Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press ‘*’ and ‘1’ on their tough -tone telephone. If you wish to withdraw yourself from the question queue, you may press ‘*’ and ‘2’. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a mo ment while the question queue assembles. The first question is from the line of Neha Manpur ia from Bank of America. Please go ahead.

Thanks for taking my question. My first question is on the Nestlé JV that we announced last month. If you could give us some color on, when we should start looking at probably roll out of these brands and how should we think about ramp up of the entire JV revenue flowing through? Will it take a couple of years before it starts, contributing to margins or would there be some incremental investment required? And just to follow on on that, will the JV contribution be over and above the double-digit growth in India that we have talked about in the past? Is that the way we should think about it?

Yes, it is going to be above that and at the same time, it will take time to bring the brands that are currently outside of India , to register them, to adjust them to the India regul atory needs or the taste of the people and obviously to build the brands in India. So, the way the JV will work is both parties are bringing the current nutraceuticals through the JV. And then, there’s a certain sequence to bring the brands, primarily of Nestlé Health Science to India – register, qualifying them, building them. Likely that in the first three years, it will be some level of investment, it is not going to be a material investment in terms of total effort, but the revenues will come only in the years after that.

Essentially, I should assume that this starts contributing to the India business probably post FY26?

It will be post FY26, likely even post FY27 . So the first couple of years will be years in which we will bring those products and build the brands in a certain sequence. So, normally people will see the growth, but this has the potential to be a meaningful business, but it will take time to build it.

Great. And my second question is on the R&D spend - we have a pretty high R&D spend this quarter, you talked about it in your opening remarks. When can we start seeing the complex product pipeline that we are talking about, or the biosimilars, contribute to earnings, particularly in the U.S. market? Some of the areas if you could talk about and the guidance for next year for R&D, please?

Yes. So, in terms of contribution to the growth, the small molecules, we will see that already in FY25, some of them and more of them in FY26 and some of them in FY27 -28. So, this is the pipeline that we have discussed in the past. In terms of the biosimilars, what will come from internal activity is , likely that in FY27, we will start to see the products coming. The level of R&D for next year will be around 8.5% to 9%. This is the range most likely we are going to have.

Thank you. The next question is from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead.

Good evening, thank you for the opportunity. So, first one on the U .S. business, just a clarity, you have said that there was a base erosion on quarter-on-quarter basis, so would the base include generic Revlimid contribution as well when you say base erosion?

Yes, the quarter obviously includes the sales of Lenalidomide. The decline is a combination of sequence of service - it is not a market share loss - it is more of a sequence of supply as well as certain price erosion that was on the base business, unrelated to Lenalidomide.

Sure, and in terms of the U .S. price revision, while it continued, have you seen any change in the recent trend where it is again accelerating at a higher pace in recent months?

So, the overall sentiment is unchanged. Still the lion share, I think, of the interest is sustainability of service and supply and this is still the case. At the same time, we did face competition in some of our big products and in those products, we did see price erosion , which to some extent was compensated by growth of other products. So, on those specific products, we did see price erosion.

And for the next year, how many product launches we have planned for the US market?

So, about, twenty plus.

Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.

Hi, thanks for taking the question. I have just one question on R&D. We have seen a significant step up and as you mentioned in your guidance, it looks like you are talking about more than $300 million of R&D spend next year. If you can provide like where this money is being spent, in terms of biosimilars or NCE research and other generics activity?

So, the R&D is spent obviously on the small molecules as well as the big molecules. I think the main contribution to the growth is the timing of the clinical trial of the biosimilars, which is about 20% of the R&D spend. So, if you wish , between the small molecules and the big molecules, you have about 60% that goes to the small molecules, about 20% that is going to the biosimilars and the 20% that goes to either API or o ther initiatives, like licensing -in, and activities like that.

Ok, thanks. And my second question would be, how do you see the growth in emerging markets in the years ahead, particularly with respect to China and some of the key markets like Brazil, if you can talk about your outlook for fiscal 2025 and 2026?

So, it will continue to grow. It will continue to grow in double digits. China looks good. We are now consistently submitting 14-15 products a year. So, this is likely to continue. And, also, we got some interesting approvals. So, overall in constant currency, I believe that, we are in a good shape. Obviously, there is a risk of forex, this remains the same. We have certain level of protection, but obviously if it will come, it may offset it, but overall, it looks good.

Thank you. The next question is from the line of Balaji Prasad from Barclays. Please go ahead.

Hi everyone, this is Mikaela. I am for Balaji. Thanks for taking our questions. So, we see you launched 4 new products in the US during the quarter. Could you just provide a little bit more detail on these launches? And my second question is , if you could provide a bit more detail on the CRL issue to the BLA for biosimilar Rituximab. What are the next steps here and what does this entail?

Yes, on the launches this quarter, as I mentioned, we launched 5 products during the quarter. We kind of mentioned the names along the way. We will try to provide it to you in a second. As per the CRL, we got certain questions, primarily about the CMC of the product. And we are planning to address that around the September timeframe. And then, obviously I am assuming, it is a six month goal date after that.

Thank you. The next question is from the line of Tarang Agrawal from Old Bridge. Please go ahead.

Hi, congrats for a really strong set of numbers. Just a couple of questions. Capital expenditures stepped up quite a lot in both FY23 and FY24. If I look at 2024 alone, its roughly Rs. 2,700 crores of capex. So if you could just give us a sense, in terms of a broad set of baskets, where this Rs. 2,700 crores would have been deployed. So, that is number one. Second, till date if between P&L and balance sheet, if you could give us a sense on what your cumulative investments in biosimilars has been and third , just a general sense on where your overall biosimilar business is at?

So, about capex. First of all, most of our capex is growing towards expansion, let us say give or take around 75% of it is going to expansions and normally , the other is going what we call maintenance. The maintenance is also whether you need to replace certain stuff or related to compliance or investment in digital, etc. Also, in the future, in terms of distribution of the capex, also for next year, we are investing primarily the capex in products that we want to launch and we will create capacity, both in the API as well as in our injectable facilities. So more than 50% of the capex is going that direction. In addition to that, we are building additional capacity in our biologics plant in Bachupally as well as in our APSL services on both biologics and small molecules. So, by and large, this is where the capex is going. Is it sufficient? I don't remember the rest of the question.

Yeah, this is alright. So, when you say expansion, these are broad buckets. I mean it is going into API, injectable, biologics and Aurigene, right?

Correct.

Okay. If you could give us an update on your biosimilar business from here on and what have your cumulative spends been on this business till March 2024?

So, in terms of biosimilar. Just to remind us all, we decided to focus on products that we have a chance to be ‘first to market ’. And when we initiated that strategy, we kind of bypass ed the products that we had the chance to be late to market. So, our first meaningful products will come in 2027 and after that more products will follow. Right now, we are not discussing specific names, but that is the overall plan. What you can assume, and I mentioned it before that if 20% is going to R&D, this is give or take, also at the level of flows that we have in here, because right now we don't have meaningful sales to cover for it. And this is something that is likely to breakeven and beyond , to be profitab le once we will launch in FY27 our first biosimilar in Europe and United States.

So, therefore, would it be safe to presume an investment of anywhere between $50 to $60 million per annum on biosimilars? Would that be a reasonable estimate from here on?

Yes, in the ballpark.

Thank you. The next question is from the line of Nitesh Dutt from Burman Capital. Please go ahead.

Thanks for the opportunity. I have a question on our manufacturing strategy for the India business. So, I just want to understand, number one, what percentage of your manufacturing in India is being turned in -house versus outsourced? And are you expecting to maintain a similar mix going forward and second for the outsourcing part, how many suppliers do we typically have? Is it like a fragmented supplier base or consolidated amongst a few companies?

So, when you say supply, you mean global or for India?

India.

So, right now, about 60% of what we do is in-house, give or take, and likely that these numbers will increase in the future because we do have localizations of some of these products in the future. As for the numbers of partners, I don't recall the exact number, but I am assuming that it is a double digit, but I don't have the exact number on top of my head.

Got it. And a follow up on that, the government has been placing a lot of emphasis on stricter implementation of Schedule M norms and quality standards, right . So how can it impact our procurement strategy on the outsourcing front? So, can it lead to some sort of consolidation of supplier base or maybe an increase in the procurement cost etc., because if the quality cost increases for our suppliers then our COGS might increase.

So, I can tell you that for Dr. Reddy’s we have one standard of quality. We believe that all people deserve the same quality, no matter what is their nationality, and that is the policy of Dr. Reddy’s. We encourage everybody to do the same. So, for us any guidance in this direction, we see that as an opportunity and if there are people that need to upgrade their system, it is good for India.

Thank you. The next question is from t he line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

So on Rituximab, just trying to understand the progress as far as the Europe filing is concerned?

Rituximab, we are planning to launch in th e UK. As we speak, we did not do it yet. So, we believe that we should get the approval soon. We are after the qualifications in the UK, and we are waiting for the inspection of the EMA as well.

Understood. Secondly, on the inventory , I s ee quarter-on-quarter reasonable increase, if you could explain that?

Let me take that question. The increase in inventory is primarily because of some of the geopolitical risks which are there, which are having some impact on the routes of supply. So, we proactively build inventory to make sure that there is no loss of sales. That is the primary reason for the increase.

Understood. And lastly, sir, this SG&A expense also , we have seen an increase over past 3 -4 quarters. So is this the run rate to consider for FY25 or will there be further increase in this?

Overall, if you look at the SG&A expenses this year for the full year, as a percentage to sales, it is about 27.7%, which is the same as last year. Now quarter-on-quarter, you will find fluctuations happening. Broadly, we are investing behind our brands and sales & marketing, behind our capabilities, while also driving productivity. Broadly, I would say that SG&A over the next 12 months or so, as a percentage to sales would remain in the similar range.

Thank you. The next question is from the line of Ankush Mahajan from Axis Securities. Please go ahead.

Thanks for the opportunity. Sir, if you see that we have U.S. sales of $390 million. On sequential basis, it has decreased. Just trying to understand, sir, if this decrease is in the base business or in the gRevlimid business?

The sequential decline, part of it is normal pattern of ordering of the product and part of it is some price erosion that we got on a few products. It is a combination of both.

Sir, what is the full year guidance of EBITDA margins for FY25?

So, as you know, we are not giving guidance. In general, we are repeating that in the long term, the place that we want to be is 25% EBITDA with 25% ROCE and double digit growth . It is something that we are consistently saying that this is the range that we would want to be in. Sometimes, we will be above it, sometimes will be below that, but we feel very comfortable that this is a place in which we can both invest for the future , and it allows us significant room for investing in the future, as well as bring very, very healthy return to the shareholders. This year, we will be, by and large, higher than that, but there will be timing where it can be even lower than that, but th is is where we feel comfortable to be. So, we are now giving a kind of overall guidance, but we are not giving guidance for specific quarter or specific year.

So, sir, when we say 25% EBITDA margins, that includes gRevlimid also?

Like I mentioned before, this is the overall guidance, not for specific products. As you can see, when we launch the product, our margins were higher, so you can do the math.

Thank you. The next question is from the line of Surya Patra from Philip Capital. Please go ahead.

Thank for the opportunity. Sir, my first question is on the pricing trend that you would be seeing for gRevlimid. And how sustainable the pricing trend currently we are having for that? Because there are multiple rounds of new player entries that we have seen, so whether that has impacted the realization potential of the product in the recent period?

So, I am not going to discuss quantities or prices of this product. We need to remain confidential to our agreements. And what we can say is that , it is going to stay a meaningful product for us throughout the period of the agreement.

Then my first question would be on the domestic formulation business . So, obviously as per your indication, that you have taken multiple initiatives, to either introduce branded products or to expand qualitative products, long term, sustainable growth driving kind of products for the domestic formulation business. But in the initial period possibly may not contribute much. So, if you can give some sense, let’s say over a period of 3 years from now, what is the fair revenue mix that you should be seeing for your domestic formulation business?

You can see that we have a flow of agreements that are coming. What we say is that the branded generic business that we have in India will grow. This quarter, its growth was in double digit, if you take out the divestments that we had in the same quarte r last year and likely that this will continue. On top of it, we have started to launch , already, products. For example, we launched Nerivio® and we will launch other products that will come and this will be on top of it. So, naturally, the expectation of India is to grow beyond the growth that is expected from the branded generics. Right now, it looks like a very healthy pipeline that is coming up , on both the NCEs, the nutraceutical deals that I mentioned, etc. The expectation of both businesses, if you ask about the long term, is to be top five in India. If you want an assumption, it is the neighborhood of around Rs. 12,000 crores, somewhere in FY30. But this is obviously the neighborhood that we are striving to be in. We believe that this is what the top five, give or take, will be at that period of time.

But is it fair to believe, sir, this domestic formulation business is going to be the growth leader for Dr. Reddy’s over next few years? Is that fair to believe?

Yes, absolutely. India is a very important market for us and we want to grow and we want to grow the rank. And it is a growth engine, but it is also our main hub for innovation, on both the back end as well as the front end. And the main place in which we believe that we can bring value, because most of the people that are collaborating with us have an interest in our brand in India as well as in our go-to-market capabilities.

My second question is about biosimilar business initiati ves and also in collaboration with the R&D spend that we are likely to have. So whether you have talked about 9% kind of R&D spend guidance for the subsequent period, sir?

I mentioned that 20% of R&D is going to biosimilars.

And are you indicating, in line with the quarterly trend of R&D spend as a percentage to sale , this is the kind of sustainable run rate going ahead?

We believe that it is sustainable for us to be in, what I said 8.5% to 9% , and it could be some fluctuation depends on the timing of the Phase III of the products. But we believe that it is sustainable.

So, an extended question to that only, sir. S o we know that, having seen the kind of challenges that is there about biosimilar success in the U.S. business and the kind of upfront investment that is required for each molecule to develop a biosimilar, so what is the kind of a ‘right to success’ that you do think for your biosimilar strategy?

So, I mentioned the timelines before. We decided, at that time, to skip the products that will be late to market, in order to be among the first ones to launch the products and we still hope to do that. The second one is that we are not developing only for the U.S. Obviously, the U.S. is a very important market for us, but we are developing globally . And actually for us, it is about U .S., Europe, India and Emerging Markets and each one of them, on the molecules that we chose, are meaningful markets for us.

Thank you. The next question is from the line of Madhav Marda from F idelity International. Please go ahead.

Hi, good evening. Thank you so much for your time. Given that India is a core , sort of, focus market for us over the longer term, j ust wanted to get your thoughts on any risks that you see from rise of organized pharmacy retailing in the country , like it happens in most developed markets that we have seen over the past few years? And rise of generic -generic drugs in the country, which the government has also tried to push last year, obviously which didn't shape up. Just your thoughts on some of the se factors and how they could play out for the country going ahead?

So, there have been several attempts to make this generic-generic business a success, but given the enforcement gaps in quality and concerns of doctors about quality, we feel that the branded generics business will continue for a while. We don't see any imminent danger of it being commoditized by generic-generics.

Given that some of the organized pharmacies come in, don't they solve for the quality angle?

Organized pharmacies are still a small portion of the overall sales. If you look at the mere market share, it is probably in the 12% to 15% range at the most.

So, just to make sure, we do see, obviously, a certain portion, like, by the way, everywhere in the world, will become generic-generics. At the same time, the market is growing as well. We recognized that trend a long back and I discussed it in previous meetings. This is why our main efforts are about actually true innovation, patent protected, etc. We believe that the brands, our brands that we decided to continue to focus on, will stay for a while, like I just said.

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

Hi, good evening. Just a question on a couple of products in the U.S. One, you had acquired this ANDA to generic Lumify® from Slayback Pharma. What is the status, when do you expect an approval? I believe it was already filed when you acquired it. When do you expect approval and launch?

To the best of my knowledge, it is an approved product by now. You asked whether it has got approval - it is approved.

And, any timelines for the launch?

We expect the launch to happen in this quarter only.

Second, believe you are also working on the peptides, so any update on how do you see the Liraglutide opportunity panning out over the next 2-3 years?

So, indeed this is a very important segment for us, long term. We put a lot of efforts, we are still putting efforts on both the API as well as the finished goods. Globally, we are planning to do it in each one of the markets. Specifically for the product s, both Victoza ® and Saxenda ®, obviously, we have, what we believe, are the dates of launch for each one of them and we want to launch when we can.

Now, is it like a couple of years away or 4 years away? What is the rough idea of when you see the opportunity coming up?

For each one of these products, there is a date. I cannot confirm a date of launch.

We will share it at an appropriate time.

At this stage, we cannot, but whenever the market will be open, we are planning to be there.

Thank you. Ladies and gentlemen, that will be the last question for today. I would now like to hand the conference over to Ms. Richa Periwal for closing comments. Over to you, ma'am.

Thank you all for joining us for today's evening call. In case of any further queries, please get in touch with the Investor Relations team. Thank you once again on behalf of Dr. Reddy's Laboratories Limited. That concludes this conference. You may now disconnect your lines.

Thank you. On behalf of Dr. Reddy's Laboratories Limited, that concludes this conference. Ladies and gentlemen, we thank you all for joining us. You may now disconnect.