Dr. Reddy's Laboratories Limited (RDY) 2026 Q4 法說會逐字稿

Good day, everyone and welcome to the quarter four- and full-year FY26 earnings call of Dr. Reddy's Laboratories Limited. I'm Aishwarya Sitharam, Head of Investor Relations of Dr. Reddy's. Joining us today are members of leadership team, Mr. Erez Israeli, our Chief Executive Officer; and Mr. M.V. Narasimham, 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 MVN providing an overview of our financial performance for the quarter as well as the year. Following that, Erez will share his insights on key business highlights as well as the company's strategic outlook. We will then open the floor for questions.

All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed. 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. (Operator Instructions) The 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 MVN to present the financial highlights for the quarter.

Over to you, MVN.

Thank you, Aishwarya. Greetings to everyone on the call. It is my pleasure to walk you through our financial performance for the fourth quarter and full year FY26. FY26 reflected a resilient operating performance, delivering highest ever annual revenues amid product-specific headwinds and certain onetime impacts.

The underlying base business continued to deliver double-digit growth for the quarter as well as for the full year FY26. At the outset, I would like to highlight a few items impacting the quarter. Number one, a shelf-stock adjustment or SSA related to lenalidomide of INR453 crores taken as a reduction in revenue.

Number two, an additional provision of INR114 crores related to potential VAT liability in one of our subsidiaries included in SG&A expenses. impairment of INR135 crores, including an R&D charge of INR6 crores on account of discontinuation of R&D programs related to CAR-T therapy as part of the portfolio prioritization.

Impairment of INR93 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 INR70 crores as well as the impact of new labor law code in India of INR117 crores.

After factoring these items, the adjusted profit before tax was INR994 crores for the quarter versus the reported number of INR199 crores and for the full year, INR6,463 crores versus the reported PBT of INR5,482 crores. Now I would like to discuss the underlying performance in detail. Margins in this section are expressed as a percentage 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 INR93.83, the exchange rate prevailing as of March 31, 2026.

Excluding SSA, the adjusted revenue stood at INR7,969 crores, which is USD849 million for the quarter, a decline of 6% year-over-year and 9% on QoQ and at INR34,046 crores, which is USD3.63 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 a 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-on-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 57.4% for the year as a percentage of its adjusted revenues, while 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 FY27.

Excluding one-off provisions mentioned earlier, SG&A spends were at INR2,662 crores for the quarter, an increase of 11% on year-over-year and 1% sequentially and 33% of the adjusted revenue base and INR10,435 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 spend to be around the same level as FY26 for the year ahead.

The adjusted R&D spend for the quarter was INR541 crores, a decrease of 26% year-over-year and 12% on sequential and a margin of [6%] of adjusted revenue. For the year, the spend, excluding onetime labor court-related provision was INR2,385 crores for FY26, a decrease of 13% and 7% adjusted revenues.

The decrease reflects reduced biosimilars developmental expenditure as a significant portion of investments related to Abatacept has been completed. We expect the spend to be in the range of 7% to 8% in the fiscal ahead. 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 spend to be around the same level as FY26 for the year ahead. The adjusted R&D spend for the quarter was INR541 crores, a decrease of 26% year-over-year and 12% on sequential and a margin of [6%] of adjusted revenue. For the year, the spend, excluding onetime labor court-related provision was INR2,385 crores for FY26, a decrease of 13% and 7% adjusted revenues. The decrease reflects reduced biosimilars developmental expenditure as a significant portion of investments related to Abatacept has been completed.

We expect the spend to be in the range of 7% to 8% in the fiscal ahead. Other operating income for the quarter was INR344 crores as against INR247 crores in the corresponding quarter last year and INR763 crores in FY26 as against INR436 crores in FY25. The increase during the quarter was largely on account of divestment of noncore brands in India business for net of INR189 crores.

The underlying EBITDA, including other income, stood at INR1,554 crores for the quarter, which is USD166 million, a decline of 37% on a year-over-year basis and 28% sequentially and reflecting a margin of 19.5% of the adjusted revenues. For FY26, the EBITDA adjusted one-off was at INR8,419 crores, which is $897 million that is like 24.7% on the adjusted revenue base.

Impairment charge for the quarter was INR259 crores as compared to INR77 crores during the same quarter last year. The higher charge this quarter was largely on account of discontinuation of [CAR-T] assets and partnered product Eftilagimod Alfa, as mentioned earlier. Impairment charge for the year, INR352 crores as compared to INR169 crores last year.

The net finance income for the quarter was INR62 crores versus INR235 crores during the same quarter last year and INR413 crores for FY26 versus INR472 crores for FY25. 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 INR994 crores, that is USD106 million, representing a margin of 12.5% and for FY26 at INR6,463 crores, that is USD689 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 FY26 ETR was at 22.5% versus 25.4% in FY25, the ETR for Q4 FY26 was lower, primarily due to recognition of a deferred tax asset on carryforward 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% to 25% for fiscal FY27. Profit after tax attributable to the equity holders of the parent for the quarter stood at INR220 crores, which is USD23 million, a margin of 2.9% on the reported revenues and for the year, INR4,285 crores, which is USD457 million, a margin of 13% before adjusting for one-off items mentioned earlier.

Based on the company performance, the Board recommended payment of dividend INR8 per equity share of face value of INR1 each. This is equivalent to 800% of the face value for the year ended March 31, 2026, subject to approval of the shareholders of the company. Diluted EPS for the quarter, INR2.64 and INR51.42 for FY26. Operating working capital as of 31st March 2026 was INR14,434 crores, which is USD1.54 billion, an increase of INR2,920 crores, which is [USD311 million] over 31st December 2025.

CapEx cash outflow for the quarter stood at INR438 crores, which is [USD47 million] and INR2,302 crores, which is USD245 million for FY -- free cash flow generated during the quarter before acquisitions related payout was INR600 crores, which is USD64 million and INR2,004 crores, which is USD214 million for FY26. As of March 31, 2026, we have a net cash surplus of INR3,271 crores, which is USD349 million.

Foreign currency cash flow hedges executed through derivative instruments during the period are as follows: USD462 million hedged using a combination of forwards and risk reversal options scheduled to mature by March. These contracts are hedged at rate of (inaudible) per US dollar, RUB1.6 billion hedged at a fixed rate of RUB1.12 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.

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 FY26 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 operation.

I'm pleased to report that the first quarter -- in this first quarter without one of our key products, lenalidomide, the company delivered an EBITDA margin 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 FY26, the adjusted EBITDA margin was in the neighborhood of 20%, consistent with our stated aspirations.

Further, the underlying base business delivered double-digit growth in Q4 as well as for the full year of FY26. All geographies besides North America recorded double-digit growth, while performance in North America was impacted due to lenalidomide sales and onetime 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 about patent expiry in India. Our oral version of semaglutide has been 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.

Further, in February 2026, the US FDA accepted for review our BLA for the intravenous IV presentation of abatacept biosimilar candidate following its filing in December 2025. Aligned with our strategic focus to bring innovation to patients in India, we already in hormone replacement therapy segment with the acquisition of Progynova and Cyclo-Progynova in India.

Our partner product, COYA 302 received fast track review status. In addition, the operational integration of our acquired consumer health care business in nicotine replacement therapy is now largely complete. On the regulatory front, in March 2026, the US provided the VAI classification for our formulation facility, FTO-SEZ 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 FY26, achieving its 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 health care and pharmaceutical industry for '24 and '25. We've been recognized in the leadership category of 2025 Indian Corporate Governance Card for the third 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 their respective local currencies. Our North America generic business reported revenue of $199 million for the quarter and $1.3 billion for FY26. Excluding onetime shelf stock adjustment, revenue were $251 million for the quarter, a decline of 40% and 26% sequentially at $1.36 billion, a decline of 21% year-over-year. The decline was primarily on account lenalidomide.

During the quarter, we added seven 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 INR1,806 crores in Q4 FY26, reflecting a robust growth of 29% year-over-year and a decline of 5% sequentially and INR6,761 crores in FY26, 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 FY26 total to 129. Within this segment, our Russia business reported a growth of 8% year-over-year and a decline of 23% sequentially in constant currency terms. Our India business posted revenue of INR1,566 crores in Q4 '26, delivering a robust double-digit year-over-year growth of 20% and a decline of 2% sequentially, while the full year revenues were at INR6,219 crores, 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. IQVIA data as of March 31, 2026, shows that we continue to outperform in the Indian pharmaceutical market, IPM, with a 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 FY26, reflecting our continued focus on strengthening our domestic market presence. Our European business, which includes our acquired consumer health business in nicotine replacement therapy, posted revenue of $136 million for the quarter, a decline of 3% on a year-on-year basis as well as sequentially and $542 million for FY26, 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 seven new generics products across market, taking the full year total to 38, further expanding our European product portfolio. Our PSAI business reported revenue of USD101 million in Q4 FY26, resulting in a 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 Files globally, taking the total number of filings 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 drivers. Underpinning this strategy is future-ready organization structure aligned to our business model with dedicated leadership across global generics, biologics, consumer health and innovation, enabling sharper focus, relevant capabilities and more effective execution across each growth pillar.

Within this framework, we will continue to advance our differentiated pipeline programs such as semaglutide and abatacept, drive operational efficiency and pursue value-accretive inorganic opportunities that support sustainable long-term stakeholder value.

With that, I invite your questions as we move into the Q&A sessions.

(Operator Instructions)

Neha Manpuria, Bank of America.

Just wondering on the shelf stock adjustment that we had in the quarter, a $50 million number for a product like REVLIMID where we knew that the patent cliff is coming seems very large. So if you could just give us some color in terms of why the shelf stock adjustment was so large, given that we knew we're expecting competition in Jan.

We were also surprised by that. It was not part of any arrangement or anything like that. I cannot speak on the details on the relationship with the customers, but it came from them, I guess, certain planning issues or mistake at their end, and that's the outcome of it.

Okay. Understood. And my second question is on semaglutide. Now that we have Canada approval, I think we had mentioned a 12 million unit sales across markets in FY27. Erez, in your view, what could be the competitive landscape now that Reddy's and the second player have gotten approval?

When do you expect more players? And out of the 12 million, based on your assessment, what would be the rough breakup between, let's say, Canada and [EMs]?

So I believe that -- so the current landscape of basically Novo Nordisk as well as the two of us will stay there probably for several months. And then likely that others will come. I believe that the market in Canada is give or take. It's about one-third in -- for what we call public, one-third cash and one-third what they call private. So it's a kind of public, private cash.

So 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, very healthy. Obviously, I cannot say, but it should be very, very healthy.

And given that we have had a setback in Brazil, are we still confident of the 12 million units sale for sema in fiscal '27? Or do you think that would depend on us getting approval in Brazil as well?

So Brazil will be -- is part of it. I believe it's still in that number, but the number moved by several months. So if -- we are still -- 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 FY28 as well. Specifically, for the next, let's say, until the end of calendar '26, I believe that the number is somewhere between 6 million to 7 million units.

This is for calendar '26?

No, this is for the markets that will get approval and Canada will be obviously a big part of it. But it will be -- this is give or take the numbers.

Damayanti Kerai, HSBC.

Continuing on semaglutide. So Erez, just to clear, the 6 million to 7 million units, which you expect to market, it's by end of this calendar year, right, by '26?

Correct.

Okay. So can you talk a little bit about your pricing strategy in the market where you'll be coming in, say, another 12 months? And specifically in Canada, after entry of second generic, how do you position yourself versus Novo Nordisk pricing?

So our list price will be give or take, about half of what Novo Nordisk will be. So that can be shared because it will be listed. Obviously, the rest is arrangement that we have with the customer that we 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 captured -- sorry, the rest of the question, sorry, I lost it. Can you remind me?

Yes. I was asking about the pricing strategy in all the market, where do you intend to come in, say, another 12 months or so, 12 to 15 months.

Sure. So we believe that the -- all the prices will be let's say, in 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 the partner and that reflect the net price that we have for them. Obviously, they will have their margins. And these numbers may go down if the competition intensified, but I don't envision it to -- at any case to be below $25.

Okay. So somewhere $25 to $30 per unit is the price you are working with?

And there will be market obviously, that it will be much more than that. But 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.

Okay. That's helpful. My second question is on SG&A spend. So you mentioned next year -- sorry, this year, FY27, it could be similar to what we had in FY26. So just wanted to understand in NRT 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.

So where you are looking for investing more? And this number, do we have any room to take a cut or see any reduction there? So if you can just talk a bit on that part.

Sure. So we will have absolutely places that will have less and we'll have places that will have more. But just to address, the NRT is a place in which we will have more. At the same time, the growth will more than finance it. So the level of profitability of the asset will stay the same and even maybe grow.

But in terms of SG&A per se, we will have more. In the -- we are also launching innovative products in India and in certain emerging markets. And 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 and this will go up. So that's why we said that give or take, in terms of nominal value, it should be the same level as sales will go by in percentage-wise, it will go down. But in terms of -- to understand the range of the spend, it will be about, give or take, the same range that we have now.

In nominal terms, right? Yes.

While, of course, the sales will go double digit up.

Tushar Manudhane, Motilal Oswal.

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. So is there anything which I've missed as far as gross margin for the fourth quarter is concerned?

So this quarter is -- there is a product mix impact. That's why it is at 48%. We believe our gross margin range is in the range of 50% to 55%.

So what will drive this in the subsequent quarters? And are you including semaglutide sales for this gross margin?

Yes, 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 FY27, including semaglutide plus product mix. Considering all these things, I think certainly our gross margin will be 50% or above.

I just want to make sure that we are planning to launch also products like semaglutide, tofacitinib, sitagliptin, (inaudible), sorry for my reading. And -- yes. So in addition to that, there are additional key products to do. So 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.

And just on these products, which you mentioned, sir, so currently, US revenue even after including the shelf stock adjustment, it is $236 million. So effectively, maybe $944 million, if I normalize that. So will we sort of grow over and above this ex semaglutide in FY27?

We will absolutely grow in North America, ex lenalidomide in double digits.

Got it, sir. And just lastly, for India market, if you could just share what has been organic and inorganic growth for the quarter?

It's organic. What do you mean inorganic? We did not -- licensing and consider organic or inorganic --

Brands, what we acquired is not a significant impact in this quarter -- just recently acquired brands.

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 neglectable.

Dr. Bino Pathiparampil, Elara Capital.

Could you give an update on the status of denosumab and Orencia, abatacept?

So denosumab will launch in Europe, and we are waiting for approval in the United States. Our partner has a deficiency letter that they need to address for the United States. Abatacept, the IV was approved for review. So it was accepted. And so it's going after the time lines.

And we are also awaiting an FDA inspection in Bachupally, Hyderabad for the same. So the abatacept so far in the right direction. And then, of course, we are working on the subcu that will be submitted later and also will be launched later as we discussed in the past.

Got it. So the IV is online for potential launch this calendar year?

IV will be likely at the beginning of calendar '27. Hopefully, this fiscal -- only hopefully in this fiscal, that's the plan. But of course, we need to see the approval for that. But right now, that's the plan.

Got it. And do you expect denosumab in the US before that?

I don't know. It depends on the ability of [Alvotech] to get approval.

Got it. Second on -- 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?

No, the investment, give or take, is what we -- MVN guided it's INR150 crores --

INR135 crores --

INR135 crores. 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. And we just impair it as per appropriate accounting. But this is, give or take, what we invested.

Sorry, I got the figures, but my question was more technical. Do you -- is it something wrong with the specific product you used or with the technology itself?

I'm not sure I understand the question. It's what we invested in the clinical trials and getting the products. Yes.

But products, okay. So your product doesn't work, but CAR-T technology as such is --

I don't know what is -- the product is the CAR-T, sorry. So -- yes.

Surya Patra, PhillipCapital.

So my first question is on the biosimilar business. So what is -- since it is a closure of the -- I mean the fourth quarter of the year and full year data is there. So just wanted to have a sense what is the size of the biosimilar right now? And whether it is already broken even or it is loss-making? If not, then what is the time line for the breakeven for this business?

So overall, our global biologics sales is about -- it is not very high. This is above 100 million sales. So at this sales, certainly, whatever investments we are doing for the development of abatacept, other products, pembro also we are with [Alvotech]. So definitely, it's not a breakeven. Once we launch abatacept, certainly, I think post that, I think certainly we can see the breakeven.

FY29, sir?

It is in -- certainly it could be in -- like I said, if abatacept, everything goes well, our inspection, everything, and we'll be launching in calendar year 2027. That would be like FY28.

Okay. Second question was on the NRT. Two things here, observation-wise. So last two quarters -- since last two quarters, we have been seeing a strong growth. Last quarter, it was 25% YoY growth.

This quarter, it is around 16%, so what is driving this growth and whether this is sustainable one? And 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?

So the NRT business is indeed growing more than we expected it to be. So we expect it to be kind of mid-single digit is certainly more than that. Specifically for the 16%, so there is some impact of the fact that in the transition, some customers take more stock.

So it's not fully, let's say, in that respect, sustainable. But 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.

Okay. Just last one point, sir. 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%. So what is the trend that you are witnessing here in India in terms of the penetration of semaglutide?

Yes. So I don't recall exactly the market share, but so far, it's a great launch.

So we -- I think our market share is about 10%, more than 10% on a stand-alone basis.

Okay. In that light, are we talking anything about the growth for the domestic business?

I believe that it will grow plus in the next coming days, we will launch also the oral product. So the combination of both should be -- should give us a very healthy growth.

Lavanya Tottala, UBS.

Just one question from my side. So even after adjusting for SSA in USA, sequential decline of 25% QoQ despite having limited REVLIMID in Q3 seems quite high. So am I missing something? Is there anything other which is one-off here?

In Q3, we had a little bit sales, right? This little bit sales. Yes. Hence, I think definitely from Q3 to Q4, there will be a natural decline.

So I don't think -- we don't see a pattern of a loss of market share or price erosion or anything like that. There is -- there could be that there were certain buying patterns by some customers. But overall, it's very consistent the way we see it. So the primary difference between the quarters is linear.

Okay. So the one which is adjusted for SSA in Q4, one can consider this as base sales for US from here on. Is that the right way to look at it?

Yes. I will not come because I don't know exactly the origin of the SSA specifically. But let's say that if you look, there might be some customers that bought a little bit more as per their patterns of acquiring products in terms of dates and stuff like that. But overall, if you look at market share prices, this kind of stuff, it should be about the same.

And also, this is -- one, we will be also going to new launches. Today, this is from the existing products and then going for the rest of the year, we'll be launching like 27 new launches overall for the full year.

Saion Mukherjee, Nomura.

Sir, just one question on [SEMA]. If you can indicate when you expect approval in Brazil? And what are the key market approvals that you're looking at? And you mentioned, I think, 6 million or 7 million units for this calendar year. What's your expectation for the full fiscal year FY27?

Yes. So the additional markets besides, 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 we got also (inaudible). So 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.

So we will be in Brazil. Probably, I don't know if it will be three months delay or four months delay, but that's still the expectations. In addition to that, you have markets like Turkey. And then 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 12 months in more than 80.

So in terms of number of markets, but many of them, we will do it with a partner that will do it for us. So between the -- what we call the B2B in which we are selling to the partners or selling ourselves directly, we probably will be in a pace of 3 million or 4 million pens per quarter. So 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 one month. So we are still in the same neighborhood, but with the delay of the few months that took those approvals.

Understood. And just one question on US generics. I think if I heard you right, are you expecting 27 launches? And 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 US outside of abatacept that you expect in fiscal '27?

I believe that Bosutinib can be a nice product. And I agree with you about that most of them will be competitive. I fully agree with that. But overall, it should give us a double-digit growth without lena.

Vivek Agrawal, Citi.

I just want to understand, out of this 3 million, 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 partners, et cetera? If you can help us understand.

It's -- if I need to guess, and I must admit that I did not do kind of calculation. So top of my head, I will say 50-50, give or take, in the neighborhood.

Understood, sir. And 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-Revlimid levels, right? So in the last three years, we have launched many products, but the US revenues haven't moved up much.

So is it fair to assume that there is a price erosion in some of the major baseline products in the US? And how to look at overall profitability of the US business? Is it still lower than pre-development levels? Or is it basically almost similar?

Yes. So first, obviously, there was -- in this period of time, there was price erosion. And 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 mean in agreement with you that 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. And going forward, the main growth in the United States will come from biosimilars, consumer health as well as certain 505(b)(2). So over time, the business will diversify itself. But right now, it's mostly generic products.

Understood. So the double-digit growth that you are highlighting for this year, that includes Sema in Canada, right? So I'm just trying to understand how to look at only the US sales. So what kind of the growth you are expecting in the US business ex Lena this year?

Yes. So it's ex Sema. It's not with Sema. Sema is on top.

Vivek. The next question is from the line of (inaudible).

I had two questions. Number one, sir, 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%.

Yes. So we are planning to maintain the base without Sema at around 20%. So this is the plan. And then 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, let's say, 30 or 25 to 30 all the way to 70.

So obviously, there will be a range of prices. But let's say, with Sema, it should be close to the 25%, but maybe a bit less, depends on how much Sema we will sell.

Understood. And sir, any thoughts on the number of pens that you can possibly sell in F '28?

FY28 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 our capacity of [FQ11]. So to the -- so it will -- it can be any number. Let's say it can be north of $40 million or so. But right now, I don't see a demand for this hopefully --

Alok Dalal, Jefferies.

One quick clarification. It is on semaglutide in Canada, has the innovator Novo already introduced an [AG] in the market?

Sorry, can you repeat?

In Canada, has Novo already introduced an AG in the market?

So I know that they are offering. I don't know if it was already sold. I don't know you -- personally. I don't have a knowledge for that. But we are assuming that they will have. That's my assumption.

All right. So in that scenario, will it be a 3-player market and lead to 75% discount to the innovator product? Is that the way to think?

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. So yes, likely that this will happen to the public eventually. But I do see it as a mix of market. So we are not planning right now our assumption based on the number that you mentioned.

Vishal Manchanda, Systematix.

Could you outline how much would you expect in annual biosimilar sales by FY29?

I wish I could.

A broad number, broad guidance.

Hopefully, it will be in the range of $0.5 billion, $600 million, $700 million. Sorry that it -- but it very much depends, of course, of how abatacept will perform. It will be the lion's share of those sales.

And would this have margins above company margins? Like can this be at the entire biosimilar portfolio, can it give you 25%-plus margins?

In the case that there will be no competition or low competition, absolutely, it will be above the average margin that we have.

Right. And we are on track to file the subcutaneous version this year in Europe and US.

Yes, we are in the US, for sure. In the Europe, there might be some delay.

Okay. Okay. And just if you could give the split of sales between IV and subcutaneous in the US by value?

It is 50-50 in US is -- but whereas in Europe, IV is very less and SC is high.

Got it. Got it. And your CapEx plans for the next two years, annual CapEx plan?

So next year would be in the range of INR2,000 crores -- around INR2,000 crores.

And would this largely be on biosimilars or you have other areas?

So biosimilars, certain like a product-specific investments, I think, are there and then general CapEx.

Siddharth Negandhi, CWC.

On biosimilars, you had mentioned that your R&D spends will reduce given that the spends towards abatacept have been completed. Going forward, given the draft US FDA guidelines, how do you expect your cost per molecule to behave? How do you see competitive intensity playing out? And 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 much later and therefore, the spend will be lower. Yes. 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? And between the 3 dosage forms, how do you see the likely salience, say, two, three years out? Those were my two questions.

Sure. So the R&D, naturally, we -- abatacept we paid for Phase III trial. And going forward, we don't anticipate Phase III. So 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 and less something that will come in-house.

So obviously, then we share the R&D cost as part of that. And number three, we are becoming more productive. One day will discuss it, but we have AI and we have this kind of stuff. And the overall, the R&D will have less cost and more output. So 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. It depends, of course, on how people appreciate the compliance of the oral product.

So and 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. So 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.

Sure. And any thoughts around how do you see the salience between pens, vials and orals in emerging markets for semaglutide?

I believe that in the places that in the emerging market, you have countries in which there is a full use of the pens and the innovator fully launched the product in a place that it was done partially and also markets that not at all. And 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.

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.