Dr Reddy's Laboratories Ltd (RDY) 2022 Q3 法說會逐字稿

Ladies and gentlemen, good day, and welcome to Dr. Reddy's Q3 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Amit Agarwal, Head of Investor Relations. Thank you, and over to you.

Thank you. A very good morning and good evening to all of you, and thank you for joining us today for the Dr. Reddy's earnings conference call for the quarter ended December 31, 2021.

Earlier during the day, we have released our results and the same are also posted on our website. This call is being recorded, and the playback and transcript can be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS consolidated financial statements.

To discuss the business performance and outlook, we have the leadership team of Dr. Reddy's comprising, Mr. Erez Israeli, our CEO; Mr. Parag Agarwal, our CFO; and the Investor Relations team. 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.

Before I proceed with the call, I would like to remind everyone that the safe harbor contained in today's press release also pertains to this conference call.

Now I hand over the call to Mr. Parag Agarwal. Over to you, sir.

Thank you, Amit, and greetings to everyone. Hope all of you are keeping well. We had yet another quarter of good performance in terms of year-on-year growth in revenues and profits, while maintaining healthy EBITDA margins and generating good cash flows.

Let me take you through the key financial highlights for the quarter in a bit more detail. For this section, all the amounts are translated into U.S. dollar at a convenience translation rate of INR 74.39, which is the rate as of December 31, 2021.

Consolidated revenue for the quarter stood at INR 5,320 crores, that is USD 715 million and grew by 8% on a year-on-year basis and declined by 8% on a sequential quarter basis. Year-on-year growth has been supported by growth across most of our businesses and was driven by good base business performance and recent launches.

Sequentially, however, our revenues were impacted on a higher base of Q2 which had a higher contribution from COVID-related products and recognition of out-licensing income in our proprietary products business. Consolidated gross profit margin for this quarter has been at 63.8% which was flat over previous year. However, the margin increased by 40 basis points on a quarter-on-quarter basis.

Gross margin for the Global Generics and PSAI were at 57.8% and 22.5%, respectively, for the quarter. The SG&A spend for the quarter is INR 1,541 crores, that is USD 207 million, an increase of 7% year-on-year and a decrease of 3% quarter-on-quarter. The year-on-year increase is in line with our business growth and on account of continued investments in sales and marketing activities for brands in India and emerging markets.

As a percentage of sales, our SG&A has been at 29%, which is lower by 20 basis points year-on-year. The R&D spend for the quarter is INR 416 crores, that is USD 56 million and is at 7.8% of sales. R&D spend increased by 1% year-on-year and declined by 7% quarter-on-quarter. The product development activities continued normally during the quarter and we continue to build a healthy pipeline of new products across our markets.

The EBITDA for the quarter is INR 1,266 crores, that is USD 170 million, and the EBITDA margin is 23.8%. The EBITDA margin for the 9 months in this fiscal is at 24% and is closely tracking our expiration target of 25%. Consequently, our profit before tax stood at INR 971 crores, that is USD 131 million, which is a growth of 242% year-on-year and a decrease of 23% quarter-on-quarter.

Adjusted for the impairment charges, our profit grew by 10.7% over previous year. Effective tax rate for the quarter has been at 27.2%. We expect our normal ETR to be in the range of 25% to 26%. Profit after debt for the quarter stood at INR 707 crores, that is USD 95 million. The COVID EPS for the quarter is INR 42.48. Operating working capital decreased by INR 512 crores, which is USD 69 million against that on September 30, 2021. The decrease was primarily driven by a decrease in receivables of INR 616 crores, aided by higher collections.

Our capital investment during the quarter stood at INR 414 crores, which is USD 56 million. The free cash flow generated during this quarter was a net inflow of INR 1,274 crores, which is USD 171 million. Consequently, we now have a net cash surplus of INR 998 crores that is USD 134 million as on December 31, 2021.

Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are approximately USD 360 million largely hedged around the range of INR 75.4 to INR 78.9 to the dollar. Ruble 5,875 million at the rate of 0.9909 to the ruble. AUD 2.5 million at the rate of INR 58.74 to the Australian dollar, and South African rand 36.9 million at the rate of INR 4.97 the South African rand maturing in the next 12 months.

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

Thank you, Parag. Good morning and good evening to everyone. I hope you and your family are all safe and healthy. I'm pleased to share that we had a strong financial performance during the quarter without any benefit from one-off or COVID-related sales.

We have grown on year across our key businesses, and both EBITDA and ROCE margins are closer to our aspiration and target of 25% each, while we continue to invest in our future growth business.

We have been able to achieve this despite certain industry-level headwinds, like a higher level of price erosion across the generic segment in the U.S. market, increasing commodity prices and higher freight costs. This sustained performance shows the resilience we have been able to build with our diversified business model to mitigate such external headwinds.

We also generated significant cash flow during the quarter and are now having a net cash surplus, which will enable us to invest for future growth. Let me take you through the key business highlights for the third quarter. The reference of these numbers in these sections are in respective local currencies.

Our North America generics business recorded sales of $248 million for the quarter with a year-over-year growth of 6%, however, a sequential quarter decline of 2%. During the quarter, we continue to gain market share for some of our key products, including a recent launch of (inaudible). However, the sales were impacted due to a price erosion for some of our products and has been a case for the entire sector and seasonal demand variation for a few of our key products.

We launched 4 new products in the United States during this quarter. Our Europe business recorded sales of EUR 47 million and was largely flat both year-over-year and sequentially. During the quarter, we launched 4 new products in Germany and 1 product each in France and Ireland. We are expecting a few good launches during Q4, which should enable us to return to growth in this market.

Our emerging market business recorded a sale of INR 1,154 crores with a strong year-on-year growth of 20%. However, registered a sequential decline of 11% within the emerging markets, the Russia business grew by 2% on a year-to-year basis and declined by 18% on a quarter-to-quarter basis in constant currency. As informed earlier, the Q2 performance in Russia was very strong, which supported by seasonal demand and launch of biosimilar bevacizumab. And the Rest of the World market sales were supported by one-off sales of the corporate-related products. During the quarter, we launched [60] new products across various emerging markets.

Our India business recorded sales of INR 1,027 crores with a year-over-year growth of 7% and sequential decline of 10%. Adjusted for COVID-related portfolio sales in the previous year, in the last quarter, the business performance has been fairly strong and in line with the expectations.

During the quarter, we launched 4 new products in India market -- as per (inaudible) report of December 2021, we have grown higher than the market at 23.1% on a net basis against market growth of 18.1%. Our PSAI business recorded sales of $97 million with a revenue growth of 2%, but sequential quarter decline of 14%. We expect the performance to improve in the coming quarters.

During the quarter, we filed 32 Drug Master Files globally including 2 filing made in the United States. We have also filed 22 formulation products across global markets and 1 ANDA in the United States. As of December 31, 2021, we had 1991 immunity filings pending for approval within the USFDA, which includes 88 ANDAs and 3 505(b)(2) NDAs. During the quarter, we have signed a deal which resolutes for commercialization of our biosimilar rituximab in the United States.

We are also continuing with the global development of 5 to 7 other biosimilars in our portfolio that are in various stages of preclinical and clinical development. Earlier during the month, we have launched Molnupiravir in India, expanding our portfolio to fight against the ongoing COVID pandemic. We are also working on certain export opportunities in line with the licensing rights of (inaudible). As regards to Sputnik, we are now ready with capacities in India.

We are working actively with the Government of India to register Sputnik Light as a vaccine and as a booster dose of Sputnik V. We have also submitted proposals to DCGI to conduct trial to test Sputnik Light as a booster to other vaccines. Sputnik continue to be a viable option for Dr. Reddy's for India and other countries.

Consistent with our aspiration and healthy balance sheet, M&A remains an integral part of our growth strategy, and therefore, we are actively pursuing a few deals across our focus geographies. We are progressing well to strengthen the key processes in core businesses and in the digitalization journey.

Going forward, we are looking to double down our efforts on very critical important areas of innovation as well as ESG. There is a good progress to deliver on the short-term and long-term growth levers across our businesses, and we remain committed and optimistic about this.

I'm pleased to share also the recent recognitions of our efforts towards ESG. In November 2021, we were positioned #9 non-pharma company in the world in the Dow Jones Sustainability Index 2021. During the quarter, we were also recognized by the UN (inaudible) in the place. our FTO SEZ PU-1 manufacturing plant in Vizag was honored with the prestigious Nation Energy Conservation Award by the Bureau of Energy Efficiency Ministry of Power, Government of India.

We have been recognized as the most innovative company for the year of 2021 at the CII Industrial Innovation Awards 2021. Earlier this month, we won a prestigious apex award for Sustainable Corporate of the Year at the 2021 Frost & Sullivan-TERI Sustainability 4.0 awards. As you can see, [ESG] should continue to remain our focus area, and we are going to increase our efforts in that direction. With this, I would like to open the floor for questions and answers.

(Operator Instructions) The first question is from the line of Kunal Dhamesha from Emkay Global.

So the first question is on the U.S., you have mentioned that the price erosion has been kind of a little bit severe, but if we kind of do a back calculation, is it fair to say on a sequential basis, it's somewhere in the high single to low double digit kind of price erosion in the U.S. for this quarter?

Yes. So we did see -- I don't see that kind of global phenomena, it's continued to be a product-based situation. But in Q4, a relatively larger number of products faced competition. And investor stock on the -- on the overall basis, it's more or like a double digit. But despite that, we are still growing. So we managed to offset this erosion with new products with market share as well as with the productivity activities.

So this still remain ratio and the growth of about, I think, now 9 out of 10 quarters we are growing in the U.S. And this will continue to be a kind of the phenomena also in the future, in which I do see growth will be slower than other markets, but we are still going to grow in the United States.

Okay, sure. And secondly, on the COVID-related contribution across our India and emerging market, what would that be as percentage of revenue for the first 9 months?

It was primarily in the second quarter, not so much in the first quarter. So third quarter was without major sales of COVID product. And we will see probably also more in Q4. So in the -- in this respect, let's say the main contribution of this portfolio will be in the second as well as in the fourth, not so much on the third.

And India, there was contribution in first quarter as well, right, due to Delta wave?

In the third quarter, not so much. That's why on a sequential basis, when you compare India, that's why there is a decline because it was relatively large composition during the second quarter, but not so much in the third. The second, as you remember, was very much was affected by the Delta wave and this one is the Omicron wave in between luckily, there was no other way, therefore not so much demand.

Sure. And just on the follow-up on that, now that we are seeing healthy COVID contribution at least for the first 9 months. Do you see that to continue in FY '22? or do you see that COVID contribution would not be a big part in FY '23?

So we are preparing for that. We are prepared for that so all the activities around prevention, whether it's vaccines or products as well as community treatments, whether it's a product that we have like Molnupiravir and additional products that we are working on.

They are meant for that area. Naturally, we don't know how this pandemic will evolve, it's hard to predict how it's going to be, but we are prepared for that.

Okay. And in case if it doesn't pan out, do we have -- still have growth levers in place to grow on this base?

Absolutely. We will continue to grow in the spirit that we discussed in the past double digit growth [25, 25] while financing the business with or without the product. This is extra...

The next question is from the line of Neha Manpuria from Bank of America.

Erez, you just mentioned about double-digit price erosion in the U.S. Could you give us some color on how this is trending in the quarter given it was product specific? Should we see this abating to more normalized price erosion? Any color on that?

It should be. So I believe that most of the products that faced erosion were already there. And I don't anticipate -- the business model the position in the U.S. will continue as it normally does.

So the business model will not change. But in terms of the products that were affected by that, I believe that most of the effect is behind us.

Understood. And on just to understand, given you saw a double-digit price erosion in the U.S. But if you look at our Generic's gross margins, these improved close to about 100 basis points quarter-on-quarter. Any color on -- and despite the fact that we had headwinds in terms of raw material costs, et cetera, what drove this improved margins?

Yes. So it is a combination. It is a combination of what I discussed just on products, which change the mix, so it's improved mix. The second is productivity activity that we are doing on cost improvement programs and others.

And third is, market share with the relevant products in which we have better productivity. So we were preparing for ourselves for this phenomena. And like I mentioned in my script, we are growing despite and -- so I'm not so concerned about that going forward.

Understood. And my last question is on the India business. I think you mentioned there was no COVID product contribution. Should I assume there was no contribution from -- or very little contribution from Sputnik too in the quarter?

Yes. So in quarter 2, there was -- in the quarter 2, there was a relatively higher demand because it was very much affected at the time by the Delta wave. And in this quarter, luckily, there was no such demand in India.

So what we are going to say is the contribution in India in Q2 as well as we are going to see some in Q4 because of the current wave worldwide. But Q3 was very less.

And what about the export opportunity for Sputnik? Are we in discussions with the government to allow us to export given that the booster trial will just start so that is some time away.

We can export -- we can export the product like both the vaccine as well as the other products.

Okay. And we have started exporting it in the current quarter or not as yet?

In Q3, we did not export COVID products.

The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets.

This question is, can you share your observations on the commodity and raw material price, whether you have seen some kind of moderation compared to second quarter? And how do you see this part moving up in next few quarters?

Yes, we did see it. We saw it in 3 areas, some commodity intermediate, especially on the (inaudible). The second is in the energy cost, especially coal a few months ago, especially in India. And the third is on the freight -- on the freight and the shipping cost. All of that we observed and was within the margin.

So we countermeasure it with other activities to offset all that. I believe that -- the trend is behind us in a way that I do not anticipate additional hike in that moment. Some of the prices did not go down yet to the original level, but I don't anticipate additional inflation in that moment...

Very broadly, we can assume that the peak is over and price might see, I'll say, more moderation from here on?

As much as 1 can predict it looks better now. Hard to predict with the pandemic and the geopolitical situation in the world, there are so many more other big event, which would be...

And my second question is, can you talk a bit about your biosimilar portfolio, which you are working on? And which are your target markets for key products?

You're talking about COVID?

For biosimilars.

Biosimilars. Yes. We are targeting globally. We have -- we have rituximab, which is -- we have now it commercially with most of the emerging assets and the primary markets for it today is India and Russia. The -- and then we have the bevacizumab and additional 4 biosimilars primarily for emerging markets.

In addition to that, we are in the development -- as I shared in my script, we signed a deal for rituximab for United States and with that, and with Europe, we will do it by ourselves. So rituximab is going to be our first global product, and we have right now additional 3 products in clinical trials as well as additional products that are in the preclinical stage. So overall, it's a healthy portfolio.

And this cover us very nicely to perform about 2024 until 2031, 2032 at which we will launch all of these products.

And my last question is, have you heard any update on your Duvvada plant from the USFDA?

We did not receive any feedback from the USFDA as of today. We -- normally it takes 90 days, 90 days are due sometime next week. So we need to -- around that date, we will probably get a feedback.

We had 2 milestones to submit certain data as part of our commitment to the response to the USFDA of the (inaudible) that we got, and we will submit it in time and in full. And we are awaiting the feedback and hopefully to get (inaudible)

The next question is from the line of Ashwin Agarwal from Akash Ganga Investments.

Am I audible?

Yes, yes, please.

Yes. Sir, my first question would be on this prefilled syringe which we have talked that would be mostly the commercialization in Q3 FY '22. Can you just update me the status for like what is the right now, current situation on that part?

Which...

Sorry, we couldn't get your question. Can you please repeat?

Yes, sure. So the question is on with the pegfilgrastim, which we have the prefilled syringe, which we have been -- will be launching in Q3 FY '22. So can you just update me with the status right now?

So currently, it is with Fresenius. For the U.S. and Europe market, we have a deal with Fresenius. And basically, they have, I think, guided for calendar 2022 launch. So as of now, that's the status.

Okay. Okay. And my second question would be a bit odd, but actually, I wanted to understand on that part whenever we launch the product, how -- what is the average duration at which we can command the premiumization compared to when that it becomes a, you can say, a normal or a pricing product?

No, I don't think we will be able to comment on that part.

Okay. Okay. No issue.

The next question is from the line of Surya Narayanan from Phillip Capital.

Sir, just on the pricing erosion situation in the U.S. what you mentioned, is it largely to Dr. Reddy's specific that double-digit kind of price erosion situation and possibly could be because of more number of (inaudible) launches by you. Is that the situation or it is broad-based, double-digit kind of price erosion that you've (inaudible) in the U.S.

It's the business model in the United States. So naturally, every company is facing price erosion. I think the proportion of the price erosion is very much based on how many of your products are facing price erosion and what is the timing in which the customers are issuing their RFPs. So the -- in our case, we had -- as we launched, let's say, in the last 2 years, about 84 at the United States so naturally those products by design will face competition, there are larger in proportion out of the entire basket.

So let's say that's why percentage per se is less for me at least the indicator of the health of the business. The health of the business, (inaudible) growth and EBITDA and ROCE. And so far, it's pretty healthy, and we are maintaining the margins and even growing a little bit in United States despite...

Sure, sir. Sir, the second point is on the, let's say, U.S. has so far been the dominant revenue contributor and earning contributor for us. But in the recent times, we have obviously thought about diversifying our focus towards emerging markets, new markets like China and all and also accordingly reducing the R&D spend focus targeted for the U.S. market.

So let's say, 5 years down the line, is it fair to -- the share of North America -- revenue share of the North America will be meaningfully different than what currently it is.

Indeed, you described our strategy for the last 4 years. So we are investing in other markets for growth in both India and United markets, and this is providing us by using the same fixed assets, so it's based on the portfolio, our assets, our knowledge, et cetera.

So this is allowing us more growth, more opportunity and with less risk. And yes, I think it's fair to say that these markets will grow faster than U.S. So the United States will continue to be an important market for us. I just want to emphasize on it. And we will continue to invest and grow in the United States.

And the other markets, emerging markets anyhow will grow faster than the United States. So therefore, then the average rate in the United States will decrease -- is decreasing already and will decrease over time. And the capital allocation is done accordingly to the diversification efforts.

Okay. Just last 1 question, sir, on this generic Revlimid. So whether we are seeing -- see we have already launched the product in Canada, and that is also kind of influencing size market for this drug. So whether we have seen the appropriate number of or the kind of revenue that the product could have generated out of Canada market, whether we have achieved the right size revenue out of it is or will take longer time to achieve the peak potential out of the market from [Revlimid]

Yes, in Canada, it will take a bit longer because in the way that the Canadian process is (inaudible) you could register it in each 1 of the relevant provinces in Canada, and then each 1 of them to participate in the relevant sales process, say, whether tenders or other mechanisms in which each 1 of the states is providing, so process expecting a bit longer. It's not a day 1 launch that you see in the United States in that respect.

In any case, the launch in the U.S. and the launch in Canada are unrelated as the launch in the U.S. is part of the settlement where in Canada is naturally a free market situation. So I would not kind of -- it's not the same situation. I would not draw any conclusion to 1 market to another.

Last but not least, we are going to launch this product not just in Canada and United States. We are going to launch it also in Europe as well as in some emerging markets. So this is going to be a global product for us.

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

Sir, the first question is for icosapent, which is VASCEPA in the U.S. So good job done on the market share gain. I think it's now stabilizing around 11%, 12% for the last few weeks. So have you reached the peak? Or what's the outlook over here? And is it the supplier that is holding you back?

We -- I think we -- I think that the product is doing well, and we are planning to continue to do well also in the next quarters to come. There is still a lot of markets to gain with this product as the innovator still holding nice market share. And the -- and in terms of supply, it is not constraining us at this stage.

So sir, then why is the market share in early double digit and not much higher if supply is not holding you back. So what's the roadblock?

The roadblock is the desire of customers to take the product from us.

But sir, that's a little counterintuitive because generic is lower cost, lower priced. So most of the time, customers are too happy to take generic product. Is anything different over here?

No, nothing different there.

Okay. Okay. That's fine, sir. Sir, the second question is on the Russia, Ukraine business. Given the geopolitical situation, what's your read of the situation? Have you seen any disruption or any problem in a business that you are doing over there?

The Ukraine, Russia situation is beyond my pay check. But we are -- we got -- Russia is a very important market for us and continue to be important market for us and if there will be any, hopefully not. I wish not. But if there will be any adverse event, we'll have to accordingly be prepared for it and we are. But I wish that it will be only peace in the world and (inaudible)

So far, have you seen any impact on the business?

No. No.

Okay. Great. Sir, 1 final question, if I may, which is on your healthtech platform. Is there any update over here? How has been the progress? Anything you can share on the physical infrastructure that you have built, especially for online pharmacy fulfillment and diagnostic side. And how many cities have you rolled out what's the plan going forward for next 4, 6 quarters?

Sure. It is growing very nicely. We basically on the last stages of finishing the [silo]. We are now present in 5 cities, going to 10 cities in the next few weeks. And this will cover, of course, the main cities of India including Mumbai and Delhi. And accordingly, it will be the rollout of the companies that will join this platform.

So the -- our main way to grow this business is by convincing the companies to work with us and give treatment to their employees and basically insured by our assurance in this product. And of course, rolling out the service of by physicians as well as the vendors going to provide the excellent service. This is very, very neat project and I'm very proud of the beginning, and we believe they loving it very much -- it's a good thing for us. And I believe it's a very good thing for India as a whole.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just the first 1 is on the PSAI business. In your opening remarks, Erez, you had mentioned, you expect performance to improve quarter-on-quarter. What's driving that optimism? I remember last quarter, we had the issue of inventory destock from some of our customers. So just can you help us understand the dynamics in the PSAI business?

Sure. So if we are taking out, let's say, call it, COVID-related behavior by companies and take the business especially in its consumption. The main driver of growth will be the launches that will be in the marketplace of FY '23, FY '24 and FY '25 by the customers, both by internal use as well as external use.

And if we use the Pareto, meaning the top products that used to drive this are going to be changed by products that will be launched in that area, which will be one, more profitable and, second, bigger in their size. This will drive the growth on the base API.

PSAI is comprised also on our CDMO activities that are slightly picking up. And we very much believe in it. So most of the (inaudible) that you saw now our small projects, which are in Phase I and early Phase II. And actually, some of these products will come to Phase III and beyond that and of course serve as a growth driver for the CDMO type of the business, which is, as I discussed in the past, part of our (inaudible) activities and it's seeding and picking up.

The third is we are selling B2B in the PSAI and picking up with launches of pharmaceutical products that we are serving in Japan as well as in some Middle Eastern and African countries. So the combination of the 2 should grow PSAI in the future.

Got it. That's very helpful. Is it early days, Erez? Or can you quantify some of the non-API sections in the PSAI CDMO other projects that you're talking about?

At this stage, the 2 sections are not big, and we are not going to give yet a specific proportion. But there will not be and there will be -- but there will be more and more meaningful. And so right now, still most of the -- most of the PSAI comprised of the API (inaudible) and in the case of Q2, it was comprised of some COVID sales as well, so -- which was not in that magnitude in Q2. So some of the sequential trend is related to COVID.

Got it. Helpful. Second question is on the Sputnik. I missed some of the early comments, you said they're actively looking to register Sputnik Light as a booster, right? And the trial, we are doing it as just to -- what's the reason for doing the trial with other vaccines.

Yes, we will -- we will have to get approval from the authorities here in India for the protocol of the trial. And based on that pending the approval of that protocol, we will have a trial with other vaccines or to serve as another option both private as well as the government for booster in the future.

We believe that the boosters will be part of our life, and we'll have to take it 1 or twice a year now. And we believe that we want to be ready for that.

Got it. Helpful. Erez, last question. Again, in your opening remarks, you have now net cash M&A. Can you just help us understand what those therapy areas or is there a geographical plans as well, which are some of the assets or products that you will be looking to acquire?

So we are looking for opportunities in all of our spaces, all the geographies India, naturally as well as emerging markets, in the United States and Europe, in all of those geographies, there are now active contracts. Some of them can be faster and within the next few weeks, if, of course, will be concluded. And some of them may be later. The nature of the capital allocation will be the same as we discussed in the past, we are not in the shopping spree.

We see it as complementary to our organic growth -- at the same time, because we have a very comfortable financial situation, we are planning to use that. So now let's see, which of the projects will be actually eventually come to a conclusion, but likely that we will see multiple deals in the next coming months.

The next question is from the line of Ashish Thavkar from Motilal Oswal Asset Management.

Sir, on the Sputnik you said, obviously, we have got permission from the government to export. Can you quantify the doses that we are planning to export or you're open to export any amount or there is a restriction?

No restrictions. I cannot specify now specific number, but -- but there are no restrictions that prevent us to export.

Okay. But these numbers will be reflected in fourth quarter, you believe so?

It's -- and it depends on the type of approvals that we left for the product. For example, if a Sputnik Light will be approved eventually as a vaccine and the subsequent to that as a booster for other products then we'll obtain WHO, if all of this will happen, it can create a nice opportunity for us.

And of course, the quantities will be accordingly. So it depends, of course, on the type of approval that is relevant for this market at this particular time.

Okay. Okay. So just to get this thing clear, you cannot export till you get some sort of approvals from various agencies. Is that a right understanding?

No, no. We can export -- we can export, but naturally, our customers will not buy a product that is not approved for use in the relevant markets for the relevant patients that are going to use it.

So it has to be approved in that specific country for the use either as a vaccine or as a booster, This is where -- from there we'll derive the quantities.

Okay. But sir, as you understand, this product is approved from most of the Scandinavian countries, so how about that?

This is not a part of our agreement with Russian. So this will come directly from Russia and not from us to these type of markets.

Okay. Yes. Got that. So next question was on the pegfilgrastim. So earlier participant asked this, but I missed it. So we were supposed to launch in quarter 3, right, through Fresenius Kabi. So we have launched our product or there is a delay. And if the delay is there, why so?

I did not get the question, sorry.

Yes. So Ashish basically, revenues, as mentioned or indicated basically calendar 2022 that is when they expect to launch the product in both U.S. and Europe market.

So do you say that we are just -- we are still 2 to 3 quarters -- probably 2, 3 quarters away from the launch?

So they have not specified the quarter, but maybe in the next 1 or 2 quarters, it may happen. But obviously, we don't have the specific dates.

Okay. Fair enough. Sir, just last question on this price erosion in the U.S. It's been quite a while since we are facing double-digit price erosion. But as the investors understood, we felt that by the end of March, the intensity of the price erosion should gradually start coming off? So in your experience and what do you see in the market, would you be on similar lines? Would you also say that price erosion intensity would eventually come off by end of March?

As I mentioned before, it's price erosion and the magnitude for price erosion is not a top down. It's bottom up, meaning it depends on the product that is facing that specific competition. And in our case, most of our portfolio faced it.

So luckily, we are not going to see another round for these specific products and hence, will probably come down. So it's not a top down. It's a bottom up, and that's from there come -- this level of...

Mr. Thavkar, do you have any further questions? Mr. Thavkar can't hear you, please unmute your line and respond. No response, we'll take the next question from the line of Shrikant Akolkar from Asian Market Securities. Mr. Shrikant Akolkar, your line is unmuted, please go ahead with your question. We'll take the next question from the line of Kunal Dhamesha from Emkay Global.

So on pegfilgrastim, we are seeing that we -- launch may happen in next 1 or 2 quarters. But have we supplied any initial inventory to Fresenius Kabi or it will happen once the approval comes around. And I assume that it will also take time, right? If already not supplied.

So just to strengthen as part of the deal, all the right, all the activities (inaudible). And the therefore, we have just had a certain financial arrangement with Fresenius. Once they will go, we will enjoy a stream of value that will come from their launch. So we are not supplying and not involved in the launch, and we are not aware of the date, and we are going to be advised by them when they will decide to do this.

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

Yes. Thanks for the follow-up. I hope my voice is audible, there seems to be some disruption. So just 1 final question. How are you thinking about your injectable portfolio for the U.S. market. As in how many -- and has it been filed and are there any complex long-acting type micro sport type product peptide products that you've done the filing? And when can we start to see the approval cycle begin for these?

Yes. So it's naturally very important to us, not just in the U.S. but also globally. And the answer is yes, we do have this complex generic assets as part of that effort. Some of it had took long time to develop, some were still in development. Overall, the injectable and the complex generic will drive the growth in the United States on the generic part, and it will grow faster than the retail product.

Very specifically, have you filed some of these high-value complex injectables?

We did file some high-value complex injectables. Yes.

Okay. And the [PSAI] done at Duvvada, does it relate to 1 such product?

Some of these products are coming from Duvvada, yes.

No, no, sir. The question is, is PSAI pre approval inspection done by FDA? Was is it related to 1 such complex large injectable product?

The PSAI was not related to specific products like that. But naturally, when we have the PSAI, they are not checking only the specific products, they're checking the entire site.

Ladies and gentlemen, we take the last question from the line of Alok Dalal from CLSA.

Taking Sameer's question forward on Duvvada, would you still expect to grow in the U.S. next year if there is an adverse observation on Duvvada from the FDA?

First, we -- First, we hope not to have this adverse effect. And second, we are -- and so at this stage, we're not looking for scenarios that we don't have at these sites. But these sites are very, very important for the growth in the United States not just next year, but also in the years to come.

Okay. And any update on Nuvaring internally, have you decided to go ahead with the launch or drop it?

We did not finish all the evaluation, but unlikely that you'll see launch in the next few months.

Got it. And lastly, any update on Copaxone?

Still in process, we -- it's now in the FDA court. The ball is in their court, meaning that we submitted all the relevant information and we are waiting for the response. Again, I believe that at least, I don't think likely to see a launch in the next few months.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you all for joining us today for the earnings call. In case of any further queries, please reach out to the Investor Relations team. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Dr. Reddy's that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.