Dr. Reddy's Laboratories Q4 FY2026 Earnings Call - Semaglutide Launches and Base Business Resilience Amid Lenalidomide Headwinds

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Our Chief Executive Officer, and Mr. M.V. Narasimhan, our Chief Financial Officer. Our quarterly financial results have been published earlier today and are available on our website for your reference. We will start today’s call with M.V.N. providing an overview of our financial performance for the quarter as well as the year. Following that, Hari will share his insights on key business highlights as well as the company’s strategic outlook. We will then open the floor for questions. All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed. Reconciliations to the corresponding GAAP measures are included in our press release. I would like to remind everyone that the safe harbor provisions outlined in today’s press release apply to all forward-looking statements made during this call.

Before we proceed, I would like to call out a few housekeeping points. All participants will be in the listen only mode during the opening remarks. Should you need any technical assistance during the call, please use the chat function in your Zoom application. The chat, however, will not be monitored for any questions to the management. This session is being recorded, and both the audio and transcript will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy’s Laboratories Limited and may not be rebroadcasted or quoted in any media or public forum without prior written consent from the company. With that, let me hand the call over to M.V.N. to present the financial highlights for the quarter. Over to you, M.V.N.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Thank you, Aishwarya. Greetings to everyone on the call. It is my pleasure to walk you through our financial performance for the 4th quarter and full year FY 2026. FY 2026 reflected a resilient operating performance, delivering highest ever annual revenues amid product specific headwinds and certain one-time impacts. The underlying base business continued to deliver double-digit growth for the quarter as well as for the full year FY 2026. At the outset, I would like to highlight a few items impacting the quarter. Number 1, a self-stock adjustment or SSA related to lenalidomide of INR 453 crores taken as a reduction in revenue. Number 2, an additional provision of INR 114 crores related to potential VAT liability in one of our subsidiaries included in SG&A expenses.

Impairment of INR 135 crores, including a R&D charge of INR 6 crores on account of discontinuation of R&D programs related to CAR T therapy as part of the portfolio prioritization. Impairment of INR 93 crores on account of discontinuation of a trial by our partner, Immutep, of an in-licensed asset following an interim futility analysis. The full year performance was further impacted by provisions related to potential VAT liability of INR 70 crores, as well as the impact of new labor law code in India of INR 117 crores. After factoring these items, the adjusted profit before tax was INR 994 crores for the quarter versus the reported number of INR 199 crores. For the full year, INR 6,463 crores versus the reported PBT of INR 5,482 crores. Now I would like to discuss the underlying performance in detail.

Margins in this section are expressed as a % of the revenues before the impact of SSA, unless otherwise stated. For the reported figures, please refer to the respective earnings releases. All financial figures in this section are translated into US dollars using a convenience translation rate of INR 93.83, the exchange rate prevailing as of March 31, 2026. Excluding SSA, the adjusted revenue stood at INR 7,969 crores, which is $849 million for the quarter. A decline of 6% year-over-year and 9% on QOQ, and at INR 34,046 crores, which is $3.63 billion for the full year, representing a growth of 4.6%.

The decline was primarily on account of lower lenalidomide sales, while the base business excluding lenalidomide delivered double-digit growth on year-over-year basis. We expect the base business to sustain its growth momentum in the year ahead. The gross margin on the adjusted revenue base after excluding the one-offs for the quarter was at 48%, lower by 760 basis points on year-over-year and 615 basis points on sequentially, and at 53.5% for the year, lower by 498 basis points on year-over-year. The decline in margins was largely on account of lower lenalidomide sales and price erosion in our unbranded generics businesses.

The gross margin for global generics was at 51.7% for the quarter and 57.74% for the year as a percentage of its adjusted revenues, while that for PSAI stood at 19.9% for the quarter and 17.2% for the PSAI for the fiscal on its reported revenues. Given our focus on the cost efficiencies and productivity improvement, we expect the margins to improve and be above 50% in FY 2027. Excluding one-off provisions mentioned earlier, SG&A spends were at INR 2,662 crores for the quarter, an increase of 11% on year-over-year and 1% sequentially, and 33% of the adjusted revenue base and INR 10,435 crores for the year, an increase of 11% on year-over-year and 31% of the adjusted revenues.

The increase was primarily on account of ongoing targeted investment to support long-term growth of our branded franchise, namely the acquired NRT Consumer Healthcare business and branded generics. We expect the spends to be around the same level as FY 2026 for the year ahead. The adjusted R&D spend for the quarter was INR 541 crores, a decrease of 26% year-over-year and 12% sequential, and a margin of 6% of adjusted revenue. For the year, the spend, excluding one-time labor code-related provision, was INR 2,385 crores for FY 2026, a decrease of 13% and 7% adjusted revenues. That decrease reflects reduced biosimilars developmental expenditure as a significant portion of investments related to abatacept has been completed. We expect the spends to be in the range of 7%-8% in the fiscal ahead.

Other operating income for the quarter was INR 344 crores as against INR 247 crores in the corresponding quarter last year, and INR 763 crores in FY 2026 as against INR 436 crores in FY 2025. The increase during the quarter was largely on account of divestment of non-core brands in India business for net of INR 189 crores. The underlying EBITDA, including other income, stood at INR 1,554 crores for the quarter, which is $166 million, a decline of 37% on year-over-year basis and 28% sequentially, and reflecting a margin of 19.5% of the adjusted revenues. For FY 2026, the EBITDA adjusted one-off was at INR 8,419 crores, which is $897 million. That is like 24.7% on the adjusted revenue base.

Impairment charge for the quarter was INR 259 crores as compared to INR 77 crores during the same quarter last year. The higher charge this quarter was largely on account of discontinuation of party assets and partnered product, eftilagimod alpha, as mentioned earlier. Impairment charge for the year, INR 352 crores as compared to INR 169 crores last year. The net finance income for the quarter was INR 62 crores versus INR 235 crores during the same quarter last year, and INR 413 crores for FY 2026 versus INR 472 crores for FY 2025. The decrease was primarily on account of lower foreign exchange gain in comparison to the corresponding period last year. As a result, the underlying profit before tax was at INR 994 crores. That is $106 million, representing a margin of 12.5%.

For FY 2026, at 6,463 crores, that is $689 million, a margin of 19%. Effective tax rate for the quarter was negative of 10.8% compared to 20.8% in the corresponding period last year. While for FY 2026, ETR was at 22.5% versus 25.4% in FY 2025. The ETR for Q4 FY 2026 was lower, primarily due to recognition of a deferred tax asset on carry-forward losses in one of our subsidiaries and a favorable jurisdictional mix for the quarter in comparison to the same period in the previous year. We expect the ETR to be 24%-25% for fiscal FY 2027.

Profit after tax attributable to the equity holders of the parent for the quarter stood at INR 220 crores, which is $23 million, a margin of 2.9% on the reported revenues. For the year, INR 4,285 crores, which is $457 million, a margin of 13% before adjusting for one-off items mentioned earlier. Based on the company performance, the board recommended payment of dividend INR 8 for the equity share of face value of INR 1 each. This is equivalent to 800% of the face value for the year ended March 31st, 2026, subject to approval of the shareholder of the company. Diluted EPS for the quarter, INR 2.64 and INR 51.42 for FY 2026.

Operating working capital as of March 31, 2026, was INR 14,434 crores, which is $1.54 billion, an increase of INR 2,920 crores, which is $31 million over December 31, 2025. CapEx cash outflow for the quarter stood at INR 438 crores, which is $47 million and INR 2,302 crores, which is $245 million for FY 2026. Free cash flow generated during the quarter before acquisitions related payout was INR 600 crores, which is $64 million and INR 2,004 crores, which is $214 million for FY 2026. As of March 31, 2026, we have a net cash surplus of INR 3,271 crores, which is $349 million.

Foreign currency cash flow hedges executed through derivative instruments during the period are as follows: $462 million hedged using combination of forwards and risk reversal options scheduled to mature by March. These contracts are hedged at rate of INR 91.37 to INR 93.46 per US dollar. RUB 1.6 billion hedged at a fixed rate of RUB 1.12 for Russian ruble with maturity falling within the next three months. With this, now I request Erez to take us through the key business highlights.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Thank you, MVN, and good day, everyone. We appreciate your participation on this call today and value your continued interest in our company. During the year, we remain focused on advancing our two pronged strategy of strengthening the base business while investing in our future growth drivers across peptides, biosimilars, consumer health, and innovation. Our FY 2026 performance reflected consistent disciplined execution of our strategic priority, namely scaling the base business, advancing our key pipeline programs, semaglutide and abatacept, and targeted business development efforts to support our growth ambitions while continuing to enhance efficiency across operations. I am pleased to report that in this first quarter without one of our key products, lenalidomide, the company delivered an EBITDA margins of around 20% after adjusting for certain items indicated by MVN earlier.

Launches of products offering meaningful opportunity, BD, and continued cost optimization efforts will take us closer to our aspirational 25%. For FY 2026, the adjusted EBITDA margin was in the neighborhood of 20%, consistent with our stated aspirations. The underlying base business delivered double-digit growth in Q4 as well as the full for the full years of FY 2026. All geography beside North America recorded double-digit growth. Performance in North America was impacted due to lenalidomide sales and one-time shelf stock adjustment related to this product. Let me now walk you through some of the key highlights of the quarter. In line of our strategic priorities, we made progress on our key pipeline assets, semaglutide and abatacept, during the quarter.

We are pleased to announce that Dr. Reddy’s became the first company to secure regulatory approval of semaglutide injection for type 2 diabetes in Canada, reinforcing our in-house expertise in peptide science and complex product development. Likewise, as the first company to receive approval in India for the same product in November last year, we successfully launched our brand, Obeda, on day one of market formation upon patent expiry in India. Our oral version of semaglutide is being approved by the CDSCO in India. We continue to engage with Anvisa in Brazil to address its concern related to our generic semaglutide filing and remain committed to making this important therapy available to patients across several markets, subject to approvals.

In February 2026, the U.S. FDA accepted for review our BLA for the intravenous IV presentation of our abatacept biosimilar candidate following its filing in December 2025. In line with our strategic focus to bring innovation to patients in India, we forayed in hormones replacement therapy segment with the acquisition of the Progynova and Cycloprogynova in India. Our partner product, COYA 302, received fast track review status. The operation integration of our acquired consumer healthcare business in Nicotine Replacement Therapy is now largely complete. In March 2026, the U.S. provided the VAI classification for our formulation facility, FTO 11, in Srikakulam, Andhra Pradesh, following a GMP and pre-approval inspection, PAI, in December 2025. We continue to build on our leadership in sustainability.

Dr. Reddy’s was awarded the gold medal for EcoVadis for FY 2026, achieving highest ever score of 80, placing us among the top 5% companies assessed globally. During the quarter, we were named by the business world among India top 5 sustainable company, ranking first in the Indian healthcare and pharmaceutical industry for 2024 and 2025. We’ve been recognized in the leadership category of 2025 Indian Corporate Governance Scorecard for the 3rd consecutive year. Let me now take you through the key business highlights for the quarter and the full year. Please note that all financial figures mentioned are reported in the respective local currencies. Our North America generic business reported revenue of $199 million for the quarter and $1.3 billion for FY 2026.

Excluding one type shelf stock adjustment, revenue were INR 251 million for the quarter, a decline of 40% and 26% sequentially, at INR 1.36 billion, a decline of 21% year-over-year. The decline was primarily on account lenalidomide. During the quarter, we added 7 new products to our portfolio, taking the annual of total 25 products. We aim to continue to launch momentum in the fiscal ahead. Our emerging markets reported revenue of INR 1,806 crore rupees in Q4 FY 2026, reflecting a robust growth of 29% year-over-year and a decline of 5% sequentially. INR 6,761 crore rupees in FY 2026, a growth of 23% year-over-year.

The growth was led by new product launches across markets and higher volume, particularly in rest of the world, further aided by favorable currency movements. During the quarter, we introduced 49 new products across countries, taking the FY 2026 total to 129. Within this segment, our Russia business report a growth of 8% year-over-year and a decline of 23% sequentially in concept currency terms. Our India business processed revenue of INR 1,566 crore rupees in Q4 2026, delivering a robust double-digit year-over-year growth of 20% and a decline of 2% sequentially. While the full-year revenues were at INR 6,219 crore, year-over-year growth of 16%. This performance was largely driven by revenues from our innovation franchise, new brand launches, price increase and volume growth.

Our Q4 data as of March 31, 2026 shows that we continue to outperform at the Indian Pharmaceutical Market, IPM, with the moving quarterly total growth of 15.2% compared to IPM growth of 11.6% and moving annual total MAT growth of 12.1% compared to IPM growth of 9.9%. Our IPM rank stood at 9 for the quarter and 10 for the year. We launched 10 new brands during the quarter and 28 over FY 2026, reflecting our continued focus on strengthening our domestic market presence.

Our European business, which include our acquired consumer health business in nicotine replacement therapy, posted revenue of INR 136 million for the quarter, a decline of 3% on year-on-year basis, as well as sequentially, and INR 542 millions for FY 2026, reflecting an acquisition-led growth of 37% year-over-year. The decline this quarter was primarily on account of price erosion in generics. During the quarter, we launched 7 new generics product across market, taking the full-year total to 38, further expanding our European product portfolio. Our PSAI business reported revenue of $101 million in Q4 FY 2026, resulting in decline of 10% year-over-year and a growth of 10% sequentially. The decline was primarily on account of lower API volume uptake during the quarter.

During the quarter, we filed 48 Drug Master File globally, taking the total number of filing to 128 for the year. Looking ahead, we remain focused on delivering on our strategic agenda of strengthening our core business while building future growth driver. Underpinning this strategy is future-ready organization structure aligned to our business model with dedicated leadership across global generics, biologic, consumer health and innovation, enabling sharper focus, relevant capabilities and more effective execution across each growth pillar. Within this framework, we’ll continue to advance our differentiated pipelines program, such as semaglutide and abatacept, drive operational efficiency and pursue value-accretive inorganic opportunity that supports sustainable long-term stakeholder value. With that, I invite your question as we move into the Q&A sessions.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thank you very much, Erez. We will now begin the question and answer session. To join the question queue, please use the Raise Hand option available 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. I would like to reiterate that the chat will not be monitored for any questions to the management. However, in case of any technical concerns, please do feel free to use the chat option to reach out to us. The first question is from the line of Neha Manpuria from Bank of America. Neha, please go ahead.

Neha Manpuria, Analyst, Bank of America: Yeah, thanks for taking my question. Just wondering on the shelf stock adjustment that we had in the quarter, a $50 million number for, you know, a product like REVLIMID, where we knew that the, you know, patent cliff is coming, seems very large. If you could just give us some color in terms of why the shelf stock adjustment was so large, you know, given that we knew we’re expecting competition in January?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: We were also surprised by this. It was not part of any arrangement or anything like that. I cannot speak on the details on the relationship or the customers, but it’s, it came from them, I guess, certain planning issues or mistake at their end and that’s, the outcome of it.

Neha Manpuria, Analyst, Bank of America: Okay. Understood. My second question is on semaglutide. Now that we have Canada approval, I think they’ve mentioned 12 million, you know, unit sales for across markets, you know, in FY 2027. Erez, in your view, what could be the competitive landscape now that, you know, Dr. Reddy’s and the second player have gotten approval? When do you expect more players? Out of the 12 million, in, based on your assessment, what could be the rough breakup between, let’s say, Canada and EMs?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I believe that the current landscape of basically Novo Nordisk as well as the two of us will stay there probably for several months. Likely that others will come. I believe that the market in Canada is give or take, it’s about 1/3 in for what we call public, 1/3 cash, and 1/3 what they call private. It’s a kind of public/private cash. What I believe will happen is that the reimbursement price will go over time as expected. The launch quantities, at least in a couple of years, we should be very healthy. Obviously, I cannot say a price, but it should be very healthy.

Neha Manpuria, Analyst, Bank of America: You know, given that we have had a setback in Brazil, are we still confident of the 12 million units, or, you know, sale for Sema, in FY 2027? Do you think that would depend on us getting approval in Brazil as well?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Brazil is part of it, I believe is still in that number, but the number moved by several months. I’m still with the same number, but probably it will have like 12 months that will probably result in somewhere in the beginning of FY 2028 as well. Specifically for the next, let’s say, until the end of calendar 2026, I believe that the number is somewhere between 6 to 7 million units.

Neha Manpuria, Analyst, Bank of America: This is for calendar 2026?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: No, this is for the markets that will get approval, and Canada will be obviously a big part of it, but.

Neha Manpuria, Analyst, Bank of America: Understood

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: it will be, this is give or take the numbers.

Neha Manpuria, Analyst, Bank of America: All right. Thank you so much.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Neha. The next question is from the line of Damayanti Kerai from HSBC. Damayanti, please go ahead.

Damayanti Kerai, Analyst, HSBC: Hi. Thank you for the opportunity. Continuing on semaglutide. Erez Israeli, just to clear, this 6 million-7 million units which you expect to market, it’s by end of this calendar year, right? By 2026?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Correct.

Damayanti Kerai, Analyst, HSBC: Okay. Can you talk a little bit about your pricing strategy in the market where you’ll be coming in, say, another 12 months? Specifically, in Canada after entry of 2nd generic, how do you position yourself versus Novo Nordisk pricing?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Our list price will be, give or take about half of what Novo Nordisk will be, that’s can be shared because it will be listed. Obviously the rest is arrangement that we have with the customer that I will not be able to disclose, but let’s say it will be the normal arrangement that you normally have. The, in terms of, I’m not sure I capture, sorry, the rest of the question. Sorry, I lost it. Can you remind me?

Damayanti Kerai, Analyst, HSBC: Yes. I was asking you about the pricing strategy in all the market. Where do you intend to come in, say, another 12 month or so, 12-15 months?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Sure. We believe that all the prices will be, let’s say, at the neighborhood of, let’s say, $30 plus. Why I’m saying that number also is because in some markets, we are going to work with a partner, and it reflect the net price that we’ll have for them. Obviously, they will have their margins. These numbers may go down if the competition intensified, but I don’t envision it to, at any case, to be below 25.

Damayanti Kerai, Analyst, HSBC: Okay. Somewhere $25-$30 per unit is the price you are working with.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: There will be market, obviously, that it will be much more than that.

Damayanti Kerai, Analyst, HSBC: Okay

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I just wanted to share with you the kind of the neighborhood of the floor area. Obviously, we are planning to have in markets also prices that are much higher than that.

Damayanti Kerai, Analyst, HSBC: Okay. That’s helpful. My second question is on SG&A spend. You mentioned next year, sorry, this year, FY 2027, it could be similar to what we had in FY 2026. Just wanted to understand, in NRT in or some of the initiatives which you had started a few years back, you have been spending for last few years, if I may say. Where you are looking for investing more? This number, do we have any room to take a cut or see any reduction there? If you can just talk a bit on that part. Thank you.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Sure. We will have absolutely places that will have less, and we’ll have places that will have more. Just to address, the NRT is a place in which we will have more. At the same time, the growth will well more than finance it. The level of profitability of the asset will stay the same and even maybe go. In terms of SG&A %, we will have more. We are also launching innovative products in India and in certain emerging market, naturally we are investing in the marketing of those new products. At the same time, we are putting a lot of productivity activity, sales force excellence, as well as additional marketing excellence program, this will go up.

That’s why we said that give or take in terms of nominal value, it should be the same level. Our sales will go by it. In percentage-wise, it will go down. In terms of to understand the range of the of the spend, it will be about give or take the same range that we have now.

Damayanti Kerai, Analyst, HSBC: In nominal terms, right?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah. While of course the sales will go double-digit.

Damayanti Kerai, Analyst, HSBC: Okay. Thank you. All the best. I’ll get back in the queue.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Damayanti. The next question is from the line of Tushar Manudhane from Motilal Oswal. Tushar, please go ahead.

Alok Dalal, Analyst, Jefferies3: Thanks for the opportunity. Am I audible?

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Yes.

Alok Dalal, Analyst, Jefferies3: Firstly, on gross margins, even after adjusting the shelf stock, for the quarter it is 48%, while ex-lenalidomide also we have talked in the past that the gross margin has been 50 plus. Is there anything which I’ve missed as far as gross margin for the fourth quarter is concerned?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: This quarter is there is a product mix impact, that’s why it is at 14%. We believe our gross margin range is in the range of 50-55.

Alok Dalal, Analyst, Jefferies3: What will drive this in the subsequent quarters? Are you including semaglutide sales for this gross margin?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Yeah, semaglutide sales of course, and then there is a cost improvement product cost improvement programs also are on. Considering what the new products we are going to launch in FY 2027, including semaglutide plus product mix. Considering all these things, I think, certainly our gross margin will be 50% or above.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I just want to make sure.

Alok Dalal, Analyst, Jefferies3: And, sir-

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I want to make sure that we are planning to launch also product like sugammadex, upadacitinib, sitagliptin.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Rimondinin.

Rimondinin.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Rimondinin. Sorry for my reading. Sorry? Yeah. In addition to that, there are additional key products to do. The mix of the product, the mix of the market, as well activities that we are taking now on our APIs, we are very confident about our ability to manage the gross margins.

Alok Dalal, Analyst, Jefferies3: Just on these products which you mentioned, sir, currently U.S. revenue, even after including the shelf stock adjustment, it is $236 million. Effectively maybe $944 million if I normalize that. Will we sort of grow over and above this ex semaglutide in FY 2027?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: We will absolutely grow in North America, ex lenalidomide, in double digits.

Alok Dalal, Analyst, Jefferies3: Got it, sir. Just lastly, for India market, if you could just share what has been organic and inorganic growth for the quarter.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: It’s organic. What do you mean inorganic? We did not licensing and consider organic or inorganic?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Brands what we acquired is not a significant impact in this quarter.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah, no.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: That Progynova is just recently acquired brands.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: No, just to clarify, we consider if we license a product from China and we are launching it in India as organic. In this terminology, it’s mostly organic. It’s, let’s say the inorganic is negligible.

Alok Dalal, Analyst, Jefferies3: Got it, sir. Thanks. Thanks a lot.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Tushar. The next question is from the line of Dr. Bino Pathiparampil from Elara Capital. Bino, please go ahead.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Hi, good evening. Could you give an update on the status of denosumab and Aurinia abatacept?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: denosumab will launch in Europe, and we are awaiting for approval in the U.S. Our partner has a deficiency letter that they need to address for the U.S. abatacept, the IV is was approved for review, so it was accepted. It is going after the timelines. I know we are also awaiting an FDA inspection in Bachupally, Hyderabad, for the same. The abatacept so far in the right direction. Of course we are working on the sub-Q that will be submitted later, and also will be launched later as we discussed in the past.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Got it. The IV is online for potential launch this calendar year?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: IV will be likely at the beginning of calendar 2027. Hopefully this fiscal, only hopefully in this fiscal. That’s the plan. Of course, we need to see the approval for that. Right now that’s the plan.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Got it. Do you expect denosumab in the U.S. before that?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I don’t know. It depends on the ability of Alvotech to get approval.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Got it. Second one, you said that you have wound down your CAR T related investments and taken a write-down. Could you just tell us a bit about what your investment was and why it failed in that area?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: No, the investment, give or take is what we, MVM guided, it’s INR 150.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: 135.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: INR 135 crore. That’s what we took down. We saw that we have issues with the clinic, and we decided to kind of deprioritize it at this stage. We just impair it as per appropriate accounting. This is give or take what we invested.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Sorry, I got the figures, but my question was more technical. Is it something wrong with the specific product you used or with the technology itself?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I’m not sure I understand the question. It’s what we invested in the clinical trials and getting the products.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Oh.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah.

Dr. Bino Pathiparampil, Analyst, Elara Capital: The products. Okay. Your product doesn’t work, but CAR T technology as such is still okay?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I don’t know what is The product is the CAR T, sorry.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Got it.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah.

Dr. Bino Pathiparampil, Analyst, Elara Capital: Understood. No problem. Thank you. I’ll join back.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Okay.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thank you, Bino. The next question is from the line of Surya Patra from PhillipCapital. Surya, please go ahead.

Alok Dalal, Analyst, Jefferies2: Yeah. Thank you for this opportunity. My first question is on the biosimilar business. Since it is a closure of the fourth quarter of the year and full year data is there. Just wanted to have sense, what is the size of the biosimilar right now, and whether it is already a broken even or it is a loss-making. If not, what is the timeline for the break even for this business?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Overall, our global biologic sales is about, it is not very high. This is above $100 million sales. At this sales, certainly whatever investments we are doing for the development of abatacept, other products, pembrolizumab also we are with Alvotech. Definitely it’s not a break even. Once we launch abatacept, certainly I think post that, I think certainly we can see the break even.

Alok Dalal, Analyst, Jefferies2: FY 2029?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: It is in certainly could be in like I already said, if abatacept everything goes well, our inspection, everything, and we’ll be launching in calendar year 2027. That would be like FY 2028.

Alok Dalal, Analyst, Jefferies2: Okay. Okay. Second question was on the NRT. The, two thing here, observation-wise. Last two quarters, since last two quarters we have been seeing a strong growth. Last quarter it was 25% Y-Y growth. This quarter it is around 16%. What is driving this growth, and whether this is sustainable one? Secondly, fourth quarter, is there any seasonality? Because last year also there was a kind of a sequential decline that we had witnessed for NRT.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: The NRT business is indeed growing more than we expected it to be. We expect it to be kind of mid-single digit. It’s certainly more than that. Specifically for the 16%, there is some impact of the fact that in the transition, some customer take more stock. So it’s not fully, let’s say, in that respect, sustainable. I believe that the right place for it is either high single digit or even low double digit. We will be somewhere in this neighborhood.

Alok Dalal, Analyst, Jefferies2: Okay. Just last one point. What is your experience about the semaglutide penetration here in India? Because generally it is understood that of the target patient population for weight loss application, let’s say, the penetration is very low. It is around 2% or even less than 2%. What is the trend that you are witnessing here in India in terms of the penetration of semaglutide?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah. I don’t recall exactly the market share, but so far it’s a great launch.

Alok Dalal, Analyst, Jefferies2: Okay.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Same.

Unknown Speaker, Management/Company Representative, Dr. Reddy’s Laboratories Limited: I think our market share is about 10%, more than 10%, on a standalone basis.

Alok Dalal, Analyst, Jefferies2: Okay. In that light, are we talking anything about the growth for the domestic business?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I believe that it will grow, plus in the next coming days we will launch also the oral product, the combination of both should give us a very healthy growth.

Alok Dalal, Analyst, Jefferies2: Sure, sir. Okay. Yeah. Thank you.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Surya. The next question is from the line of Lavanya Tutala from UBS. Lavanya, please go ahead.

Lavanya Tutala, Analyst, UBS: Hello. Hope I’m audible. Thanks for the opportunity. Just one question from my side. Even after adjusting for SSA in your sales sequential decline of 25% QOQ despite having a limited REVLIMID in Q3 seems quite high. Am I missing something? Is there anything other which is one-off here?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: No, in Q3 we had a little bit sales, right? This, little bit sales.

Lavanya Tutala, Analyst, UBS: Okay.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Yeah. Hence I think definitely from Q3 to Q4 there will be a natural decline.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I don’t think we don’t see a pattern of a loss of market share or a price erosion or anything like that. There could be that there were certain, you know, buying patterns with some customer. Overall, it’s very consistent the way we see it. The primary difference between the quarters is lenalidomide.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Yeah.

Lavanya Tutala, Analyst, UBS: Okay. The one which is adjusted for SSA in Q4, one can consider this as base sales for U.S. from here on. Is that right way to look at it?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah. I would not come. I don’t know exactly the origin of the SSA specifically. Let’s say that there might be some customers that bought a little bit more as per their pattern, as per their patterns of acquiring products in terms of dates and stuff like that. Overall, if you look at market share prices, this kind of stuff, it should be about the same.

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Erez, this is one we will be also going to new launches. This is from the existing products, and then going from rest of the year, we’ll be launching like 27 new launches overall for the full year.

Lavanya Tutala, Analyst, UBS: Oh, got it. Got it. Thank you. Thank you so much for the opportunity.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Lavanya. The next question is from the line of Saion Mukherjee from Nomura. Saion, please go ahead.

Alok Dalal, Analyst, Jefferies0: Yeah. Hi. Thanks for taking my question. Just one question on semaglutide. If you can indicate when you expect approval in Brazil, and what are the key market approvals that you’re looking at? You know, you mentioned, I think, 6 or 7 million units for this calendar year. What’s your expectation for the full fiscal year, FY 2027?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: The additional markets, beside of course, first of all, we are expecting to get approval also in Brazil. We have a partner in Brazil that is also there, and he got also our comment. We hope to get approval to our clone product that is there. And in parallel to that, of course, we are seeing approval for our initial submissions. We will be in Brazil, probably, I don’t know if it will be 3 months delay or 4 months delay, but that is still the expectations. In addition to that you have markets like Turkey. You have a bunch of, relatively high number of smaller markets that we have a partner that will probably serve, like in Latin America or in Southeast of Asia.

Because altogether, we are planning in this calendar to launch in more than 50, and in 12 months in more than 80. In terms of number of markets, but in many of them, we will do it with a partner that will do it for us. Between the, what we call the B2B, in which we are selling to the partners or selling ourself directly, we probably will be in a pace of 3 or 4 million pens per quarter. If you add to that, it will come to around 10 or 11, close to the 12 that we discussed last time, give or take 1 month. We are still in the same neighborhood, but with the delay of the few months that took those approvals.

Alok Dalal, Analyst, Jefferies0: Understood. There’s one question on U.S. generics. I think, if I heard you right, are you expecting 27 launches? You actually mentioned a few of those products. It looks like most of them are very competitive. Are there any chunky large product opportunity in the U.S., you know, outside of abatacept, that you expect in fiscal 2027?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I believe that bosutinib can be nice product. I agree with you about that most of them will be competitive, I fully agree with that. Overall, it should give us a double-digit growth without Lena.

Alok Dalal, Analyst, Jefferies0: Okay. Yeah. Thank you.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Saion. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Abdul, please go ahead.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I’ll find this.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Abdul, you are unmuted now. Okay. In the interest of time, we will move on to our next participant, and we’ll come back to Abdul, once he’s able to unmute. The next question is from the line of Vivek Agarwal from Citi. Vivek, please go ahead.

Alok Dalal, Analyst, Jefferies5: Yeah. Thanks for the opportunity. Just want to understand, out of this, 3, 4 million pens per quarter, how much of this capacity that you are going to sell directly, and how much of the sales you are expecting through partner, partners, et cetera? If you can help us understand. Thank you.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Calculation. It’s if I need to guess, I must admit that I did not do any kind of calculation, top of my head I will say 50/50, give or take, in the neighborhood.

Alok Dalal, Analyst, Jefferies5: I understood, sir. Thanks. One question on North America. If you look at, in this quarter we have done close to $250 million kind of revenues and it is again, close to pre-development levels, right? In the last 3 years, we have launched many products, but our, the U.S. revenues haven’t moved up much. Is it fair to assume that, there’s a price erosion in some of the major baseline products in the U.S.? How to look at overall profitability of the U.S. business? Is it, still lower than pre-development levels or is it, everything almost similar? Thank you.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah. First, obviously, there was in this period of time there was price erosion, what it tells is that market share and new products, give or take, covered. I see it as a kind of very low single-digit growth, not flat, but I’m in agreement with you that that’s this market is not growing as the other markets that we have that are all growing in double-digit. Moving forward, this year, again, without Lena, we will see double-digit growth, going forward, the main growth in the United States will come from biosimilars, consumer health, as well as certain type of IB2s. Over time, the business will diversify itself, but right now it’s mostly generic products.

Alok Dalal, Analyst, Jefferies5: understood. Right. The double-digit growth that you are highlighting for this year, that includes Sema in Canada, right? I’m just trying to understand how to look at only the U.S. sales. What kind of the growth you are expecting in the U.S. business ex Lena and ex Lena this year?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah. It’s ex Sema. It’s not with Sema. Sema is on top.

Alok Dalal, Analyst, Jefferies5: Perfect. This is helpful. Thank you.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Vivek. The next question is from the line of Ashutosh Jha from Barclays. Ashutosh, please go ahead.

Ashutosh Jha, Analyst, Barclays: Hi. Thank you for taking my question. I had 2 questions. Number 1, when you look at the next year, I think you have given the breakup of the costs by line items, but given that the base business right now is at, call it, 19%-20% margin, where do you see the overall margin for the business with sema, et cetera, in the next year and the year after versus our target of 25%?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: We are planning to maintain the base without Sema at around 20%. This is the plan, and the Sema is supposed to help us to get more than that. Now, it obviously depends how much we will be able to sell and what price and what will be the mix, because I shared already that it will be a range of price that can go, let’s say, between INR 30 or INR 25 to INR 30 all the way to INR 70.

Obviously there will be a range of prices. Let’s say, with semaglutide it should be close to the 25%, but maybe a bit less. Depends on how much semaglutide we will sell.

Ashutosh Jha, Analyst, Barclays: Understood. Sir, any thoughts on the number of pens that you can possibly sell in FY 2028?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: F.28, potentially we will have a lot of capacity because we will be able to qualify in addition to the current cartridge suppliers that we have today, we will be able to qualify also a capacity of FTO 11. It can be any number. Let’s say it can be also 40 million also, but right now I don’t see a demand for this. Hopefully we will-

Ashutosh Jha, Analyst, Barclays: Understood, sir. Thank you so much. Those are my questions.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thank you, Ashutosh. The next question is from the line of Alok Dalal from Jefferies. Alok, please go ahead.

Alok Dalal, Analyst, Jefferies: Yeah, thank you. One quick clarification. It is on semaglutide in Canada. Has innovator Novo already introduced an AG in the market?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Sorry, can you repeat?

Alok Dalal, Analyst, Jefferies: Yeah. In Canada, has Novo already introduced an AG in the market?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I know that they are offering. I don’t know if it was already sold. I don’t know the units, personally. I don’t have a knowledge for that.

Alok Dalal, Analyst, Jefferies: Okay

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: assuming that they will have. That’s my assumption.

Alok Dalal, Analyst, Jefferies: All right. In that scenario, will it be a three-player market and lead to 75% discount to the innovator product? Is that the way to think?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I don’t think so in that way because the market is divided to public, cash and private, and what you’re discussing is absolutely public. likely that this will happen to the public eventually. I do see it as a mix of markets. we are not planning right now our assumption based on the number that you mentioned.

Alok Dalal, Analyst, Jefferies: Okay. Understood. Thank you so much.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Alok. The next question is from the line of Vishal Manchanda from Systematix. Please go ahead, Vishal.

Alok Dalal, Analyst, Jefferies4: Hi, good evening, and thanks for the opportunity. Could you outline how much would you expect in annual biosimilar sales by FY 2029?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I wish I could.

Alok Dalal, Analyst, Jefferies4: A broad number, a broad guidance.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: A broad, hopefully it will be in the range of $half a billion, $600 million, $700 million. Sorry that it’s very much depends, of course, of how abatacept will perform. It will be the lion’s share of those sales.

Alok Dalal, Analyst, Jefferies4: Would this have margins above company margins? Like, can this be the entire biosimilar portfolio, can it give you 25% plus margins?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: In the case that there will be no competition or low competition, absolutely it will be above the average margin that we have.

Alok Dalal, Analyst, Jefferies4: Right. Are we on track to file the subcutaneous version this year in Europe and U.S.?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yes, we are in the U.S. for sure. In the Europe, there might be some delay.

Alok Dalal, Analyst, Jefferies4: Okay. Okay. Just if you could give the split of sales between IV and subcutaneous in the U.S. by value?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: It is 50/50. In U.S. is. Whereas in Europe, IV is very less, and SC is high.

Alok Dalal, Analyst, Jefferies4: Got it. Got it. Your CapEx plans for the next two years, annual CapEx plan?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Next year would be in the range of INR 2,000 crores, around INR 2,000 crores.

Alok Dalal, Analyst, Jefferies4: Got it. Would this largely be on biosimilars or you have other areas?

M.V. Narasimhan (M.V.N.), Chief Financial Officer, Dr. Reddy’s Laboratories Limited: Biosimilars, certain like a product specific investments I think are there, and then general CapEx.

Alok Dalal, Analyst, Jefferies4: Got it. Thank you. Thank you very much.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Last question.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: In the interest of time, we’ll take one last question, from Siddharth Nigande from CWC. Siddharth, please go ahead.

Alok Dalal, Analyst, Jefferies1: Thank you for the opportunity. On biosimilars, you had mentioned that your R&D spends would reduce given that the spends toward abatacept have been completed. You know, going forward, given the draft U.S. FDA guidelines, how do you expect your cost per molecule to behave? How do you see competitive intensity playing out? You know, given that you’re guiding for a lower R&D spend, should we assume this is because of those draft FDA guidelines or is it because the new set of launches post abatacept and denosumab will be, you know, much later and therefore the spends will be lower? Yeah, that’s one question. On semaglutide, just wanted to get your perspective on how you see dosage forms playing out given that you’re also launching oral in India.

Do you see oral Being unique to India or do you see that having a play in other emerging markets too? You know, between the 3 dosage forms, how do you see the likely salience, say, 2, 3 years out?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Yeah. on the R&D-

Alok Dalal, Analyst, Jefferies1: Those were my 2 questions.

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: Sure. The R&D, naturally we abatacept we paid for a phase III trial, and going forward, we don’t anticipate phase III. Obviously, the level of R&D in this area will not be the same. In addition to that, the products that will come in the next coming years in biologics, for us will come, primarily with partners unless that something that will come in-house. Obviously, then we share the R&D cost as part of that. And number three, we are becoming more productive. One day we’ll discuss it, but we love AI and we love this kind of stuff, and the overall, the R&D will have less cost and more output. This is on the R&D question.

On the semaglutide question, definitely we believe that the oral will grow not just in India, for sure in India, but also in other places. Depends of course on how people appreciate the compliance of the oral product. As time will go by, also the oral will have probably additional, because that’s what the innovator is doing, additional forms, and we will have all of them. There is a life cycle management that we are looking, and obviously we are following as well, and we will launch the same as IP will allow us to do that.

Alok Dalal, Analyst, Jefferies1: Sure. Any thoughts around how do you see the salience between pens, vials, and orals in emerging markets for semaglutide?

Hari (Erez), Chief Executive Officer, Dr. Reddy’s Laboratories Limited: I believe that in the places that, you know, in the emerging market, you have countries in which there is a full use of the pens and innovator fully launched the product in a place that it was done partially or And also markets that not at all. Obviously, the price point for each one of the market is a bit different. In the places with the lower prices, we believe that the oral will be more successful than in the lucrative markets, at least the way we look at it now.

Alok Dalal, Analyst, Jefferies1: Thank you.

Aishwarya, Moderator/Call Facilitator, Dr. Reddy’s Laboratories Limited: Thanks, Siddharth. That was the last question. Thank you for joining us today. We value your time and participation on the call. If you have any further questions or need additional information, please feel free to reach out to me. With that, we conclude today’s earnings call. Thank you, everyone. Have a good evening.