Dr Reddy's Laboratories Ltd (RDY) 2007 Q1 法說會逐字稿

Good evening, ladies and gentlemen. I'm [Prativa], the moderator for this conference. Welcome to the Dr. Reddy's Laboratories conference call. For the duration of the presentation, all participants' lines will be in the listen-only mode. The presentation will be followed by question and answer session for participants connected to SingTel bridge, followed by question and answer session for participants of the WebEx International Center, and finally a question and answer session for participants at WebEx India.

I would now like to hand over to Mr. Nikhil Shah of Dr. Reddy's Laboratories. Thank you and over to Mr. Shah.

Thank you, Prativa. A warm welcome to all of you and our apologies for the slight delay in starting the call. I am Nikhil Shah, the Investor Relations Officer at Dr. Reddy's. Thank you for joining us on the call today as we discuss Dr. Reddy's financial results for the first quarter fiscal year 2007.

By now you should have seen the press release, as well as the additional financial disclosures which were released earlier today. The results are also posted on our website on the homepage under the Quick Links icon. To discuss the results, we have on the call today G.V. Prasad, our Chief Executive Officer, Satish Reddy, the Chief Operating Officer of the company, Vasudevan, who has now resumed the role of the Head of our European generics business, and Saumen Chakraborty, our new Chief Financial Officer.

Please note that all discussions and comparisons during the call will be based on U.S. GAAP numbers and the I.R. desk will be available to answer any query relating to Indian GAAP immediately after the conclusion of the call.

To ensure full disclosure, we are conducting a live web cast of this call and a replay of the call will be available on our web site soon after the conclusion of the call. Additionally, the transcript of this call will also be made available on our website at www.DrReddys.com under the Quick Links icon. Please note that today's call is copyrighted material of Dr. Reddy's and cannot be rebroadcast or attributed in press or media out clips without the company's express written consent.

Now the Safe Harbor statement. I would like to remind you that the discussion and analysis during the duration of the call might include forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have made these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change, and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

And now to get started, let me turn the call over to G.V. Prasad, our Chief Executive Officer.

Thank you, Nikhil. I'd like to thank you all for joining us today as we announce Dr. Reddy's results for the first quarter of fiscal 2007. But before I begin the discussion on the results, let me place on record our appreciation for the contributions made by Vasu as the Chief Financial Officer in driving growth at Dr. Reddy's over the last two decades. And I am sure he'll continue to add significant value in his new role as the Head of our European generic operations as we set out to build a dominant presence for Dr. Reddy's in Europe.

I would also like to take this opportunity to introduce Saumen Chakraborty as our new Chief Financial Officer. His original responsibilities included Information Technology and business process excellence. Saumen has been with Dr. Reddy's for over five years now and has played a significant part in centering our HR practices as the Global Chief of Human Resources.

Now let me begin with the headline numbers. Revenues for the quarter are at $306 million, as against [$122 million] last year. Gross profit margin is at 43% of revenues, and SG&A is at $73 million. R&D investment for the quarter is at 4% of revenues. Profit after tax is at $30 million compared to $8 million last year. This translates to earnings per share of $0.40 as compared with $0.46 for the full year of 2005/6. So as you can see, the first quarter has been a very strong quarter, benefiting from authorized generic opportunity, in addition to the continued momentum from the underlying core businesses.

Let me begin with the performance of the core businesses. If you exclude the significant contribution from acquisitions and authorized generics, the underlying revenue surged ahead to $162 million against $122 million last year. This represents a sound growth of 34% over last year, with contributions from all businesses and geographies. The quality of the revenue mix up four quarters [INDISCERNIBLE] is also reflected in the gross margin ratio for the quarter, which sustained within the historical range.

The global API business continued its growth momentum, with a 20% growth driven by performance in our key international markets. The global CPS business, including the contribution from the acquisition, is off to a very good start. In terms of the [INDISCERNIBLE] business, revenues in the U.S. witnessed a significant step up on the back of three key launches during the quarter. As we've been discussing for the last few quarters, our investments in building the U.S. generics [INDISCERNIBLE] are now beginning to do very well, with several vertical launches lined up over the next few years.

The rest of the world markets, officially the branded formulation business, as we call it internally, continued its strong performance, driven by the key markets of Russia, CIS and India. The other interesting aspect of the growth, which is truly satisfying, is the fact that it has been fairly diversified geographically, with contributions coming in from all key markets. This level of performance clearly validates on the strength of our core businesses, which continue to deliver a sustainable growth year after year, driven by a unique combination of geographies, as well as products.

I would also like to draw your attention to another aspect of our performance, which is the ongoing highly intensive effort in pursuing business development opportunities to accelerate the growth in all our businesses. Last year was quite productive, to say the least, when you look at the number of different deals that that we concluded in the various business segments. Let me recap some of these deals. We executed the first ever authorized generic deal from India, with Merck for Zocor and Proscar. In early February, we acquired a set of [in-marketed] products in the U.S. and followed it up with a similar deal in Spain.

On the discovery front, which entered two joint development and commercialization arrangements. We also jointly promoted Perlecan Pharma, India's first integrated drug development company, as a response to mitigating increasing clinical development costs.

And more importantly, the two company acquisitions, one in Mexico, another in Germany, which in fact is the largest overseas private sector acquisition from India, are really [INDISCERNIBLE] events. I'm very pleased to say that all these initiatives have already started contributing significantly to the current performance of the Company and I'm quite confident that they will continue to add value to our future growth, as well.

In the CPS business, I'm also quite satisfied with the performance of our acquisition in Mexico, which is off to a good start for the year. Revenue at $27 million benefited from higher off take in the first quarter and we're making good progress in increasing the breadth and depth of our relationships with several large pharmaceutical companies. The profile of our global customer base is quite diverse and includes a number of large pharma, as well as emerging pharmaceutical companies. I remain confident that the CPS business will achieve the $100 million revenue mark by the end of this year.

Coming to the specifics on authorized generics deal, combined revenue from simvastatin and finasteride were at $73 million. We expect to achieve market share in the range of 30% for simvastatin and upwards of 25% for finasteride. Our marketing team has done a very good job as far as the market shares are concerned, despite the challenging market conditions, particularly for simvastatin. I'm looking forward to the continued performance of both these products during the remaining period of exclusivity.

Now let me talk about our performance in Germany, which I assume is on top of everybody's mind. As you are all aware, the new set of reforms in Germany was introduced in May. As a response to the reforms, the large players such as Hexal and Strada announced aggressive price [INDISCERNIBLE]. Our teams in Germany carried out a detailed evaluation of the impact of the reforms, as well as the competitive response on our portfolio. Consequently, we have taken average price cuts of about 25%, 24% on many of our products.

Revenues of the fourth quarter were lower at $44 million due to the lower off take as a result of the reforms. The gross margins were about 52% of revenues. The margins would have been higher but for the one time [shelf stock] I just mentioned that we had to book during the quarter as a result of the price decreases.

Let me now talk about another item on our P&L, which is the R&D investment. During the quarter, we invested about $17 million at a gross level, which is about 7% of our sustainable revenue base, after adjusting for the authorized generics business. At a net level, the R&D investments are much lower, at $12 million as we benefited from the [income recognition] of over $3.4 million for generics product development. This is under the ICICI venture partnership. We also benefited from the income recognition of $1.8 million for clinical development costs and R&D services under the Perlecan Pharma venture.

As communicated earlier, our intention was to mitigate the impact of increasing R&D investments through suitable risk-reward partnerships. We have achieved this objective and the benefit of these partnerships is quite visible now. Our overall R&D investments are now settling down in the single-digit range from the historical high of 13% to 14% of revenues. During the quarter, we continued expansion of our product portfolio, with seven India filings, four DMF filings, and about 72 international dossier filings during the quarter.

With this introduction, let me hand over the discussion Vasu for an update on financials.

Thank you, Prasad. Good evening, everybody. I'm sure all of you [INDISCERNIBLE] related to the various [moving parts], the financials. Let me explain the financials in greater detail. As Prasad mentioned, the key [INDISCERNIBLE] of our performance this quarter. How to sustain growth and revenue and margins of the core businesses, and the significant impact of the various business development initiatives on our current performance.

Looking at specifics, total revenues for the quarter were at $306 million, as against a $122 million in the same period last year. The first quarter reflects the first full quarter of consolidation of both our acquisitions. On the authorized generics, simvastatin contributed $65 million and finasteride about $8 million in revenue. Combined revenues from the two acquisitions were at $71 million. Mexico had an excellent start, with the first quarter revenues being at [$37] million, while Betapharm contributed $44 million in revenues.

Let me explain the key highlights of each of these businesses. In the API business, revenues grew by over 20% to $50 million. This growth was driven by key products of [Citrolen], naproxen, moxifloxin, as well as development products in the U.S.

The gross margin ratio for the quarter is at about 27% for this business. Revenues from branded formulation business grew by a strong [29%] to $73 million. The continued momentum in India, Russia, and [INDISCERNIBLE] regions were the key growth drivers. In India, driven by performance of key brand and new product launches in the last two years, our performance was better than overall market growth. In Russia, we grew by 45% on the back of a sustained economic growth, our focused marketing initiative, as well as opening up [both new ] lines of businesses, both in the OTC as well as hospital segments.

These two new segments now account for about 26% of our total revenues in Russia. The growth in Russia tends to be higher in the first half compared to the second half due to the seasonality factor. We believe this year also will not be any different. We also witnessed [INDISCERNIBLE] growth rates in [CS] markets of Kazakhstan and Ukraine. Total gross margin for this business is at about [17%] of revenue.

In the U.S., total revenues were significantly higher, at $93 million as against $7 million last year. I already discussed the revenues from authorized generics products. The other key product launch was that of the fexofenadine, which was launched outside [INDISCERNIBLE]. This product added revenues of $11 million to the bid. During the quarter, we sold six products more than in the same period last year using our own label. We are not excluding the contributions from authorized generics. Margins for the [INDISCERNIBLE] business, have improved from the previous level, benefiting from the launch of fexofenadine. Overall revenue contribution from Europe was at $52 million. Revenues from Germany are at $44 million. The performance of [INDISCERNIBLE] and fentynel patch have been quite satisfactory, which helps to partially offset in the [INDISCERNIBLE].

Revenues from U.K. market declined 26% over last year to $9 million. The relatively high pricing environment in the last year did not sustain beyond the first two quarters and this makes the year-on-year comparison quite challenging. However, [INDISCERNIBLE] volume growth in key products of omeprazole and amlodipline, which reflects our market leadership position and ability to take advantage of the market dynamics.

During the quarter we launched Sumatriptan and [INDISCERNIBLE] in the U.K. markets. Overall revenues for the CPS business are at $31 million. The gross margins for the quarter for this business is at over 30%.

Moving on from revenues to expenses. On the SG&A line item, expenses are at $73 million. This works to 31% of revenues, adjusted for the revenues from the authorized generics product. Of this -- this acquisition contributed $35 million to the total SG&A.

On the R&D front, we invested about $17 million at gross level, which is about 7% of the adjusted revenue. We also recognize $3.4 million of credit under the ICICI venture partnership. And also we recognized $1.8 million towards the clinical development of the four [INDISCERNIBLE] assets, [and same] to Perlecan Pharma, as well as R&D services provided by Dr. Reddy's to Perlecan Pharma in connection with development of these assets.

Amortization at $9 million includes the amortization of intangibles related to the Betapharm and the Mexico acquisitions and also [item].

During the quarter, we recorded net interest expense of $5.5 million against net interest income of about $3 million in the same period last year. The tax [INDISCERNIBLE] for the quarter is about $4.5 million or 13% of our pre-tax profits. This is primarily due to the significant increase in profitability, one-time profits from the authorized generic, and also partially offset by the benefits of the deferred tax level [INDISCERNIBLE] on amortization of intangibles.

Profit after tax is at $13 million, as against $9 million in the previous year. The net working capital has increased to [$180 million] as of the end of June, from $116 million as of the end of March. This increase was driven by significant step-up in sales in the first quarter, including the authorized generics opportunity and inventory build-up of the key products. With major products already launched in the fourth quarter, the working capital requirement is likely to peak in the first half and normalize in the second half of the year and we have put in place [INDISCERNIBLE] that will enable us to manage working capital efficiently.

With this overview, I'll now ask Saumen to say a few words before he hands it over to Prasad again for concluding remarks.

Thank you, Vasu. And good evening to all of you. I'm very excited to assume the responsibility of the CFO of Dr. Reddy's. [INDISCERNIBLE] of the efforts of Vasu in building a strong financial organization, and at the same time, I'm looking Ford forward to the challenge [INDISCERNIBLE] the finance organization to support the transformation of the company. I'm also looking forward to interacting with all of you in the future. I now hand it over to Prasad to make the concluding remarks.

Thank you, Saumen. Overall performance in the first quarter has been good with strong contribution from the core businesses, which gives us sufficient time to integrate the requirements of an incoming acquisition in the next few months.

Looking ahead to the rest of the year, I'm quite confident about the prospects of all of our businesses and geographies, in particular the U.S. market. This year is going to be a significant year for the generics business in the U.S.

Speaking of outlook for the rest of the year, I am particularly looking forward to the performance of simvastatin and finasteride in the remaining period of exclusivity.

We however need to closely monitor the pricing dynamics in this period. On fexofenadine, though our current market share is at about 10%, we hope to increase this upwards of 15% in the coming months, as we add a few more [accounts] on this product.

Although the timing of additional competition for the start-up still remains unclear, simvastatin and finasteride have been good opportunities for us. The other interesting exclusivity opportunity could be ondanseltron towards the end of the third quarter. We are of course awaiting final approval and we have to see how the events unfold on this opportunity.

In addition to this, we have a few other launches lined up, as well. To capitalize on all these opportunities, we will have to execute flawlessly in terms of [demand fulfillment] and gain the desired market shares. I am quite confident that the organization as a whole is geared to deliver on these opportunities.

To sum up, over the last few years, as you are aware, we have made significant investment in building one of the largest [INDISCERNIBLE] in the U.S. generics industry and the front end to deliver the pipeline. And as I have discussed in the previous call, our key priority for the U.S. generics business is to make it self-sustaining and achieve critical mass over the next few years.

We remain on track to achieve this objective. Our pipeline is now beginning to unlock value with several launches expected this year onwards. We are supplementing our internal product [INDISCERNIBLE] pipeline through a combination of R&D partnerships and in market product acquisition opportunities, which we believe will create additional growth opportunity.

In the API, as well as the branded formulation business, we expect the growth momentum to sustain on a year-on-year basis. This reflects our belief in the strength of the portfolio of markets and products that we have built in each of these businesses. At the same time, we also need to recognize the quarterly seasonality patterns for many of these markets.

Moving on to Europe. In Germany, [INDISCERNIBLE] performance was affected by certain one-time events, we expect [sales and margins] to improve in the coming quarters. We have had good brand launches [INDISCERNIBLE] and the fentanyl patch and we have achieved significant market share for all these products.

We are also opening new countries, such as Spain and Italy, which are expected to start contributing to the overall performance and growth in the coming years.

As to the CPS business, as I mentioned earlier, I'm quite pleased with the progress achieved by our business development teams in broadening the customer relationships, particularly with large pharma companies. This progress gives me the confidence -- comfort that we will achieve the $100 million revenue mark by the end of this year [INDISCERNIBLE].

As we discussed earlier in my presentation, I'm quite happy with the outcome of the many business deals concluded in the last several months. We will continue to push the business development agenda aggressively to supplement the internal product development programs. And this, we believe, will add more power to the growth momentum across businesses and geographies.

Putting all this together, I believe that the key elements of sustainable and profitable long-term growth are now falling in place and I'm quite excited with the way our business model is evolving into a unique, balanced global portfolio of businesses, geographies and products.

To sum it up, we will achieve critical mass in Arabia [INDISCERNIBLE] and [INDISCERNIBLE] are well established sustainable and profitable growth engines. With several exciting opportunities lined up over the next few years, the generics business in the U.S. is on track to become self-sustaining and more importantly, achieving critical mass.

In Europe, we are now a significant player with good ground pressure presence in UK and Germany. We intend to build a dominant presence across Europe in the next few years. Betapharm brings in a strong capability on the front end in one of the largest branded generic markets in the world. We're also actively looking at expanding our presence in the other markets of Spain, Italy, and France. To pursue these opportunities, it is important that we step up our production capacities. Towards this objective, we're making significant investment plans for creating additional capacities for the generics, as well as the API and CPS businesses.

And as we make progress towards building a global generics business portfolio, we will continue to push the innovation agenda in our drug discovery, specialty, and biologics businesses, which will serve as an important bridge as we transition into a discovery-led global pharmaceutical company.

We continue to make good progress in expanding the [biplane] in these businesses. The most [INDISCERNIBLE] we are looking forward to the results of the long-term [INDISCERNIBLE] studies, subject to which we hope to move it into the phase three, clinical trials, by the end of this fiscal.

To conclude, as an organization, we have used opportunities [INDISCERNIBLE] quite creatively to build a highly competitive business model. It is the strength of our globally diversified business portfolio that keeps us excited about the future of Dr. Reddy's as we transition into a billion-dollar global pharmaceutical organization.

This ends my discussion and we can now leave the floor open for the question and answer session, and we will be pleased to answer your queries. Prativa, can we have the first question?

Shah, sir, at this moment, I will hand over the floor to [Zini] to conduct the Q and A session at the SingTel bridge. Zini, please go ahead.

Thank you, Prativa. We will now begin the Q and A session for participants connected to the SingTel bridge. [OPERATOR INSTRUCTIONS] At this moment, there are no questions. I'll hand over to Laurie.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Elliot Wilbur of CIBC World Markets.

Good evening, thank you for taking the questions. I wanted to ask two questions. First is with respect to your general outlook for pricing conditions in the U.S. generic market. We've heard mixed signals from some of the industry leaders over the past couple of weeks. Some are indicating they expect double-digit price deflation to continue throughout 2006, yet yesterday Mylan Laboratories talked about -- and least with respect to its own business -- pricing stability. So I'm wondering if you think that perhaps we have kind of reached a bottom in terms of the rate of price deflation and things should improve going forward? Or if you would expect further deterioration in overall pricing conditions over the balance of '06?

And then my second question has to do in respect to the authorized generic simvastatin. Could you just maybe provide us with some color on how you think Merck's rebating tactics at the managed-care level have impacted the uptake of your authorized generic? Thank you.

Well, thank you, Wilbur. With respect to the pricing outlook, I think it is very specific to the competition that is there for each [INDISCERNIBLE]. [INDISCERNIBLE] there are a large number of players, the discounts have been very, very trivial. I don't think we expect this to change in the near term. So for products which have multiple competitors [INDISCERNIBLE] this rapid price erosion will continue and I think pricing will be under pressure in the near term.

With respect to simvastatin, yes, Merck did some unusual things, but I think that impacted the authorized generic market only marginally with respect to one or two customers. But otherwise, our [matrixes] show that we've done a decent job [with the] product.

[ OPERATOR INSTRUCTIONS ] At this moment, there are no further questions from participants outside India. I would like to hand over the proceedings back to Prativa.

Thank you very much, Laurie. We will now begin the Q & A interactive session for participants connected to WebEx India. [OPERATOR INSTRUCTIONS] First in line, we have a question from [Mrs.] Visalakshi of DSP Merrill Lynch.

Thank you. Congratulations on an excellent quarter. My first question is on Betapharm. Could you elaborate as to what the extent of this onetime [shelf stock] adjustment for the quarter? And my second question is a more generalized question on this [INDISCERNIBLE] which got introduced in the Senate on -- you know, talking about banning authorized generics. Would the management have any comment on that?

Vasu will answer the first question [INDISCERNIBLE].

Sure, regarding the German market and Betapharm's performance, we do expect medical institutions [INDISCERNIBLE] this point in time. Clearly we expect this to build in the second quarter. At the end of the second quarter, we'll definitely know what [INDISCERNIBLE]. So it could be very difficult to put an estimated number [INDISCERNIBLE] at this point of time, though we have internal estimates.

With respect to the [INDISCERNIBLE] bill, I think [INDISCERNIBLE] if it comes before that, but I think it's not likely to happen. Let's wait and see what happens to the bill that has been introduced.

What do you think are the chances of this bill -- for the passage of this bill?

I really don't understand the political system in the U.S. but the bill seems to be positive overall for generics industry.

Finally a question on generic Zofran, do you expect a six-month exclusivity for generic Zofran tablet?

Yes, that is our impression, that we have the exclusivity rights, but again, that's dependent on [INDISCERNIBLE]

Thank you so much.

Thank you.

Thank you very much, ma'am. Next question comes from Mr. Rahul Sharma with Karvy Stock Broking.

Hello, Mr. Sharma?

How much inventory is there in the current quarter results which is reflected in the results?

Hi, this is Nikhil, the initial sales [INDISCERNIBLE] simvastatin and finesteride represent about four to six weeks of sales.

[INDISCERNIBLE] probably in evening it out.

Yes.

Okay. Thank you.

Thank you very much, sir. Next question comes from Mr. Sameer Baisiwala of J. Morgan Stanley.

Hi, good evening. My first question is on [INDISCERNIBLE]. Has this been consolidated with Mylan?

Sameer, this is Nikhil. The case has been consolidated with Mylan and the hearing was completed in the first week of July.

And when you expect the ruling to be out?

We estimate by the end of the calendar year, but again, as is the case with all court decisions, you really can't predict the exact timing.

Okay, and my second question is regarding Germany. Are you to talk about [shelf stock] adjustment to take into account price cuts? And with that, [INDISCERNIBLE] Does the quarter take into account the full quarter impact of the price cuts?

At this moment, Sameer, [INDISCERNIBLE]

Okay, so which means [INDISCERNIBLE]

[ ENTIRE ANSWER INDISCERNIBLE ]

I'm not quite sure I understand. So can you say that for the current quarter, 52% is a great gross margin based on the current price levels?

52% gross margin is this [INDISCERNIBLE]

Okay, and [INDISCERNIBLE] has issued certain statements about restating its accounts and its possible implications for its partners, you being one of those. [INDISCERNIBLE] have you heard anything from them? Any implications for Dr. Reddy's?

No, as far as we believe, there will be no implications for us.

Okay.

We have not heard from them.

So which means it's still an open issue?

Open issue but we believe there will be no impact on us.

Okay, fine, thank you very much.

Thank you very much, sir. Next question comes Rajesh Vora with ICICI Securities.

Good evening and congratulations for super set of numbers. I just wanted to know, Mr. Prasad mentioned about the critical mass is one of the key objectives of Dr. Reddy's to obtain critical mass in the U.S. Do you know in terms of considering the current momentum and maturing pipeline, obviously it's much closer than it was before, so if you could shed some light on that. And if Vasu can tell me a little bit in terms of you have $173 million of cash, [INDISCERNIBLE] and debt of $726 million. What sort of CapEx outlook is Mr. Prasad mentioned about investment in building production capacity [INDISCERNIBLE]

In terms of U.S. business, I think our critical mass, we are well on the way to critical mass. I think we will achieve it in this fiscal year, even if we separate the authorized generics deal, I think we are on our way to achieving critical mass in the current year. As we add products in the next fiscal year, [INDISCERNIBLE]we believe [INDISCERNIBLE] on an ongoing basis is what the critical mass should be.

Okay.

Vasu will handle the other part of the question.

[INDISCERNIBLE] cash balances available, we believe the CapEx [INDISCERNIBLE] may require about $100 million [INDISCERNIBLE]. And we will be able to manage capacity as well as unlocking of the [INDISCERNIBLE] over the next few months.

Okay, and in terms of significant cash -- internal cash generation, considering the kind of momentum we have seen in the quarter and going forward, so that would go towards the repayment of debt, if any free cash is left?

[INDISCERNIBLE]

[ ENTIRE QUESTION INDISCERNIBLE ]

If you look at our mix today, I think we have a nice balance between India, U.S., Europe and the rest of the world.

Sure.

Also, if you see the spread between businesses, it's again nicely spread between CPS, API, branded formulations and generics, so there's roughly a balance there, but we do see aggressive growth, both in Europe and the U.S. as something we will pursue in the next few years. And we see ourselves growing consistently, even beyond a billion dollars in the next few years.

Excellent. Thank you so much and wish you good luck.

Thank you very much, sir. Next in line we have Mr. Nimish Mehta from [INDISCERNIBLE].

Good evening and congratulations on a good set of numbers. My first question is related to the pipeline that you've built for simvastatin and finesteride. I'm sorry if I missed it, but can you give me this sales of simvastatin and fenasteride [INDISCERNIBLE] pipeline?

Well, it will be an educated guess. I think it will be somewhere between four and six weeks. [INDISCERNIBLE]

Okay. And what is the kind of price cut that you have taken [INDISCERNIBLE] generic version?

We are not discussing pricing on this call.

Okay. You mentioned about 30% of market share, am I correct?

Close to 30.

And finally, when simvastatin -- [INDISCERNIBLE] exclusivity expires, what are your plans? As I understand, you still do not have approval for simvastatin, right?

Approval is expected.

Okay, so it is expected before December. Okay, fine, thank you much.

Thank you very much, sir. Next we have a question from the SingTel bridge. The question comes from Mr. Sharma. Zini, can you please open the line for Mr. Sharma?

Yes, can you hear me?

Please go ahead, sir.

Yes, good evening, everyone. Two small questions. First is on Germany. What is the sustainable level of margins there? Should we take 54-55 or it could be closer to your [INDISCERNIBLE] formulation?

Thank you. Regarding [INDISCERNIBLE] 55%.

Did you say 55 or 65?

55.

Okay, and secondly, domestic business has grown very well this quarter despite a [high base] of last year. So is this one off or how should we see that?

[INDISCERNIBLE] sustainable because most of the growth has come from the top brands in our portfolio and we expect this to continue from new products that we've launched in the last two years, even if you [INDISCERNIBLE] they will drive the growth [INDISCERNIBLE]

Okay, wonderful, and one last question I want to squeeze in is there still a chance of launching [INDISCERNIBLE] on 31st Jan. next year?

I would not put a very high probability on that happening. Given our understanding of the product and its regulatory implications, we are not very sure that we will be launching [ever.]

Okay, understood. Thanks.

Thank you very much, sir. Our next question comes from the line of Mr. Rajish with Apollo [INDISCERNIBLE] investments.

Hello. My question is what is the period of authorized generics for Zocor [INDISCERNIBLE] and after that, what will be [AUDIO DROPPING OUT]

With respect to the authorized and next, the agreement is a multi-year agreement [INDISCERNIBLE] ago there has been nothing to report on the Plavix front.

[ENTIRE QUESTION INDISCERNIBLE]

We discussed that earlier, it's a shade under 30%.

Thank you very much, sir. Next question comes from the line of Mr. Subhabrata Majumder with Macquarie Securities.

Hello. Congratulations to management team on phenomenal set of numbers. I had a couple of questions. One was the custom pharmaceutical business has done extremely well and my sense is you are running at a rate faster than what we were given in the guidance of $100 million a year. Do you think you'll need to revise your estimate [INDISCERNIBLE]?

Well, we've not given any guidance. We've said we are within the striking mark of $100 million. It's likely we will achieve the $100 million but that depends a lot on the performance of the next-year quarters.

But this business [INDISCERNIBLE] largely contractual and one could assume the current quarter [INDISCERNIBLE]

Part of it is contractual, part of it is [INDISCERINIBLE] A large portion of the Mexican revenue is based on [INDISCERNIBLE] So those fluctuations will be there.

Okay, and please remind me the gross margin you were earnings on this business?

30%.

[AUDIO DROPS OUT] The second question is on Betapharm. If you can give us some idea on year-on-year basis, what kind of [INDISCERNIBLE] in terms of [AUDIO DROPS OUT]

In this quarter it has been unusual as far as the quarter [INDISCERNIBLE] so there has not been any [AUDIO DROPS OUT].

Thank you very much, sir. I would now like to hand over the floor to Mr. Nikhil Shah for final remarks.

Thank you, Prativa. We would like to thank all of you for joining us on the call today and for further clarification, please feel free to get in touch with the I.R. desk, either on phone or email. Thank you.

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