Ladies and gentlemen, good day, and welcome to the 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. Thank you, and over to you, sir.

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, 2019. 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 shall 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. Saumen Chakraborty, 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 this conference call. Now I hand over the call to Mr. Saumen Chakraborty. Over to you, sir.

Thank you, Amit. Greetings to everyone. The current quarter financial performance has been quite good, with the highest ever quarterly sales without any one-off cited. An improvement in both the gross margin and EBITDA margin and end cash generation. However, the profit is impacted by significant amount of impairments kick in due to specific figures occurred during the quarter. Let me take you through these and other major items in some more detail. Netting all the amounts are translated into U.S. dollars and a convenient translation rate of INR 71.36, which is the rate as of 31st December 2019. Consolidated revenues for the quarter are at INR 4,384 crores, which is $614 million. Raising a growth of 14% on a year-on-year basis. The growth has been supported by a good performance across all our businesses. On a sequential quarter basis, our reported revenue declined by 9%. In Q2 FY '20, we had an amount of INR 723 crores recognized as revenue towards the sale of 2 neurology brands of our propriety products business. And adjusted for this, the sequential quarter growth would have been 7%. Consolidated gross profit margin for this quarter is 54.1%. With an improvement of 20 bps on a year-on-year basis. On a quarter-on-quarter basis, while there is a decline of 340 bps in the reported gross margin. However, after adjusting for the one-offs in Q2 FY '20, the normalized gross profit margin has improved by about 260 basis points. Gross margin for the Global Generics is at 58.2%, with a quarter-on-quarter improvement of 270 basis points. Gross margin for the PSAI business is 30%. We did quarter-on-quarter improvement of 540 basis points. The SG&A spend for the quarter is INR 1,267 crores that is $178 million, which is 28.9% of sales. With the leverage benefit being…

Thank you, Saumen. Greetings to all. I'm very pleased with the continued improvement in all of our business spaces and our ability to improve our performance and health networks this quarter. We have seen strong growth in revenues across our key businesses, coupled with improvement in gross margins, operating expense leverage and achievement of healthy EBITDA margin. During the quarter, we also turned to net cash surplus and further improved the benefit of balance sheet as an outcome of sustained and focused efforts around our businesses. We are progressing well in implementing our strategy across the markets under the regarding principles of creating more opportunities with less risk. Now let me take you through the key business highlights. Please note that all references to the numbers in this section are in respective local currencies. Our North America Generics recorded sales of $225 million for the quarter with a growth of 8% year-on-year and 12% on a sequential quarter basis. We launched 5 new products in the quarter and with that, we relaunched 22 products, including 4 relaunch of the earlier discontinued products. We expect the new launch momentum to continue to deliver with about 30 product launches during this year. We are gradually improving our market share in [indiscernible] that really improves products and further [indiscernible] our recent launches like Carboprost injectable and obviously, Tromethamine and Psuedo products. During the quarter, the market for beginners leading to potential reduction in the size of the opportunity for us. Based on these changing market dynamics, we have taken an impairment charge in the intangible caring value depending upon the various scenarios expected to perform our market input. We continue to work on responding to the CRL, which is expected to go out in the next few months. Our Europe business recorded sales…

[Operator Instructions]. The first question is from the line of Aditya Khemka from DSP Mutual Fund.

So firstly, on the cost management. So for the past 4, 5 years now, we have been seeing low single-digit growth in most of our cost components, which includes R&D expense and SG&A expenses and I understand this has come from a lot of efficiency and hard work from your end, from the other ends. Could you sort of give us some flavor on if there was, let's say, 100 is the scale of which cost optimization could have been done when you joined Dr. Reddy's, where are you in that journey 200? Are you at 50? Are you at 80? Are you at 99? How close are we to sort of achieving the optimal cost structure that you would have desired?

I cannot quantify these numbers but there is still a lot of room to be better. Because we've to be the most efficient company on earth in our space, and we are very far from there. So I will continue to see these efforts also going forward.

Okay. And just in terms of your commentary in some of your calls where you said that the ideal metrics that you want to target is a 25% EBITDA with a 25% ROCE. Do you think that's something which is achievable over the next 2, 3 years? Or you would target that for the next year itself? How would you think about that goal?

We achieved already for this quarter, 24.5% on the EBITDA overall. So we are very close and I believe that -- and also the -- I will say we are not that far. So I believe that it's achievable. And I believe that it's achievable basically not just as another goal, but it's relevant actually for every activity that we want to do. Which means that the average can be even higher in the future. I don't have a time frame or guidance of that because we don't give guidance, but this is the indication.

Fair enough. On the revenue side, if you could just guide us on what the domestic business, we have seen a decent turnaround in terms of the growth that we have been doing now. But what has changed in the domestic business? What have we changed to achieve this superior growth versus the product market? And how do you see that effort sustaining in the future?

We decided that we want to win in this market. I think this is the main change, and we substantiated by putting relevant R&D for those products by opening UTAs, by changing the team leaders, by booking commercial excellence. So it's multiple efforts in multiple way activities. But I attribute the main success, if you wish, for what we do is the fact that we, as a management team, decided that India is a priority for us, and we decided that we want to be in the future to fight for India, and we are planning to achieve it.

Sure. Just 1 last question. So now that your balance sheet is a net cash balance sheet. The outlook on any inorganic opportunities and your priorities on that side?

We are always looking for opportunities, and we are very active on this front. The priority is on emerging markets and India, in particular, so -- because this is where the area of focus. Having said that, we said it in the past, I want to use the opportunity set now. We see it as a complementary move, and we don't want to manage both financial risk and businesses, meaning that we will not grow more than 2x EBITDA for acquisitions. And we -- the primary growth of Dr. Reddy’s will be organic.

The next question is from the line of Vishal Gada [ph] from Aviva Insurance.

Sir, could you guide us how has the China business performed in third quarter?

China did well, and it is growing. And on top of it, we discussed that we won, I think, the first winner, at least outside of China in the product of olanzapine. We are not giving specific numbers for the market. But overall, I'm very pleased with the performance. China grew this quarter as well.

Okay. Could you help us with the kind of launches that you're planning for Europe and EM in the coming few quarters?

We have -- what we're doing now is primarily taking and leveraging the U.S. portfolio in Europe. So most of the launches in Europe in the future will be primarily injectables. And in the case of Germany, it will be also a solid growth. So the overall expectation and our strategy in Europe is to build a healthy organization with better clinical -- critical mass based on debt leverage. And give or take, whatever we are launching we'll launch in the U.S., we want also at least portion of it to submit and launch in Europe.

Okay. And so the last question is, could you help us to understand what helped in containing the SG&A costs?

It's primarily the commercial excellence. We are selling them more, but we were able to do it with the same or even less resources has helped us with the cases. Just, the SPO management of a much more stringent focus on KPIs, nothing special. And again, nothing we do especially, it's just more disciplined.

I'll come back in the queue for the questions. Thank you.

The next question is from the line of Prakash Agarwal from Axis Capital.

Thanks for the opportunity. Just one question on the $11 billion write-off that you've taken for the NuvaRing product, and you kept $3 billion pending. So I just wanted to understand, has the value with 1 or 2 players come off that significantly or we are going ultra conservative, some thoughts?

So these are all triggered debt impairment testing that we do. And given the dimensions, the nature of this gain, we will take an independent valuator. Beyond what team management will consider and our statutory rate is. So of course, there will be various scenarios with possible eventuality. So we probability attached on tax indicator in terms of the impairment outcome. So pure accounting treatment, we have taken this.

Okay. And what is our current understanding of the product in terms of we got a CRL in the past. So when do we plan to get this resolved and get an approval?

We are planning to submit this in the next few months.

Okay. And any color on the expectation on approval, sir?

The [indiscernible] will go through the review with 6 months without inspection and 10 months out. So it's an additional inquiries. So from that submission, we need to count that time. But of course, it can -- it can go to another cycle. We already have 2 cycles in this one.

Understood, fair enough. And secondly on, sir, your cost, I think, a couple of guys already asked but just 1 thought here that since we are focusing more on the emerging market, which is India, Russia, CIS, where the cost is a push model where you need to use your MRs, and we have been rightly growing mid-teens now. So I just wanted to understand, I mean, going forward, high single-digit or early teens should be the right metrics in terms of cost. Or we can still maintain our low single-digit kind of cost escalations, what are the thoughts?

Firstly, in emerging markets, part of our model is B2C and part of it is B2B. And overall, going forward, B2B is selling directly to account management hospitals around the world footprint rate will grow. So part of it is a mix of business model that we have to take into account as well. Overall, there is a room to grow efficiency also in what we have now. So we did not finish the efficiency activities. And in general, the way you should look at it is that bottom line will always grow faster than the top line.

Bottom line would be always faster than the top line?

Will grow faster than the topline.

That is great. And secondly, just two more updates, if you could help us with Copaxone expectation now as well as REVLIMID?

We will submit for the next few months with CRL.

For Copaxone?

Yes. For Copaxone.

Okay. And sir, any updates on REVLIMID expectations?

Yes, we expect it to be an amazing product. I did not say more than a person can understand.

We can move to the next person.

Next question is from the line of Anubhav Aggarwal from Crédit Suisse.

Yes, my question is on the Russian market. It was quite a strong quarter in this geography despite a mild winter so -- and in your release, you mentioned about the volumes and realization both were better in this quarter. So some more explanation will help just in a quarter, what led to such a strong result?

This also has been helped by the tender of ritux that also we got in this quarter.

So it's a combination of both. We do better on the retail, and we want the tenders together. And I attribute it, primarily, to the commercial excellence program that we put in place, and we are achieving better results with less people.

So your comment that the volumes and realizations were better. Largely, that was for rituximab, right?

It's a combination of both, retail and the rituximab that we won in Russia.

So just to help us, guys, so that we have a better idea. So retail performance, was that out of line with what we've been doing for the last 2, 3 quarters? Or was it much stronger this quarter?

I believe that we -- just -- the team performed better. We did not do anything special and there was no single act or single activity that led to that and -- because it was a cost to both. The only 1 that was signaled out was rituximub, which we mentioned already.

Okay. Second question was on the PSAI business. Our top line was largely similar sequentially, September to December quarter, but margins were significantly better. Some color will be helpful. Was it like more API? More custom products? Or within API, a significantly better mix? What was the reason for that?

The main reason for that is a combination of product mix. So the mix of the product was more profitable. And second, I think we're doing better on costs also.

Sorry, what was the second reason?

That we are doing better on cost. We are more and more cost conscious. And from quarter-over-quarter, we see the benefit of that.

Manufacturing over it is implying. Okay. And just one clarity on the earlier question on NuvaRing when you responded that you've made several cases and to probability adjust it. So when you do this kind of current accounting, do you typically do all probability adjusted scenarios? Or is it just you would tend to be more conservative and select the most conservative one?

The accounting standard doesn't allow you to be extra conservative, and it doesn't allow you to be adjusted. So we have to have a very nice balance. And that's why you making a very significant, you actually go out and get a third-party also to do the same thing to validate the rationales.

The next question is from the line of Neha Manpuria from JP Morgan.

On the U.S. business, if I remember correctly, there was -- other than Ranitidine, there were some logistical issues, which impacted the revenue which should have been resolved in this quarter, given you've had 20-plus launches in the last nine months, our revenue does not seem to be reflecting both resolution of logistical issue or the launches. Am I missing something in the U.S. performance for the quarter?

I don't know if you are missing, you normally don't miss, Neha. So I'll do my best to explain. Firstly, logistics issues are behind us. Ranitidine event was only last quarter. This quarter, we did not sell Ranitidine, we are still out of the market. And then it's a combination of new products and price erosion. So it's just a mix between the two of them.

Sir, is it fair to assume that we're still seeing probably high single-digit price erosion in our portfolio, despite our concentration being much lower because with the work on market share increase and launches, should there not have been an improvement in the U.S. business versus, let's say, the first quarter in FY '20?

Our portfolio is indeed in the -- as a price erosion, if you do your [indiscernible] it's been max price erosion. It's absolutely inhibited. What -- I do agree with you also that the product mix is much more healthy than it used to be. Naturally, when we launch new product those products that we launched in the earlier part of the year also higher price erosion because it's still within the first year. That's always the case. But for new products, the percentage of price erosion is normally higher than mature products.

Understood. And second question on the India business. Sir, if you could give us some color on what is the MR that we have on ground? And are we seeing an improvement in productivity. Because as per the last reported number of March '19, there's been a reduction in the number of MRs, that we had in India. So have we added, deducted? How the productivity has improved? Just trying to understand the profitability of the India business.

Primarily, the sales force productivity has improved considerably. And what you see, what we report is the top line growth. Our profitability in India has grown much better than the top line.

And do you see more scope for improvement there?

Yes. Yes, there is proforma improvement even in the future. We just started to have an improvement.

The next question is from the line of Kunal Mehta from Vallum Capital.

Sir, when you look at your present manufacturing infrastructure, are there any sites where the utilization is below what we would like to have, I mean, below 50% or so?

Yes, there are sites where utilization is still low multiple reasons. So there is, again, it's got to improve our FX capital turn over.

Sure. And sir, second question is sir, over the set of actions which we have taken to improve the business has been very commendable. But sir, I would just wanted to understand your view on what sort of precautions that we're taking to make sure that the inspections we go through in the next -- in the future, would give us satisfactory outcomes because any company we use is probably 1 barren inspection away from affecting their product mix and their growth trajectory. So how would we dealing with that?

Since 2015, until to date and increasing every year we took measurements to be compliant, not just with the United States, all over the world. And it's in the forms of a very, very different quality organization than we used to have with factors of growth, very different digital, most activities are digitized. All the activities that are related to past events very, very different level. And so is the resources and the awareness of compliance. I personally believe and so far, the track record for the last few shows that it's working. And one should never be to show up himself, and we -- it's something that we always need to be consistent and we're planning to do so. But so far, so good. And luckily for us until now, knock on wood, we're not out of that compliance. We're and hopefully, it will continue in the future.

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

Congrats on very good set of numbers. Sir, just on the U.S. market, you have mentioned in your commentary that you saw price erosion in some of your key molecules. Can you just let us know what is driving this price erosion? I mean, was the new entrants? Or was there some other reason?

Primarily new entrants. And that's that we launched after last. And some of you know when this market. So when there's a new entrants come, especially to 1 of the key customers, then you either defend your share or move your share and that's the mechanism, and that's what happened to us.

Okay. And that -- and I'm sure what you're saying is these are mostly new products, they were not the mature products.

The also mature products, but let's say, the -- as we started to launch new products after the growth that we had since October last year, those products that we launched in the late last year, in the beginning of this year, naturally grows higher erosion percentage in the inventory products.

Okay, got it. Sir, just delivering a bit more on this point. Going forward, our understanding is that the North American market pricing environment has got a lot better from mid-teens to high teens has gotten down to single-digit price erosion. Is this something that you would also confirm? And how do you see, as we roll forward to fiscal '21 on price erosion?

So we're not giving specific numbers. For us, there is no overall trend. It's more of what portion of our portfolio is seeing this compensation. Because a product sell customers is always double digits. So it now depends on how many of your products under this kind of regime. In our case, we do see a price erosion also this year but we are not giving specific numbers.

Okay, great. And just one more from my side. And sir, most companies in Indian generic space have margins mid-20s and that sort of top -- topping it out at EBITDA level. You're already there and your commentary suggest that you had just started. You've a long way to go. So quite naturally, you expect this EBITDA margin to expand substantially over next 2-year period?

I believe that we can do much better on the EBITDA. Yes, absolutely.

Okay, great. I have a few more and get back in the queue.

The next question is from the line of Nitin Agarwal from IDFC Securities.

Sir, on this pure Rituximab launch in Russia. Is it -- I mean, this is a 1 quarter number. It's going to be sporadic? Or this is something that's going to continue through the quarters?

No, rituximab we have launched long back in Russia. The way it gets sold is through tendering and the tender happens in a particular sequences. So this quarter, there was tender awarded consequently through [indiscernible]. But it is not a new one, but it doesn't happen consistently every quarter.

Okay. There's going to be a limit of lumpiness to these earnings depending on the tenders there?

The lumpiness is there on account of this particular.

Okay. And then just on Reditux per se, how are we -- this were biosimilar in emerging markets. Beyond Russia, how should we look at this portfolio now?

We have Rituximab in many markets. And then -- how many -- 14, 15 markets, and normally, in Russia, there is an assembling of either biosimilar is there by hospitals to sell by government body would like to for the rest of the country. We are now in the middle of the price for the U.S. market. And the way we look at it, those markets that we like to get the data of the USFDA approval want to approve. It will open a new opportunity for us in a place that we have a good go to market, we will do ourselves. And in the place that we can't, we will like to see others.

And sir, are there any other products in the biosimilar pipeline beyond rituximab?

We have 11 more in the pipeline.

The next question is from the line of Surya Patra from PhillipCapital.

Congratulations for the great set of numbers. Sir, just a simple clarification on the gross margin front. Is there -- is it fair to believe that there was a element of currency that also played meaningfully for the expansion of the gross margin sequentially this quarter?

Constant currency, there has been no impact, either on sales or profit year-on-year basis. Specific currency, it could have happened, but it has utilized. Overall for the company and on a constant currency, it would have been very, very similar to what is reported growth.

Okay. And on the kind of a CapEx trend and the R&D expenses trend, along with the kind of a cost containment pieces that we're seeing the kind of flattish R&D spend. And alongside the CapEx also meaningfully as corrected from the last couple of years. So any thought process on the kind of money, free cash flow that we are generating about the usage of those?

As far as CapEx, we have spent considerable amount of CapEx FY '13, '14, '15, '16. For all these years, we have spent considerable amounts. But today, as we told that there are some assets in our networks, which is quite underutilized. But overall, utilization level is also something when we can do much more with the current level up and tentative we have created. Having said that, maybe some scientific business, for example, service business, if you have to scale up, then we need to move accordingly in the Sandoz to scale up. And also for biologics, if we sell more in different markets, and we need to increase the capacity. But the level of CapEx that we need to do, and we actually alluded right at the beginning of the year that we will not be spending as much as we would have been spending in the past. R&D on an absolute amount, again, is something which will be to slightly less than maybe than what we have spent last year. But of course, the percentage of sales as our sales goes up. In R&D as a percentage of service are down to single digits. Right now, it is around 9% and if we can contain on an [indiscernible] level and improve R&D productivity because I always want to emphasize that our focus on R&D is always very high. We have been focusing on developing our pipeline, expanding our pipeline, and we want to continue to focus on that, but just want to improve the productivity so that we -- same level of this productivity can deliver more. In terms of the cash flow, obviously, if our margin is bigger and if we can improve one and consequently, of the generation as generation can improve. On [indiscernible] working capital being in this quarter, we said that our working capital networks increased by three days. Suppose, instead of increasing by 3 days, it would have improved by three days review, then we would have generated more cash flow. So there are always opportunities to what extent we do based on how do we execute on multiple fronts. The good thing happened with this quarter in all the businesses we have grown something we have different -- we don't -- we haven't put all eggs in 1 basket, there are multiple baskets. In this quarter, all businesses have grown. So that is good, but in working capital front this quarter was not that fit.

Okay. Just on the U.S. business front sir, in the opening remarks, you have mentioned that we have relaunched a couple of the discontinued or few discontinued products and also the kind of filing effort that is also picking up. That is what you were mentioning. And simultaneously there is a pricing pressure also that you are witnessing, and also, you're saying that the focus on the anchor product for the dependency that is also, to some extent, is going away. So that way, what would be the ultimate status that you are thinking about U.S.? Well, are you thinking that, okay, whether it is the anchor product or it is a common product, everything that you should be launching? And hence, the quality of earnings in the U.S. that is going to deteriorate and that means you're trying to chase growth at the cost of quality, is that the meaning that you were trying to convey?

First of all, to the last comment, absolutely we'll not grow cost on the expense of quality. It is not in the equation of we will meet the quality standards, for so called U.S. market and absolutely, we will not comprise of quality, of course. So this is 1, it's unrelated to quality. So this is a license to build the business. In the case of the product would know, we will not be dependent on any single product to grow, including United States. These notion of the past the company focused on a relatively small number of assets in the comp generics or biologics or comparative products for the growth of the company. This is a strategy that was indeed in the company until 2 years ago. Since then, we've announced a new strategy in which we have multiple spaces in the safe synergy among them, much more opportunistic. So we moved from high risk, high reward to a low-risk, very high reward. That's what we moved, and we are not dependent not [indiscernible] and [indiscernible] and not on any other big names to grow there. In the United States, we will grow because we want to have 350 products. Now we have commercially 120. And this is including the 4 that we have in the pipeline, plus the products that are in the pipeline on the R&D, plus additional efforts that will have to number of products. What we want is to give the customer in the United States, the products that they need, not necessarily focused on specific assets. Naturally, when you will have a broad portfolio of some of your product will give you upside. What is important to us is that the products will have a low-cost in order to allow the right EBITDA and the right ROC.

Okay. But is it fair to -- any time line that you are targeting to achieve double-digit kind of a growth again in the U.S.?

I'm not targeting the double-digit growth, I'm targeting EBITDA and ROC.

Okay. Great sir. Wish you all the best.

Thank you.

The next question is from the line of Nikhil Mathur from AMBIT Capital.

My first question is on SG&A expense. So in fourth quarter FY '19 and first quarter FY '20, the proprietary products are out licensed. So my understanding is that there would have been some cost savings in SG&A from that out licensing. So has that -- has it materialized in third quarter or for that matter, even in second quarter as well?

[Operator Instructions]. We have a line for the management reconnected. Over to you.

Should I repeat my question, Nikhil here from AMBIT?

Yes, please repeat.

Okay. So in fourth quarter and first quarter, we would have out licensed your proprietary products. My understanding is that there would have been some cost savings arising from that out-licensing. So as those costs come off in third quarter this year, for that matter with second quarter as well?

There will be, suppose we will divest in commercial way there are also cost associated in terms of separating piece so that's it sometimes to really get the complete benefit out of that. So when we went on next financial year or not, we can see a full benefit of that kind of a costing. But yes, it has contributed to the overall cost savings to some extent that I can place.

Okay. So in FY '21, even if a bit of expense increases because of growth in India and Russian markets, you still have -- do have a lever of this proprietary road cost that kind of benefit you.

On the Proprietary Product, we are what used to have the commercial cost that is going to be benefited because we are going to continue to focus on the Proprietary Products family.

Okay. And second question is on your product launches in FY '21. Can you give some kind of an indication as to what kind of proportion would those be injectable, so some kind of complex launches in FY '21. And the question associated with that would be, I believe that there will be a fair share of launches from your partner sites. So are most of the partner's sites compliant with USFDA currently?

I don't know both of us have a about the sort of the segmentation of the product launches, that I don't know. In general, we are not dependent on a specific supplier or a specific vendor or third-party to launch a forecast. Most of the products will be launched out of the U.S. facility.

The next question is from the line of Surajit Pal from Prabhudas Lilladher.

Just 2 to 3 questions. One thing is there any update on Suboxone, which you're supposed to receive it from the originator for blocking your launch? That is one. Second thing is that -- is there any [indiscernible] update on the Duvvada observations? Had it crossed 90 days? And what is the status of the plant currently? And third is that the 30 products, which you have guided out of which 22 already you have launched. Any key products can we expect?

So on the first question, Suboxone. In the bonds that we have, we are still in the legal process. And it will be resolved when the legal process will take its place. So far, we want all the relevant related litigations that we have on this. And so it's still work in progress in that respect. I do not expect that the legal process will end in the next few months, it will probably take more than that. But I don't have exactly the indication of how long it will take. As for Duvvada, it was a PI inspection that was in August. We did not receive [indiscernible], and what you call [indiscernible] we don't have any additional information. On that we're just awaiting the [indiscernible]. And as for specific big products in the rest of the year, again, I'm repeating none of the product per se will be that important. Some of them can bring nice money, some of them not. But nothing special that we can share.

We'll be able to take one last question. The last question is from the line of Shyam Srinivasan from Goldman Sachs.

Just first 1 on China and the second GPO for 32 drugs. I know we didn't win anything here, but just wanted to understand any of the learnings that you got from olanzapine in the round 1. How did they play out this time? We see that the price cuts are very high 60%, 70% again in GPO 2. So how does this kind of shape your China strategy? So that's my first question.

It's part of the strategy. Just to remind us all, we have 4 different spaces in China. One is branded generic. One is selling generics directly to the hospital. One is this tenders, if you wish, and one that we are selling services like API and other activities to Chinese. On this front of this GPO model, it's still work in progress also for the Chinese authorities. So the next tenders have already different roles. For example, there will be 10 minus one windows for the next tender. So there is a high likelihood or higher likelihood to be a player in that. But of course, there will be also more winners. And this is the main learnings that I can share. What we do in China is a clear leverage strategy. We are taking U.S. products or products that we submitted for the U.S. that can meet the Chinese criteria, we are submitting them. We're obtaining approval and then participating and do our best to win as much as we can. Even in the case that we will not win, it's a leverage product. So it's not a risky move in our case. That's how we plan to build, but it's very hard to tell whose product will win and which products will not and what will be the price. Mentioning on this product on one hand, there is a relatively high price reduction. But on the other hand, you don't have to pay SG&A because you're not promoting those products. It goes to be standard.

Yes. Just following up on this. So are you saying even after this price cut? This is a reasonable money to be made? Or you think there is a period of 2 to 3 years, where we have to invest before we start seeing profits come through in China?

No, every product that we are launching [indiscernible]. So it's not that period of investment and period of profit, we are making profit as we speak.

Got it. Just a follow-up again on China. Any -- the coronavirus is making the news, does it impact our Chinese operations? Or on the contrary, does it also benefit us in some form of way? Is there any impact of the virus?

Naturally, it did not impact the quarter because it's recent. No, I don't have anything that happens to us in the last few days as of the corona issue and I hope and wish for everybody that nothing will happen.

Got it. And my last question is on REVLIMID. I know it's a great product. We get that. But the point is on trial dates, is there -- our understanding was that the trial has been pushed to second half of calendar year 2020. Could you confirm or just give us details on when are the upcoming dates so that we can look out for this product?

I'm not aware of a specific date that was scheduled. That's what I know. But from my point of view, versus what we want the product and the legal process is continuing in accordance to outlines.

Got it. So it is just delivering here. So is it still is not a near-term opportunity and we still think it's probably sometime out?

Yes, I don't see it in the next few months. It's -- probably will be after that.

We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you, everyone, 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. On behalf of Dr. Reddy’s Laboratories Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.