, we should be absolutely good in all the parameters that we are familiar with, meaning the EBITDA as well. So we are aiming that the base business will be always north of 50%. And and in C Maglotide, it should be even more than that on the gross margins and the EBITDA. Obviously, like, always 25 or north of it. In the in the in the time in which we don't have Lina and we don't have CEMA, likely that these these parameters will lower than it.

Neha Manpuria
Neha Manpuria
Senior Analyst at Bank of America

Understood. Yeah. Got it. Thank you so much,

Operator

Thanks, Neha. The next question will be from the line of from HSBC. Please go ahead.

Damayanti Kerai
Damayanti Kerai
Analyst at HSBC

Yeah. Hi. Thank you for the opportunity. My first question is again on Lena Lidomide. So it is for two q as well also, you you you have mentioned the levels should be similar to what you booked in the June, or there is still, like, some room to book higher sales given, I think, you want to book most of the sales intended for FY twenty six in first half itself?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. No. They're not too much because there is also moving parts on prices. The the price went down in this fiscal versus last fiscal. But overall, let's call it similar magnitude. I will not say the same, but similar magnitude.

Damayanti Kerai
Damayanti Kerai
Analyst at HSBC

Okay. So on the pricing pressure part, is there a possibility you you will be facing higher, you know, magnitude compared to the current level? Because I understand your competitors are also trying to pass on maximum volume, which is possible in first half itself. So in view of that, will price erosion intensify possibly from here?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We hope not. I believe not because most of the booking was done already. The in general, naturally, when more companies came this year, they had the bigger quotas, and they tried to sell in less quarters. So by design, it's great certain density versus there before. It is all well anticipated.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So I I honestly, I don't see any surprise. And in my discussions, especially in the last couple of weeks, and I met quite a few people during this period of time, we cannot explain that. So I believe that what you should see from us, it's give give or take similar magnitude of pricing as well as quantities. And after that, it will be sharp decline in the other quarter.

Damayanti Kerai
Damayanti Kerai
Analyst at HSBC

Sure. My second question is on semaglutide regarding your preparation. So can you update us on your capacity expansion at Vizjag, and when do you expect, that capacity to come on board?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yes. So we are in the launches that will happen in f y twenty six and f y twenty seven will not be out of Isaac. It will be with our partner. And using our API but with the partner, and the which means that the capacity of f y eleven will come from f y twenty eight onward. We will likely to have, in the beginning with our partner, about 12000000p in f y twenty seven.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

And if you let to look at calendar '26 it's very relevant for the potential Canadian launch, it's about 10,000,000 pens. This is what we are planning to have.

Damayanti Kerai
Damayanti Kerai
Analyst at HSBC

Okay. So for 2627 fiscal year, you are good to go with 12,000,000 pen capacity from your partners. Do you think that that will be sufficient to gain meaningful market share in the market which you are targeting?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We believe so. We believe so that naturally, we would love to have more, but we feel very comfortable confident about this magnitude. There is maybe potential upside to it, but this amount, I feel very confident about. And now it's a matter of what mix of market we will get overall and then what will be the average price for those. This, of course, is unknown.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

But, yeah, I I feel very comfortable about this magnitude.

Damayanti Kerai
Damayanti Kerai
Analyst at HSBC

K. That's helpful. Thank you.

Operator

Thanks, The next question is from the line of Madhav Badha from Fidelity International. Madhav, please go ahead.

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

Hi. Good evening. Thank you so much for your time. First question was if you could just give us an update on the biosimilar, Baticept phase two trials, how that is progressing, and by when do we expect outcome for the phase two trial? That's my first question.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So so far, so good. The readout is November 25, which is as expected in accordance to the timelines. Following the readout, which I hope it will be open belief that it will be positive, we are planning to submit the BLA in order to be on time for the market formation, which is December 26 or January 27, let's say, if we look for the realistic launch because there are some registration post approval. Just to make sure that, you have the full picture, the launch in the in the beginning of calendar twenty seven can be of the IV formula formulation. The subcutaneous formulation because of IV will be a year later.

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

Understood. Yeah. That's quite clear. And the second question is on the cost saving measures. So could you give us some sense in terms of the extent of cost savings that we can drive?

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

And if you could give us some sense in terms of in the r and d spend, given we do have phase two trial of biosimilar vorticept ongoing, what's the quantum of that spending? And I'm assuming that spending should not recur next year. So the extent of cost saving that we can drive, for the organization, next year. Thank you.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Absolutely. You got it right. We use the time in which we enjoyed the backing the tailwind that came with the with the linadolamide, And we, boost some investment on the future, including Abatacept, including the creation of the franchise of the GLP one, including the buildup of the facility for that, including the acquisition of the NRT business. So all of that was done because we had access to more financial capacity, and we used it. As you said rightly, some of that investment, we don't need anymore.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Post, for example, November 25, we'll not have to pay for the clinical trial, of the of abatacept. We, also kind of feel that there are discretionary costs between r and d, h g and a that can be 500 basis points, 600 basis point that we are planning to adjust in according to, the motion. We need to remember that we have also, some question mark of how the future will hold between tariff and the semaglutide, the magnitude. So according, we are preparing a scenario. So the idea is between growing the base semaglutide and the expenses as well as the success BD, we will kind of manage to, make sure that the growth is coming in the right way.

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

So just to clarify, when you say 500 to 600 basis points, doctor Eddie sale, you know, it's at about, let's say, 30,000 crore plus, top line. So 500 to 600 basis points. Are you saying there's ex potential to save 1,500 to 1,800 crores on cost? Is that the right way to think? Of course, like you said, depends on how the business shapes up, but, is that the potential?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

The potential is like that, but it doesn't mean that we are going to save all of this. So I

Erez Israeli
CEO at Dr. Reddy’s Laboratories

I'm not recommending you to put in the model that much. Yeah. For sure. But but, absolutely, that's the game that we play. So we prepared it in advance naturally.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

The linadolamide was a known factor. We are preparing for it for actually, since we we signed the deal, and the that's part of the idea. Hopefully, we don't need it because if the growth will allow us to invest more, eventually, we want to invest because we want to create additional future. And we we want to be a growing company for many, many years. So we are trying to manage the famous 2525% double digit growth.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Also into the future, it's not going to be necessarily every quarter because of this timing of some big products as you can appreciate, but I I'm confident that on a on the big scheme, we will be there.

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

And if I can ask one last question. When you said that, you know, we have 12,000,000 pens available in FY twenty seven, I guess you're right that the mix of markets will be important for the profitability, but are we confident given we plan to launch in more than 80 countries, potentially some of which can be small as well, but that we can sell the entire 12,000,000 pens, you know, with or without Canadian approval? Like, we can sell the entire volume at least?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

I believe so for for two reasons. One, in all of this market, we are aiming to be first or among the first.

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

Yeah.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Second, the demand for this product looks crazy. And so far, the indication in places that we started to speak to people can confirm this, that the demand is there. Yes. So I believe that it's absolutely possible.

Madhav Marda
Madhav Marda
Investment Analyst at Fidelity

Perfect. Perfect. Got it. Thank you so much. Thank you.

Operator

Thanks, Madhav. The next question is from the line of doctor Harit Ahmed from Aventispark. Harit, please go ahead.

Harith Ahamed
Director - Equity Research at Avendus Spark

Good evening. Thanks for the opportunity. So a couple of questions related to your US pipeline. The first one is on generic liraglutide, which you had filed sometime in 02/2023, and I see that there are quite a few generics already in the market. And it's a fairly decent opportunity.

Harith Ahamed
Director - Equity Research at Avendus Spark

So what are the status of our, filing, and, what are the timelines we are looking at?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So, it's a product that we obviously have, and we are planning to launch it also in the next coming quarters. And in some market, we will be late. In some market, we will be first to market. It's also as you know, the regulatory is Victoza and Saxenda.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We believe that with Saxenda, we are going to be first to market or some of the first to market in in in some of them. So it's a product in the in the mix. It's not as big as semaglutide. That's why we're not talking about it. But if you recall, we have about 25 products that we call them peptides or how to make or with bigger potential.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

He asked me about it before. I I'm not guiding on those products before they're coming, but liraglutide is definitely one of them, and we're planning to, to launch it.

Harith Ahamed
Director - Equity Research at Avendus Spark

Okay. Thanks for that. On semaglutide in Canada, you said earlier that you're making two assumptions. One of them is that there won't be any patent protection for the brand in Canada. So is there a risk to that assumption, or is there any scenario where, you know, there could be a patent related hurdle to your launch?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So just to, to, correct, the there is no patent in Canada. What keep the product from being launched is that exclusivity that will expire in January 26. There is a patent in India that, we are now litigating in the in Delhi High Court. And, of course, so far, we are following the instruction of the court, and and we are preparing for that. And the the second is that we need to get approval.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

If both will happen, it we will be good. The I don't see a IP situation in Canada that will stop us.

Harith Ahamed
Director - Equity Research at Avendus Spark

Okay. Thanks for that. I'll get back in the queue.

Operator

Thanks, Harith. The next question is from the line of doctor B Bilo Atim Parambil from Elara Capital. Dilo, please go ahead.

Bino Pathiparampil
Head of Research at Elara Capital

Hi. Hi. Good evening. Most questions got answered. Just a couple of them.

Bino Pathiparampil
Head of Research at Elara Capital

On the PSAI gross margins, it has been it was very weak this quarter. I think your press release talks about some operating leverage issue. But if I look at the top line in PSAI, it has not changed materially y o y or q o q. So why then the gross margin decline from mid twenties to, low teens?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So, actually, the API business is healthy. And the the the reason for that is some of the demand products for The US are also being back integrated. And also the way we build the inventory, so if you wish, it's attributed to the internal sale. Once there is less internal sales, there is more cost allocation on whatever you sold, you know, in according to accounting.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

And that's what created, it's actually a very healthy, business, and it's growing. And you'll see that it will correct itself in the next coming quarters.

Bino Pathiparampil
Head of Research at Elara Capital

Understood. In in others, I see about $1.65 crores, which is more than the usual quarterly run rate. Is there any one time other operating income there?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

So in this, you know, we have a out licensing income from our origin. So that is like a it's always I think it's part of our regular business. I think business, that's what is there. One this quarter, we have that income.

Bino Pathiparampil
Head of Research at Elara Capital

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

Operator

Thanks, Pino. The next question is from the line of Sanyam Mukherjee from Nomura. Sanyam, please go ahead.

Saion Mukherjee
MD & Head - Equity Research at Nomura Financial Advisory and Securities

Yeah. Hi. Thanks for taking my question. Sir, can you share the PLI income or the government grant that you generally share for the quarter?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

So, Hassan, here, if you remember, like, overall thousand crores for a period of six years, I think the first four years quota, we have already because we have just taken we have got additional approvals, and then we accounted for f I 26. PLI is not much. I can say almost is zero. Then once again, you will see the PLA income in FY 2728.

Saion Mukherjee
MD & Head - Equity Research at Nomura Financial Advisory and Securities

Okay. So there there is not much in this quarter is what you're referring to?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

After this quarter and for the full year also is almost is let me put it, I think, is very small value is there, not very big.

Saion Mukherjee
MD & Head - Equity Research at Nomura Financial Advisory and Securities

Okay, sir. Understood. And on the PSAI front, with regard to Origin Pharma Services, if you can throw some light house, you know, how you see the CDMO business scaling up and what kind of customer or profile of customer and kind of products or services you're offering.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So it is growing. It's I n t it's I don't remember how much we sold, but I think 17 or $18,000,000 this quarter or something like that. We are gearing up for about $100,000,000 of sale for the full fiscal. It's it's a combination of small molecule CDMO as well as biologics CDMO, primarily ADC. It's a kind of a combination of both.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

It is going nicely. And it is not that we are going to be a CDMO company, but it's a nice growing business as we speak. And we've we see that there is enough traction for those that wants kind of our size of business, and they that creates synergy with doctor Reddy's. Those that are not afraid from doctor Reddy's, but actually want to have a synergy with us, especially as related to collaboration on clinical trials, r and d activities, and, and even marketing rights in emerging markets.

Saion Mukherjee
MD & Head - Equity Research at Nomura Financial Advisory and Securities

Understood. But it is, like, do you have from $100,000,000 this year, I mean, what what what should we expect? Let's say, three, five years down the line, do you have some, line of sight of growth on this business?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. It should be, between 250 to $300,000,000 by 2013.

Saion Mukherjee
MD & Head - Equity Research at Nomura Financial Advisory and Securities

Understood. Okay. Thank you.

Operator

Thanks, The next question is from the line of Tushar Manudani from Motilal Oswal. Tushar, please go ahead.

Tushar Manudhane
Research Analyst at Motilal Oswal

Yeah. Thanks for the opportunity. So just on this Tetruda biosimilar, if you could, you know, share, like, throw some insights in terms of the kind of spend that will be done on on the clinical trial on a combined basis, doctor ID as well as antibiotic basis?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. We if you recall, we are targeting on biosimilars, being relatively young organization in that space to try and bring products that want to do ourselves a product with relatively less level of competition. And this is how we target abatacept, daratumumab, in this kind of product. Pembroke is a is a is a molecule that many, many markets wants, naturally being a very, very important molecule in this space. But we felt that it's likely to be crowded.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So the exemption of phase three, no phase three plus collaboration, plus the ability to licensing create a situation in which the level of net investment is not much. And then it's a it can create a very good ROI, especially when we are going to the relevant markets. So the intent is to launch it in many markets, including United States, including in Europe, but with much less burden of a prior investment. This was the thinking behind it.

Tushar Manudhane
Research Analyst at Motilal Oswal

Got it. And, the trials, again, given that this molecule has been there for multiple indications. So what is the thought process? Like, we'll be progressing with certain indication to start with and then or the the clinical trials of the biosimilar version would be as good as the molecule.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So you don't need to do it for the indication. Actually, the type of trial that we do allow you in each one of the market to get the same indication that is approved for the relevant market of ketubra. So you don't need to do it for multiple indication. You can have one trial and get all the relevant indications. I see it's going to be interchangeable product.

Tushar Manudhane
Research Analyst at Motilal Oswal

Got it. And just one more on the r and d spend. Like, you know, this year, it's relatively less as a percentage of sales, like, almost 77.5%, summing up to, let's say, compared to a f y twenty five, which was almost eight and a half to 9%. Given that we have such complex assets in the pipeline, you know, what is sort of, the thinking to sort of reduce the r and d spend both as a percent of sales as well as maybe on the absolute amount as well?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Like I mentioned before, we have certain level of 500 to 600 basis point that of what I call discretionary that we can play with, in order to, to match the sales growth as well as to the expenses. R and D is part of it. So, right now, you should think about 7%. We have, of course, enough project to go more than that if the p and l and the numbers will allow us, we will do that. And if not, we can go even down to six.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So we have, that flexibility. Like I mentioned, the the profitability of the company, very important for us. This is the level of flexibility that we have on the r and d. Right now, we are somewhere in the middle, waiting for to see how the next quarter will evolve.

Tushar Manudhane
Research Analyst at Motilal Oswal

Got you. Oh, and just one last one, if I may. And, like, while there are many questions asked on some of you. Right? But just broadly, you think this is, like, sort of a two year opportunity, one year opportunity, or much more than that?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

First of all, I see that as many, many years opportunity. Actually, we are entering a decade of GLP one product. Obviously, it's not going to be it's going to change and evolve. At the beginning, it will be more like, to start to be be in the market to try to get in those markets that will be first or among the first certain premium, selling our capacity. We believe that this segment will grow significantly.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We will add capacity. There will be more volume, obviously, lower prices. And we are going to see brands branded play, whether consumer can play, like, like in the obesity or, you know, differentiated devices and stuff like that. So, actually, just the beginning of the journey, more products will be added. By the way, the full portfolio of GLP one for the company is 26 products.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Obviously, the semaglutide as well as the Eli Lilly product will be the biggest, and we are trying to get for each one of them to be first to market as well as to create some differentiated play. So it will evolve. 2026 is got just the first year that we will significantly deal with these products.

Tushar Manudhane
Research Analyst at Motilal Oswal

Sure, sir. Thanks. Thanks a lot for this.

Operator

Thanks, Tusharj. Participants are requested to restrict the number of questions to two to ensure that everyone gets an opportunity to interact with management. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Shyam, please go ahead.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

Yeah. Thank you. Thank you for taking my question. Just the first one is on within CapEx of $80,000,000 We have about $350,000,000 in cash. So just want to understand outlook on CapEx for the year.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

Where is it generally being spent for? And the sub question is on $350,000,000 of cash. So what is the other than CapEx, maybe, is the other areas or revenues where we are looking to deploy this cash?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

So CapEx is this year also would be more or less, like, last year level. We are overall for the full year, we are expecting cash outflow for in the range of 2,100 to 2,700 crores. That is the level. And then this entire CapEx also, the log investments is going for peptides and biosimilars.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

As you know, we are looking for BD. Like I mentioned, we have four levers of growth. The baseline growth, special products, cost optimization, and BD. We believe not just this cash. We have also the ability to borrow that we have 2 to $2,500,000,000 of financial capacity.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

And we are engaging as we speak with BD, and hopefully, we'll come. I know. BD, you can never guide, but we are definitely working on it, and we see growth opportunities.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

There is a two two point five is like, what is the net debt to EBITDA? Or what is the leverage you have in mind?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

This is Charm is going to be, like, a max of point five.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

Understood. Okay. Just a second question on the India business. We have outgrown IPM. So just wanna understand.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

I know we are you talked about the top 10, but what can help us sustain double digit or even outperforming the market? And if you could also give us some data points around what our field force is, what is our expansion plan in terms of distribution in India? Thank you.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Sure. So, Shyam, the we decided, and I know you are fully aware of it and appreciate it, that we will not focus on brand and generic at the time. We we believe that the growth in India will come primarily by introducing innovative products, which better than the standard of care that is used today in the market. And the the growth that you see now, it's is a part of that. So we are launching innovative product in addition to the the brand and generic.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So the brand and generic will be like normal price adjustment with some minor volume growth. We will not be that special on the branded generic. Some products will do more, some less. But our key, that and that's why I believe in the consistency is because we signed many deals so far on branded product and more to come. So we believe that we would outpace the market, and that's what will grow.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

I reckon I'm still committed to the number five in the market. We are doing it in a slow way because we are not acquiring to be there. We are growing that organically. Actually, inorganically, if you consider relicensing in. And that's what we are planning to do.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We should see consistent double digit growth in India in the coming quarters and years.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

Just a data point on the field force, Erez or MEN? Sorry. Yeah.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. About 10,000 people in in the 50 teams.

Shyam Srinivasan
Shyam Srinivasan
Analyst at Goldman Sachs

Understood. Thank you, and all the best.

Operator

Thank you, Sean. The next question is from the line of Surya Patra from PhillipCapital. Surya, please go ahead.

Surya Patra
SVP at Phillip Capital Inc.

Yeah. Thanks for this opportunity. My first question is about biosimilars. So it seems that we are busy in in licensing, doing deals for biosimilar to expand our portfolio there. Could you provide some pipeline visibility for US market?

Surya Patra
SVP at Phillip Capital Inc.

Let's say, starting from FY twenty seven or '28, which are the key product opportunities that we are targeting for The US market?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So, obviously, the key products will be abatacept. Abatacept, like I mentioned before, end of calendar twenty six, January 27, we should launch the IV product. And the and the and in the year after, we will launch the subcutaneous. This is sorry?

Surya Patra
SVP at Phillip Capital Inc.

Okay.

Surya Patra
SVP at Phillip Capital Inc.

Yeah. Yeah. Second product, I'm with that. So if you can get.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

No. Then then we will have launches of smaller product, which is obviously, we will launch the nusumab here prior to that, primarily to prepare the launch of a dataset. So we, so we took a licensing of this product, for both Europe and US because it's the same similar customer base, especially similar doctors. So in a way to prepare the team, so by the time that the dataset will come, we'll have the team as well as to have data ready. In addition for that, after that, we'll have pembro, zilumab.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We will have daratumumab. And, obviously, more products will come to The US. But right now, these are the four names that will be in The US. Rituximab, we will have also in The US, but with Fresenius not by our people.

Surya Patra
SVP at Phillip Capital Inc.

Okay. My second question is about the Russia business or the or particularly the secondary tariff, either emerging from the European sanction or The US sanction work on Russia. So whether this is a kind of factor of worry for us?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

No. If at all, it's an opportunity. We are working freely in Russia, a great relationship with the country, great team that we have. And, if other people will put sanction on it, the sanction are not relevant to us. And if it's all, it's an opportunity.

Surya Patra
SVP at Phillip Capital Inc.

Sure, sir. Just last one point on the NRT. We have reported that there is a q o q growth of around 12 odd percentage. So is there any seasonality in that NRT portfolio? And what growth, like to like that, the portfolio would have seen on a y o y basis?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So first, no seasonality. This is a smoking cessation brand.

Surya Patra
SVP at Phillip Capital Inc.

Correct.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

The second, it's a normal and, normally, the brand is, used to grow in single digit. So far, we are accelerating it. And and but we are still, at least in our business model, we anticipate a mid single digit growth. Right now, so far, knock on wood, the this acquisition is exceeding our expectations.

Surya Patra
SVP at Phillip Capital Inc.

Oh, great, sir. Yeah. Thank you. Wish you all the best.

Operator

Thanks, Sylvia. In the interest of time, we would request all participants to restrict the number of questions to only one. The next question is from the line of Abdul Kadir Pourangwala from ICICI Securities. Abdul, please go ahead.

Abdul Kader Puranwala
Analyst at ICICI Securities

Yeah. Hi. Thank you for the opportunity. My first question is with regards to with regards to semaglutide. So, sir, just on you know, we spoke a lot on the call out in perspective of the launch timing.

Abdul Kader Puranwala
Analyst at ICICI Securities

But in terms of pricing, you know, if you could provide some color on, you know, tentatively indicating at what prices point you may want to introduce this product in Canada and, you know, other markets?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

As high as we can. Honestly, I wish I could give you much better answer. It's very much depends on how many competitors will be, what will be the reimbursement. So the scenarios are very wide. So it will be dictated, obviously, by number of but whatever the market will give us, we will take.

Abdul Kader Puranwala
Analyst at ICICI Securities

Sure, sir. And just next next one question on, you know, on the expenses, what you would have incurred on NRT and. So when you talk about, you know, five hundred to six hundred bps of cost savings, would that be that you know, would it be safe to assume that a lot of that is currently getting incurred toward these two products, which may not happen in the near future once Revlimid goes off?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

No. We are talking not about discretionary cost. I don't normally cost that you can save at the time that you need to, which are not supporting sales. And so so not support marketing. Obviously, we just got the product.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We want to grow it. We will invest in it. We are talking about things that are good to do also on the ongoing basis, but for sure if you need to save money, less traveling, less less meetings, less less consultants, etcetera. So this kind of the discretionary that will not touch the sales. We we are not desperate.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We are actually very comfortable with what we do. We knew that, Lina will come, but, no, we are not planning to cut expenses that are supporting the growth of the company. The priority is to grow the company.

Abdul Kader Puranwala
Analyst at ICICI Securities

Got it, sir. Thank you for answering my questions.

Operator

Hi, The next question is from the line of from Bank of Baroda Capital Markets. Please go ahead.

Foram Parekh
Research Analyst at Bank of Baroda

Yeah. Thank you for the opportunity. Most of my questions are answered. Just on the NRT front, should we still assume EBITDA margin to be 25%, or would it be in the neighborhood if you can just, throw some light on that?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yes.

Foram Parekh
Research Analyst at Bank of Baroda

Okay. Yes.

Foram Parekh
Research Analyst at Bank of Baroda

You can. On the Europe front, ex of NRT, the growth has come down to 15%. So going forward, do we expect it to to bounce back to above 20% kind of growth as we have new product launches and biosimilar launches, or can we work out with 15% kind of growth?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

First of all, to grow double digit in generic business is not bad. Yeah. Once we will launch the biosimilars, it will accelerate this growth. It's hard for me now to calculate the percentage because I think we are launching each one of them in in 10 countries, and it's pretty complicated. But let's say, we should expect double digit from Europe.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

But if it's 15 or 20, it's hard for me to tell per quarter. The the important part about Europe, it is all average activity. These are all products that we have not just for Europe. And, that's the beauty of this business. It's adding to the economy of scale, and, so far so good.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yes. So it's in the neighborhood of what you said, maybe plus, but I but I'm taking a disclaimer that I don't know what will be exactly the timing of the biosimilar and how it will contribute to that.

Foram Parekh
Research Analyst at Bank of Baroda

Sure. No problem. And lastly, if I may squeeze in, can you just throw some color on how do you see ahead of the semaglutide launch in India, how do you see obesity market forming, you know, post the launch given that the size of the obesity market is very small with just, you know, one, innovators? So post generic, how do you see the obesity market expanding in India?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

I believe that it's going to be significant. The the unmet need is very, very clear, especially for people that live here in India. And so I believe that it's a big opportunity.

Foram Parekh
Research Analyst at Bank of Baroda

Would it be possible for us to quantify?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

I don't want to give you unreliable numbers. It's big. The potential is big. I I I don't know to say how much.

Foram Parekh
Research Analyst at Bank of Baroda

Okay. Thanks. No problem.

Operator

Thanks, Foram. The next question is from the line of Shashank Krishnaguar from MK Global. Shashank, please go ahead.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

I think he's on mute. He's on mute.

Richa Periwal
Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories

Sushant, can you unmute yourself? Okay. Can you ask for the next question? Thank you.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Hello?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. Yes.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Yeah. Am I audible?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yes. Yes.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Yeah. Yeah. My first question was on the outlicensing income, which we booked this quarter. Is it possible to quantify that?

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

It's it's $1.20 crores.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Got it, sir. So my second question was I

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

think, Shashank, just I would like to add. This is not like a onetime income. This is like a always, I don't know, few quarters in a year or I can go in for it always will be there.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Got it. Got it. So my second question was more from a medium term strategy standpoint. We have typically relied on high value complex centric launches in The US. How do we sort of reconcile that?

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

The fact that we're also looking to moderate our r and d spend. I think you mentioned possibly we can also reduce it to 6% going forward. So can we still keep pace with the pace of, complex centric launches that we have typically done, in the past in The US, if we sort of moderate r and d spend going forward?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. Just to remind, r and d spend are relevant for products that will be launched in The United States between ten to twelve years from now. So, yeah, absolutely, we can decide how much to spend for the future and how much to keep in accordance to our performance. I don't see any effect for the immediate terms because all those products were either we committed the development or we we have the files already.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

That's that's it.

Operator

Thanks, Shashank. The next question is from the line of Aman Witch from Astute Investment Management. Aman, please go ahead. Aman? Aman, your line is unmuted.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Yeah. Sir, first question is on the semaglutide API side. So if you can talk about our, yields currently and the quality and the pricing compared to Chinese, API players because I believe they have a lead. And, but we are talking of we are planning to set up a big capacity in India, which is much more than the guidance of 10 to 12,000,000 pens you have talked about for two years, which we are targeting. So could you talk about this site?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Sure. Just first to calibrate, the 12,000,000 pens is the launch for '26. And, obviously, only small portion of the capacity will be used for that. We are also, in this, peptide capacity, going to do, products for third party as well as for the future as well as other peptides. So they just took clarify, it's not a competitive numbers.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Second, in terms of cost, we believe that once we will finish the scale up, our products will be competitive with the other competitors, including China.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

That is a hard thing to hear, sir. Second question is on the Delhi High Court patent challenge, which I think by next week, we will, get an answer. But I I'm saying, in my understanding, in worst case scenario, isn't it just that even if it goes against us, it means we will be able to launch only two months later? Because India patent expires in March versus Canada in January. So it doesn't delay beyond two months in worst case scenario. Is the understanding correct?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

The understanding is correct as related to the timing of the launch in India. Mhmm.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

For us, it is important to enable our launch in Canada. So the Canadian launch then will be more than two months. If if it will not go our way, obviously, I cannot react because it's, you know, the laws in India are not reacting on any prejustice situation. But we believe that it's going to go in in the way that would be satisfactory to us.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Sure, sir. Just final question. You've talked about ten, twelve million kind of capacity, which we have tied up with, say, the fillfinish players and the pen players. So in, say, good case scenario, if the demand is, say, two x our initial assumption, will we have do we have arrangements with both the parties, the suppliers, well as the fillfinish players that if the demand is way more because, I believe there is shortage of capacity in terms of both fill finish and devices. So is there a case is there a case where if the demand is two x, we can somehow arrange two x volumes also?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Two x for calendar '26 will not happen.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

'27, sir. You said similar number for '26 and '27. Right? So I was more worried on '27, not on '26.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Yeah. So I just make sure that, you got it right. Calendar twenty six calendar twenty six, which is FY '27, but mostly is 10,000,000. If you take it as f y '27, it's 12,000,000. There is some upside to that, but I normally when I'm giving guidance, I have to be very, very accurate and and reliable in what we are giving.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Double, it will not be in that period of time.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Okay. But slight increase, we'll be able to manage with the arrangement, say 40% extra than what we are predicting.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Depends on the definition of slides, but yes.

Shashank Krishnakumar
Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd

Sure, sir. That and that's it. Thank you for answering the questions.

Operator

Thanks, Salman. We will take the last question from Kunal Dvesha from Macquarie. Kunal, please go ahead.

Kunal Dhamesha
Kunal Dhamesha
Research Analyst at Macquarie Group

Hi. Good evening. Thank you for the opportunity. Just one on SEMA Canada. So because there are two brand, one for type two diabetes, which is Ozempic and one for weight loss, Wegovy.

Kunal Dhamesha
Kunal Dhamesha
Research Analyst at Macquarie Group

So currently, Canadian authorities are not reimbursing Wegovy so for the weight loss indication. So how are we planning to tackle this issue when we launch our product?

Erez Israeli
CEO at Dr. Reddy’s Laboratories

We are going to launch only Ozempic, generic Ozempic. The the submission of generic Wegovy will happen throughout the year, but the launch that we are discussing is only for Ozempic. I do not anticipate any issues with it.

Kunal Dhamesha
Kunal Dhamesha
Research Analyst at Macquarie Group

Sure. Sure. And, can you help us also understand the split of this 10,000,000 pen capacity that we have, between single use pen versus multiuse pen? Because semaglutide in Canada is available in both version, multiuse as well as single use pen.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

So the quantity that I mentioned is in a single use terms.

Kunal Dhamesha
Kunal Dhamesha
Research Analyst at Macquarie Group

So one pen per week is the yeah. It's a way Yeah.

Erez Israeli
CEO at Dr. Reddy’s Laboratories

It's like equivalent to one pen a week.

Kunal Dhamesha
Kunal Dhamesha
Research Analyst at Macquarie Group

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

Erez Israeli
CEO at Dr. Reddy’s Laboratories

Thank you.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

Thank you.

Operator

Thank you. With that, and I'll hand the call over to Richa for the closing comments.

Richa Periwal
Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories

Thank you all for joining us today. We appreciate your continued interest in doctor Radhis and the time that you've taken to engage with our q one FY twenty six results. If you have any further questions or require additional information, please feel free to reach out to Ashwadia or myself. With that, this concludes today's earnings conference call. Stay safe, and take care.

M V Narasimham
CFO & Member of the Management Council at Dr. Reddy’s Laboratories

Thank you.

Analysts
    • Richa Periwal
      Head - Corporate Analytics, Corporate Strategy & IR at Dr. Reddy’s Laboratories
    • M V Narasimham
      CFO & Member of the Management Council at Dr. Reddy’s Laboratories
    • Erez Israeli
      CEO at Dr. Reddy’s Laboratories
    • Amey Chalke
      VP & Sector Lead - Healthcare & Pharmaceutical at JM Financial Ltd
    • Neha Manpuria
      Senior Analyst at Bank of America
    • Damayanti Kerai
      Analyst at HSBC
    • Madhav Marda
      Investment Analyst at Fidelity
    • Harith Ahamed
      Director - Equity Research at Avendus Spark
    • Bino Pathiparampil
      Head of Research at Elara Capital
    • Saion Mukherjee
      MD & Head - Equity Research at Nomura Financial Advisory and Securities
    • Tushar Manudhane
      Research Analyst at Motilal Oswal
    • Shyam Srinivasan
      Analyst at Goldman Sachs
    • Surya Patra
      SVP at Phillip Capital Inc.
    • Abdul Kader Puranwala
      Analyst at ICICI Securities
    • Foram Parekh
      Research Analyst at Bank of Baroda
    • Shashank Krishnakumar
      Senior Research Analyst - Equity Research at Emkay Global Financial Services Ltd
    • Kunal Dhamesha
      Research Analyst at Macquarie Group
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