Dr Reddy's Laboratories Ltd (RDY) 2025 Q4 法說會逐字稿

Ladies and gentlemen, good evening, and welcome to quarter four and full year FY25 earnings conference call of Dr. Reddy's Laboratories Limited. (Operator Instructions)

I now hand the conference over to Ms. Richa Periwal. Thank you, and over to you, ma'am.

Thank you. Good morning and good evening to all of you. Thank you for joining us today for the Dr. Reddy's earnings conference call covering the quarter and full year ended March 31, 2025. We appreciate your time and participation.

Joining us today is the leadership team of Dr. Reddy's Limited, comprising Mr. Erez Israeli, our CEO; Mr. M. V. Narasimham, our CFO; and the Investor Relations team. Earlier today, we released our results, which are now available on out site.

We will begin today's call with MVN presenting the financial highlights for the quarter and the year. Following this, Erez will share his thoughts on the business performance. We will then open the floor for the Q&A session.

Please note that today's call is a copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlet without the company's expressed written consent. This call is being recorded, and both the playback and transcript will be available on our website soon. All discussion and analysis in this call will be based on the IFRS consolidated financial statements.

Additionally, today's discussion include certain non-GAAP financial measures. For the reconciliation of GAAP to non-GAAP measures, please refer to our press release. Before we continue, I would like to remind everyone that the safe harbor provisions outlined in today's press release also applies to this conference call.

Now I hand over the call to MVN.

Thank you, Richa. Greetings to everyone, and I hope you are all doing well. I am pleased to present an overview of our financial performance of the fourth quarter and full year FY 2025. Fiscal year 2025 was another milestone peer for the organization, marked by strong financial performance, we achieved record high revenue exceeding USD3.8 billion and crossed the USD1 billion threshold in EBITDA for the first time. Both revenue and EBITDA registered double-digit growth for the year.

Please note that all the figures in this section are translated into US dollar using convenient translation rate of INR85.43, the rate prevailing as of March 31, 2025. Revenue performance. Consolidated revenues for Q4 FY25 stood at INR8,506 crores which is equivalent to USD996 million, reflecting year-over-year growth of 20% and a sequential increase of 2%. For the full year, our revenues were at INR32,554 crores and USD3.8 billion, representing a growth of 17%.

These results include contribution from the acquired consumer health care business in nicotine replacement therapy, which added INR597 crores in Q4 and INR1,202 crores for the full year. The overall revenue growth was driven by this strategic acquisition and contribution from our generic portfolio across geographies, excluding sales of the NRT business, revenue growth was at 12% on year-over-year for both the quarter and the year and 2% sequentially for the quarter.

Gross margin. The consolidated gross profit margin for Q4 was at 55.6%, reflecting a year-over-year decline of 300 basis points and a sequential decline of 312 basis points. The decline was mainly due to reduced manufacturing overhead leverage and higher milestone income recognized in the comparative period. Gross margin for the Global Generics and PSAI segments stood at 59.3% and 26.3% for the quarter.

For the full fiscal year, the consolidated gross margin remained stable at 58.5%, consistent with FY24. Gross margin for Global Generics and PSAI were at 62% and 27.1% for the full year, respectively. Selling and general administrative expenses. SG&A expenses for the quarter amounted to INR2,406 crores, which is [USD 282] million, marking a year-over-year increase of 17% and the remaining broadly flat quarter over quarter. SG&A as a percentage of the sales was 28.3%, representing a decline of 63 basis points year over year and 57 basis points on QoQ.

For the full year, SG&A expenses amounted to INR9,382 crores, in dollars, $1.1 billion, up by 22% year-over-year. This increase is primarily driven by recently acquired NRT business in the Consumer Healthcare segment, investment in other commercial activities and higher prices impacting logistics costs. We continue to maintain disciplined cost structure while strategically allocating resources to strengthen existing business and expand into the new growth segments.

Research and development investment. R&D remains a key pillar for long-term growth. We continue to enhance our internal R&D efforts with strategic external collaboration for innovation assets. R&D expenditures for the quarter stood at INR726 crores, USD85 million, representing a year-over-year increase of 6% and quarter on quarter increase of 9%.

As a percentage of revenues, R&D investment was at 8.5%, lower by 118 basis points year-over-year and higher by 57 basis points sequentially. Full year R&D investments was INR2,738 crores, USD320 million, reflecting a year-over increase of 20%, but investment largely focused on building differentiated pipeline, expanding small molecules, biosimilars, complex generics, including (inaudible) and novel oncology assets.

Other key financials. Impairment loss is INR77 crores in Q4 and INR169 crores for the full year. The impairment pertains to certain product-related intangibles from main portfolio and other product-related intangibles forming part of the company's global generic business in India and Europe due to adverse market conditions. Our operating income is INR247 crores in Q4 versus INR66 crores for the same quarter last year and INR436 crores for the full year versus INR420 crores in FY24. Q4 increases primarily on account of reclassification of foreign exchange gain related to foreign operations from FCTR, full form of FCTR is foreign currency translation reserve.

Post divestment of Freeport Manufacturing Facility. The net benefit to P&L on account of FCTR reversal after addressing severance cost and other onetime costs is INR121 crores. Ending EBITDA. EBITDA for the quarter was INR2,475 crores, USD290 million, registering a year-over-year growth of 32% and quarter-over-quarter growth of 8%. EBITDA margin was at 29.1%, an increase of 267 basis points on year-on-year and 160 basis points sequentially. For FY25, EBITDA stood at INR9,213 crores, USD1.1 billion, reflecting year-over-year growth of 11%.

The annual EBITDA margin stood at 28.3%, down from 29.7% in FY24, reflecting a decrease of 143 basis points. Finance income and profitability. Net finance income was INR235 crores in Q4 versus INR102 crores in previous year and INR 400 crores for full year as compared to INR399 crores last year. Higher year-over-year income is due to net foreign exchange gains. Profit before tax was INR2,005 crores, in USD235 million in Q4, up 25% year-over-year and 7% QoQ.

PBT for the year was INR7,678 crores and in terms of dollar, USD899 million for the full year, a year-over-year growth of 7%. PBT margin was 23.6% for Q4 as well as for FY25. PBT includes INR89 crores for the quarter and INR101 crores for the full fiscal from the NRT portfolio. The effective tax rate was 20.8% for the Q4 and 25.4% for the full year. ETR for the quarter is lower due to reversal of previously recognized tax provision pertaining to prior year and transfer to the income statement is not subject to taxation.

The full year ETR is higher than the previous year, mainly due to the reversal of previously recognized deferred tax assets related to land indexation and the recognition of previously unrecognized deferred tax asset on operating tax losses compared to the period ended March 31, 2024. We expect the ETR for FY26 to be similar to the current fiscal year.

Profit after tax is attributable to the equity holders was INR1,594 crores, in dollars, USD187 million in Q4, up 22% year-over-year and 13% QoQ, translating to a margin of 19%. Full year profit after tax was at INR5,655 crores, reflecting year-over-year growth of 2% and a margin of 17%. Earnings per share stood at INR19.1 for the quarter and INR68.1 for the full year. Based on the company's performance, the Board has recommended payments of dividend of INR8 per equity share of face value of INR1 each. This is equivalent to 18% of the face value for the year ended March 31, 2025, subject to approval of the member of the company.

Cash flows and balance sheet, operating working capital as of March 31, 2025 stood at INR12,590 crores, a reduction of INR192 crores compared to December 31, 2024, primarily driven by improved receivable management. Capital expenditure was INR767 crores for the quarter and INR2,699 crores for the full year. Free cash flow for the quarter was INR1,110 crores and for the full year, INR1,332 crores for the full year before acquisition-related payouts.

At the year-end, the company maintained net cash surplus balance of INR2,454 crores post NRT acquisition payout in October. Foreign currency cash flow hedges executed through derivative instruments as of March 31, 2023 are as followed: an amount of USD786 million has been hedged using structured derivative contracts maturing over a course of the next financial year.

These contracts provide a minimum production rate of INR85.9 for US dollar while retaining the potential for outside participation in the event of US dollar appreciation. An amount of INR2,500 million has been hedged with a minimum production rate of INR0.91 for Russian Ruble. These contracts are scheduled to mature within next three months.

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

Thank you, MVN, and a very good morning and good evening to everyone.

Dr. Reddy's delivered another year of robust performance marked by highest ever annual revenues and profits. Fiscal year 2025 was characterized by double-digit growth across all business segments. During the period, we continued to strengthen our core generic businesses while investing and building our 3 strategic growth areas, namely consumer health, innovation and biosimilars.

Our efforts remain focused on driving operational efficiencies, strengthening our pipeline and enhancing organizational capabilities. In parallel, we execute on value accretive inorganic initiatives to complement our organic growth in alignment with our stated strategic objectives.

I would like now to highlight some of the key financials for the fiscal year as well as important updates from the fourth quarter. One, we sustained momentum and delivered healthy double-digit revenue growth of 20% in Q4 and 17% for the full fiscal year. EBITDA margins remained resilient exceeding 29% for the quarter and closing the full year at over 28%. Return on capital employed ROCE reached 27.7% underscoring our continued focus on capital efficiency and value creation.

We concluded the fiscal with a net cash surplus of USD287 million, thereby enhancing our financial flexibility to support future growth initiatives. Our biosimilar strategy progressed this quarter to key strategic partnerships. We secured exclusive commercialization rights for the daratumumab, biosimilar candidate on Henlius in the United States and Europe, reinforcing our oncology portfolio. We signed an agreement with Bio-Thera for commercialize ustekinumab and golimumab biosimilar candidates with a primary focus on Southeastern Asia markets.

The US FDA also accepted the filing of our partner, denosumab biosimilar, making a key milestone in our investment within regulated biosimilar markets. The phase integration of our newly acquired nicotine replacement therapy NRT business is moving forward as planned. The United Kingdom was successfully integrated at the start of the month, and we are on track to complete the integration of the Nordic in the next phase. We are demonstrating our commitment to bringing innovation to India and improving health care access through strategic partnerships.

We extend our collaboration with Sanofi to introduce Beyfortus, which is nirsevimab, a noble drug hopefully preventing RSV. In partnership with ALK-Abilor, we launched (inaudible) and immunotherapy product for house dust, mite-induced allergies. We commenced participation in the government of India General Ashwani program with one of our products. We divested our Shreveport Manufacturing Facility in Louisiana, United States.

On the regulatory front, the API manufacturing facility in CTO2 located Bollaram, Hyderabad received the VAI status from the US FDA following the successful GMP inspection conducted in November 2024. We continue to deliver industry-leading performance in sustainability, earning multiple recognition for environmental, social and government ESG initiatives. Our EcoVadis improved to 73%, positioning us among the top 15% of the company assessed globally. We were able -- we were also honored with Climate Action Program 2.0 Degrees award by CII in the highest resilient category within the last manufacturing sector.

We recognized in the leadership category or on the Indian Corporate Governance Scorecard 2024 by Institutional Investor Advisory Services.

I will now walk you through the key business highlights for the quarter and the full fiscal year. Please note that all figures referenced in this sections are presented in the respective local currencies. Our North America Generic business generated revenue of $418 million for the quarter, reflecting a year-on-year growth of 7% and a sequential growth of 4%.

For the full fiscal year, revenue stood at USD1,727 million representing a 10% increase over the previous year. This performance was primarily driven by increased volume in key product and successful new product launches, partially offset by price erosion. This quarter, we launched 7 new products bringing the total for the fiscal year to 18. We expect this strong momentum to continue into FY26.

Our European Generics business reported revenues of EUR140 million for the quarter, reflecting a year-on-year growth of 142% and sequential increase of 4%. For the fiscal year, revenue stood at EUR395 million, representing a growth of 73% compared to the previous years. Our strong performance driven by contribution from the NRT business, higher base business volumes and gains from new product launches helped to offset pricing pressures. Excluding the contribution of the NRT business, European generic business recorded a year-on-year growth of 29% and a quarter-on-quarter growth of 11% in Q4 and a full year growth of 15%.

This quarter, we launched 10 new generic products in Europe, bringing the total for the fiscal year to EUR39 million. Our emerging market generic business reported revenues of INR1,398 crores in Q4, reflecting a year-on-year growth of 16% and sequential decline of 20%. For the full fiscal year, revenue stood at INR5,477 crore, representing a year-on-year growth of 13%. The performance was mainly driven by higher volume and new product launches, partially impacted by unfavorable ForEx.

During the quarter, we launched 26 new products across various emerging market countries, bringing the total for FY25 to 85 products. Within this segment, our Russia business posted year-on-year growth of 27% in constant currency for the quarter, although it experienced a sequential decline of 13%. On a full year basis, the Russia business recorded a growth of 24% in constant currency terms. The India business recorded revenue of INR1,305 crores in Q4, reflecting a double-digit year-on-year growth of 16% and 3% sequential decline for the quarter.

For the full fiscal, the revenues were INR5,373 crores, representing a 16% year-on-year growth. Excluding the contribution of the in-licensing vaccine portfolio, the business recorded a 6% growth in Q4 and for the full year, driven mainly by successful new product launches and favorable pricing. According to IQVIA, we have maintained our position as a 10 largest player in Indian Pharmaceutical Market, IPM, and have marginally outperformed the IPM with the moving annual total MAT growth of 8.4% compared to the IPM growth of 8%.

In addition to the Sanofi and Nestle portfolio, we have launched 23 brands during the fiscal. Our PSAI business recorded revenues of USD112 million in Q4 in FY24, reflecting a year-over-year growth of 13% and sequential growth of 15%. For the full fiscal year, revenue stood at USD401 million, represented growth of 12% compared to the previous year. The growth was primarily driven by increased volume contribution from new API launches and growth in our complex development and manufacturing organization CDMO business. During the quarter, we filed drug master files, DMFs, including seven for the United States, bringing the total number of filings for the year to 111.

We remain committed to investing in our pipeline to drive future growth further supported by strategic collaboration focused on innovation. Our R&D investment for the quarter amounted for INR726 crores, reflecting year-over-year growth of 6% with growing emphasis on complex assets, such as GLP-1 and biosimilars.

Additionally, we completed 95 global generic filings bringing the total for the fiscal year to 249. In FY 2026, we'll continue to expand and strengthen our core businesses, drive value to portfolio management, grow our process in consumer health care, innovative therapies and biosimilars, leveraging our commercial footprint and explore value-accretive acquisitions and partnerships, and maintain financial discipline to build the foundation for sustainable future growth.

And with that, I would like to open the floor for questions and answers.

(Operator Instructions). Neha Manpuria, Bank of America.

My first question is on tariffs. Given you speak to the policymakers and customers, what is your sense on the extent of tariff or to what level the tariff could be implemented on generic? Could it be in the API? Could [KSM] be included? And the second part is, given that Reddy's does not have any manufacturing in the US what are the mitigation factors that we are looking in case tariff is implemented for generics?

Thank you. First, obviously, I wish I knew how much tariff will come. We are preparing ourselves for the scenarios, and we're obviously watching carefully the information as it will come. At this stage, the main effort is to ensure sustainability of supply.

So the main activity, as we speak, is to work closely with our customers and see what is the need in terms of inventories, future inventories as well as new product demand, identify products that may have supply disruption and try to help them to address it. We are all waiting to see what will be after the new policies and accordingly, we will address.

If it's the API, if the country of origin will be based on API or pharma, I don't know. Most of the people believe that it's for API, but we need to wait and see for formal communication in that respect.

As for the production footprint in the US, I don't think that at this stage, the generic industry is having a short-term issue here. As a company, we would love to have a footprint in the United States. It just has to be the right asset and we are always looking for an asset, but we are not going to do at this stage specific activities to build footprint. It is more -- if the right opportunity will come to us, we will be more than happy to engage it.

And based on your composition with customers, would they be open to absorbing an impact of any potential tariffs depending on how much it is? What's your sense of -- bear the burden in case of the tariff?

My sense is nobody wants to absorb the tariff. At least, I did not find any player that yes, I would love to come. I think what will happen is there will be a certain adjustment period in which people will have to walk together to see what to do with it. So it is primarily about working together.

What I want to emphasize is that under any scenario, we will not create shortage of supply or supply disruption to the US market. This is very, very important to us. We want to stay in the United States for many years. And that's something that was also clarified in all of our discussions with our customers.

Understood. My second question is on our cost base. And given that our cost base has ballooned quite a bit, even though our margins are great, as we look at Revlimid cliff 3/4 out, how much flexibility do we have to actually reduce this cost once Revlimid goes away? So just trying to get to how we get to the 25% margin. I know you have a lot of products, et cetera, which will come through. But from a cost perspective, how much flexibility do we have from an R&D and SG&A perspective to reduce cost?

So even (inaudible) I think supposed Revlimid the patent cliff will happen in January 2026 based on our current modeling, we will continue to have -- suppose what we have guided is like a sales double-digit growth and that EBITDA ROCE 25% are above at this point of time.

But in terms of R&D and SG&A costs, would it still be at similar levels?

Yes, yes, R&D and SG&A will be in the similar zone. I think the SG&A now is like somewhere 28% of the sales, R&D 8.5% would be in the similar zone.

So Neha, the main way to do is we are planning to just go faster the sales than the expenses, this is one main, and we have the levers to do that in all the relevant markets, as well as obviously using -- so if you want to just put the levers that will allow both the growth as well as the margins, first, we are planning to grow the base and we are planning to grow the base significantly faster than the expenses while using all kinds of productivity measures on the cost.

It's not a cost cut. It's all kind of productivity measures. And of course, we are planning to have some nice products that are coming up, both semaglutide as well as the biosimilars that will come. And BD, we are planning to continue to do BD, and we are engaging with quite a few opportunities mostly likely. So the combination of all of that, I believe that will help us to grow, cover also from the potential decline because of Lenalidomide and to keep our margins.

Understood. And when you say double-digit growth, I assume the extra limits?

Yes, we believe that FY26 double-digit growth is possible as well as maintaining the markets.

Kunal Dhamesha, Macquarie Group.

The first question on the gross margin, which has kind of changed quite a bit dramatically on the QoQ basis, and we have highlighted the reduced operating leverage. But as far as I see, like our revenues have grown, right? So I kind of fail to understand how the operating leverage has kind of worked other way for us. So if you can provide some more color on that would be great. That's my first question.

Thanks, Kunal. Here, like one-off costs in this quarter, are there part of the manufacturing overheads. As per our policies, that's where it's impacted adversely. Like in the Freeport plant we divested, we have just had a severance cost. That is a onetime cost that impacts the part of the manufacturing overhead. And similarly, the second just I articulated earlier, this is -- as compared to the Q3 and the Q4, our out-licensing income is lower. That will have a direct impact on the gross margin. That's where like a 300 basis points is lower in this quarter. We believe this would be like a one-off and then we'll go back to our normal level.

Can you please quantify the severance cost onetime impact for this quarter?

That is not -- we will not give right now, but it's not a very small amount. It's not -- what I'm just saying, maybe if I have to say out of 300 basis points of manufacturing overhead, this is one plus another our accounting provisions also. Overall, it has impacted 0.8% out of 80 basis points out of 300 basis points.

That's the severance cost. And then maybe another 50 basis points --

It is not the severance cost alone. There are other costs also.

Okay. 80 basis point is one-off. And then the proprietary product milestone not coming is incremental to that 80 basis points?

Yes, that is the one. And then like a little bit on the inventory also, there is an overhead. Overall put together, I think that all happened in one quarter. That's why you see there is 300 basis points.

Sure, sure. And just a related question. If I look at the NRT business, the PBT margin between the two quarters has a meaningful delta of around 500 basis points, right? So is there a seasonality? And when we look at this business on a full year basis, how should we kind of think about this business? Because based on two quarters, really difficult for us to understand.

So overall, for this business earlier, we've also spoken, our EBITDA margin in zone of like 25%. This -- and because I don't know why the fluctuation between the Q3 versus Q4, there are a lot of integration costs, that's where it's impacted. Otherwise, when you are modeling the EBITDA you can take it slightly at 25%.

Okay, sure. And one question for Erez. If you could provide update on our or GLP-1 or let's say, generic Semaglutide product across various markets and also the abatacept product?

Sure. So we are gearing up to launch it during the calendar '26 in all the markets that the IP landscape will allow us to launch. So this is still intact, and we are progressing nicely in our preparation for that. As for abatacept, so far, so good. We are close to -- we are deep into the Phase III. And so far, it looks like the time lines is -- did not change.

We are planning to submit the product somewhere in the end of this calendar year, end of '25 to be ready to launch the IV at us immediately after patent expiration. And the same for the subcu, which will become a year later because of patent related issue. So once the IP landscape will allow us to launch it, we will do it. So far, so good.

Right now, it's Phase III, which is currently going on, right?

Yes. The Phase III is going on, and we are planning to submit by the end of this calendar year. By the end of '25.

Madhav Marda, Fidelity.

Just a follow-up to the previous question. Could you help us maybe understand the sizing of the generic semaglutide opportunity for us in markets such as Canada, Brazil and the other larger EMs where it goes off patent next year? We obviously have invested in capacity for generic semaglutide.

But -- and what we understand looking at penetration rates in, let's say, Canada or Brazil is severely underpenetrated because supply was short and obviously, it was very much higher price point. So as some of this product supply comes through and prices go down, how do we see the volumes expanding for this product, let's say, in Canada and Brazil? If you could give us some sense there, that will be great.

Yes. So naturally, Canada is one of the markets that will open early. And what's stopping the people from launch is that exclusivity that will be finished in the beginning of January of '26. The product to the best of our knowledge based on the marketing report is growing nicely. And at least in according to IQVIA and the financial reports, the market price is around $1.8 billion, which suggests that it's around give or take, 10 million pens, of course, give or take. So the -- it's a very nice market.

The CAGR is big, somewhere between -- in some report, I saw 28%, in another report, I saw 39%. It's a very, very high level of growth naturally. And when we saw the prevalence of the disease versus the use comparing to other markets, it looks like that in Canada, there is room for growth also quantity-wise. So it's an interesting market.

And once the IP landscape will allow us to launch it and assuming approval, we are planning to go, we are -- we see ourselves as one of the companies that have the opportunity to be first or among the first in Canada. We are planning to do the same in India, in Brazil and the other markets in accordance to, of course, to whatever the IP landscape will allow us.

Okay. So the 10 million pens paying which you mentioned, that's the Canada market size today, right? Did I understand that right?

Yes. What I quoted to you, the numbers that I mentioned are the relevant reports about Canada.

So that's what I was trying to understand that this is at a much higher price. So would you have any sort of sense in terms of this 10 million pens, can this -- given that if you look at the obese population or the diabetic population in Canada, the size and the potential market can be -- maybe 3, 4, 5 times. So could give us some sense of the market could grow...

Yes. So I heard 5x, but my knowledge is not different than yours. They probably read the same report. The prevalence is still high. The use relatively to the prevalence is still low. Now if it's 3, 4 or 5x, I don't know eventually what will happen. And -- but clearly, that it is going to be an important product for Canada. And obviously, we are very keen on it.

Amey Chalke, JM Financial.

The first question I have, there is a gross margin drop, but there is also reasoning given that there was a price erosion and one of the reasons for the gross margin drop. So is it possible for the management to give us some understanding what is the US business price erosion for the year? And how the US business has done for the year for FY26, excluding Revlimid?

So this gross margin, the price erosion is like on year-over-year basis. And in US, I think the price erosion is very stable. That's what we have put it in the press conference. We do not see any challenges even. In fact, the price erosion is like much lower as compared -- during FY25 as compared to FY24.

Sure. And the US business, how it has done for the year? It has grown, it has -- like how it has performed?

The US business grew. It grew very, very nicely. And it's primarily due to the usual new launches, market share gains. And just to make sure that in addition to what MVN said, the price erosion that was in the US was relatively low, primarily as most of the product kind of I believe, exhausted the potential of the price erosion. So it's normally when there is no price erosion in United States, it's not always a good sign. But in our case, it was a very low single-digit price erosion within the fiscal.

Sure. Second question I have on the Revlimid. In FY26, I understand that Jan would be when the exclusivity is ending. But if we consider the quota-related quantities which we would be booking before the Jan, how the distribution we should expect to happen over the next few quarters? Is it evenly distributed? Or do you think that first half of the FY26, we should expect Revlimid sales to be booked?

So obviously, it's in accordance to the demand of the customers, but likely that we will finish what we can sell a few months before the January in order to make sure that our customers will not be with the goods on the shelf in order to avoid the price shelf adjustments. So likely that we will stop a few months before that.

Sure. Just last question, if I can squeeze in. We spoke on Canada market related to semaglutide. However, traditionally, we have seen generic capturing the branded market where the prescription is typically marketed by the innovators. However, here, the market is severely underpenetrated. Do you think there would be any need for you to market the product even despite being a generic?

We believe that the demand from the customers will be strong enough that we don't need to market the product or introduce it to the market. What I believe can happen is that as the product will be much more affordable and some of the use is without reimbursement. So I believe that it will create an additional demand. But no, we are not planning to actively market the product as a brand.

Bino, Elara Capital.

Just following up on Revlimid, Erez, are you seeing any price erosion -- significant price erosion in Revlimid as of now compared to six months back?

So there is a price erosion. There is also increase in quantity. So it's a combination of both. I will not be able to tell you exactly the amount, as you know. But yes, there is a certain level of price erosion.

Okay. And just to reconfirm what I heard earlier. You -- I believe you said that for financial year '26, you can do with double-digit growth and maintain the EBITDA margin at the same level of FY25. Did I hear that correct?

Yes, that's what I said.

Okay. Okay. And once the Revlimid cliff happens, which maybe FY27, the margins may settle down back to your long-term target range of around 25% or so. Is that how we look at it?

Yes. So we always said the 25% is indication for the place that we feel comfortable to be, giving enough total shareholder return, but also allowing us to invest in the future. So we will continue to aim for that amount. It may fluctuate from quarter-to-quarter, sometimes it will be above, sometimes below. But yes, we are planning to be in this neighborhood also in the future and post the lenalidomide era.

Understood. And one last question on CapEx. So this year's CapEx was, I think, more than double the previous year's level. Where has it mainly gone through? And for next year, what's the level we should look at?

So largely, the major CapEx are going in two fronts. One is for the peptides, both for to create infrastructure for both APA and formulations and also to create the biosimilar facilities. Largely, these 2 are major investment driving factors. Apart from that, certainly, since like we are in the complex molecule journey, then there is a product-specific investments as well. So that's where I think it is overall CapEx. And then you're asking for FY '26. We believe at this point of time would be in the similar range for FY '26 as well.

(Operator Instructions).

(inaudible), Quantum Mutual Fund.

Could you talk about the India bit --

Sorry to interrupt you, but you're losing your audio. Line from the participant have been dropped. We will go on to the next participant.

Tushar Manudhane, Motilal Oswal.

Sir, for the Europe market, the FY25, was a great year. If you could sort of elaborate on the growth prospects for this region ex NRP as well for '26-'27 maybe?

I agree with you. Europe is a growing area for us. We are planning to grow by -- first of all, we are expanding to more countries. We are launching more products, primarily leveraging the pipeline for the United States. We are going to launch biosimilars in Europe, both rituximab, bevacizumab and after (inaudible) and we are planning obviously to grow the NRP business. So indeed, Europe is going to be an important growth area for us.

Noted, sir. Sir, as far as semaglutide is concerned, like because it can be manufactured using biological route as well as synthetic route. Any color if you could share in terms of at least the initial countries like India, Canada, would they be okay to approve the synthetic route and the competitive dynamics would be different if that happens? Or do you think the competitive dynamics would be similar even if it is approved either through a synthetic route or a biological route?

Yes. So we believe that the synthetic route can be approved for the injectable, for the pens. And the semisynthetic route is going to be used for the oral product. And that's what we are planning to do, synthetic for the injectables and semisynthetic for the oral.

So likewise, the price erosion basis competition would be higher for synthetic route?

It, of course, depends on how many people we launch the product in each one of the markets. So it's not so much because of the synthetic versus non-synthetic, it depends who has access to capacity at least at the beginning and who is going to obtain approval.

So in terms of competition, I believe that in some of the markets, they may have some advantage for those that will have at least for a short period of time or a longer period of time, depends on the scenario, less competitive, maybe less players that will play in the market.

And thereafter, it will be very competitive because many companies are having this product and they will compete the market share. At the same time, the product will grow. So we are preparing ourselves for the scenario in which we believe that we have a chance for relatively limited competition, but as well as prepare ourselves for the scenario of high volume, low price, very competitive landscape, and we are gearing for both.

(Operator Instructions) Abdulkader Puranwala, ICICI Securities.

So my first question is on your India business, where you talked about 6% growth, excluding the vaccine business. So how should we see this portfolio ramp-up happening next year? Any areas where you think the growth was a little lower this year and then next year, how should we model this business for?

So you're going to see similar growth overall for India also next year. So we are planning to grow. This year, we grew 16%. This kind of range of growth you're going to see also in FY '26. Indeed, we highlighted -- I want to emphasize that although we highlighted the inorganic versus organic, but I want to highlight that most of our growth in India will be inorganic.

We are licensing products. We are acquiring products. We are introducing innovation to that. So it will not be by (inaudible) necessarily only the big brands, although -- and I will refer to it in a second, but primarily by introducing products that have better standard of care. Having said that, most of our big brands from the past grew actually double digits.

There are two areas in which we did not do as well. This is in cardiovascular as well as in GI. And we have mitigation also plans for those primarily by adding more marketing resources as well as addressing the product and introduction of life cycle management. So overall, between new products, innovation, big brands, dealing with those big brands that do not do well, we are -- we believe that we'll have a high level -- high double-digit growth in India next year.

Got it. And sir, my next question is with regards to the recent updates coming from the US in terms of a certain concession on the regulatory front being offered by the US agencies as well as they talking about increasing the intensity of surprise inspections for plants phased out in India and China. So would love to hear your take on the development coming from the US market?

Yes. So it's not new. Just this year, the inspection that we had in CTO 3 and CTO 6 were unannounced inspection. Our facilities are ready for it. This was always the guidelines in the United States for years, and it's unannounced. So all of our facilities are ready for that. That's actually is the guidelines for a while. And it will require people that are not ready for that maybe to upgrade the systems, but we are ready for it.

(Operator Instructions) Surya Patra, Philip Capital.

My first question is on the R&D spend front. What we have seen in the last two-year period, sir, there is a kind of a back-to-back around 20% kind of growth annually on the R&D spend front that we have witnessed. So could you give some visibility about the kind of work that we would have done on the pipeline buildup front and the likely investment on those front on the R&D side going ahead? And what buildup that we would have created so far as the future pipeline or the growth pipeline for us?

So here, of course, the R&D investments have been increasing in biosimilars, like let us say, abatacept is in Phase III. Certainly, the investments are high. And then in case of our generics, we are continuously focusing on all the GLP-1s. I think these are all the complex molecules and requires a lot of investment and it is also earlier spoken with abatacept once we file it, the revenues start in calendar 2027 somewhere. So you will just see the revenues from all the efforts what we are doing now certainly a little later. It is not very far off, I think, but definitely in the near term, I think you will see some of the products will start showing up the revenues.

(Operator Instructions) Shashank KrishnaKumar, Emkay Global.

I just wanted to check with respect to REVLIMID, given the import alert that has been issued to Viatris facility. So could you see any meaningful benefit, particularly in the first half this year? Or is that largely a nonevent given that there are volume restrictions in place?

I don't think there will be any impact on us.

Shrikant, Nuvama Wealth.

In the Canadian Semaglutide market, there are 4 players who are filed. If you can talk about our approval time lines? And do you think that all the 4 players would be there in the Canadian market when the opportunity opens up?

I obviously don't know who would come or who would not, but we are planning to be there at the date that the market will be open.

And the approval time line for us?

Approval time lines will likely to be a little bit before the date. So somewhere in the end of this calendar.

(inaudible), Quantum Mutual Fund.

Yes. Just quickly, when I look at the European revenue for us, it sounds like UK has grown very faster. Is it because we started selling NTR out there and the NTR number which you give out INR 1,200 crores, can I double that just to get the whole revenue for the full year? And the last question on Revlimid. When we speak to NACO, they say that June, September could be a better quarter for us in FY '26. Is it -- does it hold true for us also? That's it.

So I cannot share numbers or guidance on the Revlimid. And so I can only say like we always do that it's going to stay meaningful product for us. As for the UK, I'm not sure I got the question. It is primarily due to relatively high level of launch of new products, plus we launched the bevacizumab also in United States -- sorry, in United Kingdom. So the combination of both allowed us to grow in the UK.

And the NTR, the run rate of INR1,200 crores, is it that we simply double that is what the number we get for the full year for FY25, '26?

Could you just repeat your question?

If I -- the number of NTR, which we -- nicotine, which we have for the H2 is around INR1,200 crores. So if I double that, is it the number which I get for the full year or...

Yes. Certainly, give or take,that would be the range.

And when we start selling in the UK all by ourself, it will be next year, is it?

Yes, yes. Currently also, we are selling in UK and then going forward also, we'll continue to sell in the UK. But when -- what the numbers we are reporting for UK without...

Right. And if I just can squeeze the last thing. On the GLP last launch like which happened in the US after (inaudible) players have come in. Do you think the scenario could be the same when it happens for (inaudible) when it launches in the US? I think the (inaudible) just got an approval or they launched. So is it possible that the market will still be -- there are a lot of filers, but could be like 2, 3 players like Victoza or it will be what, large players, number of players out there?

Which product you are talking about? Semaglutide in the US will be in 2033. Sorry? Liraglutide, the Victoza and Saxenda.

I'm trying to understand the number of players in Victoza are very less even after Teva has come in and Noise has gone. Do you think the same amount of players -- because a large number of filers for sema in Canada and India and all, do you think everybody will get an approval and there will be large number of players or like with the GLP in the US right now, or Victoza, there are only 3, 4 players. How do you think the landscape will be on the competition part? That's what I'm trying to understand.

We believe that the landscape of semaglutide will be very competitive. It could be a situation at the time of launch or around the time of launch, there will be people that may get later the approval or have later access to the supply chain. And so it will evolve. And those players that may come before and be there on day 1 may gain kind of first launch advantage. But overall, it's going to be, we believe, a very competitive market, and we are preparing ourselves in terms of cost, supply to high-volume, low-cost type of a product over time.

Saion Mukherjee, Nomura.

Am I audible?

Sir, the line for the participant dropped. With this, I now hand the conference over to Ms. Richa Periwal for closing comments.

We appreciate you joining us for this evening call. If you have any further questions or require clarifications, please feel free to reach out to the Investor Relations team. Once again, thank you on behalf of Dr. Reddy's Laboratories Limited.

Thank you very much. On behalf of Dr. Reddy's Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.