Dr. Reddy's Laboratories Limited (RDY) Q3 2023 Earnings Report, Transcript and Summary

Ladies and gentlemen, good day, and welcome to Dr. Reddy's Laboratories Limited Q3 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Richa Periwal. Thank you and over to you, ma'am.

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, 2022. 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 discussion 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 outlets without the company's express 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, Parag.

Thank you, Richa, and greetings to all and wishing you call a very happy new year. I'm pleased to take you through our financial performance for the quarter. For this section, all the amounts are translated into US dollar at a convenience translation rate of INR82.72 which is the rate as of December 30th, 2022. This is yet another quarter with a strong all-down financial performance reflected in higher server sales and profits and strong free cash flow. Consolidated revenue for the quarter stood at INR6,770 crores that is $880 million and grew by 27% year-on-year basis and by 7% on a sequential quarter basis. The performance was supported by healthy growth across our businesses, with contributions from both base business and new product launches. Consolidated gross profit margin for this quarter stood at 59.2%, an increase of 545 basis points over previous year and 15 basis points sequentially. On year-on-year basis the gross margins were mainly aided by an increase in contributions from new products and favorable product mix. Gross margin for the global generics and the PSAI business were at 64.6% and 18.2% respectively for the quarter. In line with our expectations, PSAI gross margins have rebounded compared to the last quarter. The SG&A spend for the quarter is INR1,798 crores that is $217 [ph] million, an increase of 17% year-on-year and 9% quarter-on-quarter. The expense in the current quarter reflects an increase in investment, certain one-off expenses, and an impact of the ForEx rate. As a percentage to sales, our SG&A has been at 26.6%, which is lower by 240 basis points year-on-year and marginally higher by 30 basis points sequentially. The R&D spend for the quarter is INR482 crores that is $58 million and is at 7.1% of sales. We have been making good progress on our R&D pipeline in line with our business strategy. We continue to drive productivity across our businesses, while also making investments to strengthen the product pipeline and capability development in marketing, digitalization, and people including for Horizon 2 initiatives. The next finance expense for the quarter is INR14 crore that is $2 million. The EBITDA for the quarter is INR1,966 crores that is $238 million and the EBITDA margin is strong at 29%. Our profit before tax stood at INR1,635 crores that is $198 million, which is a growth of 68% year-on-year and a growth of 1% quarter-on-quarter. Effective tax rate for the quarter has been at 23.7%. We expect our normal ETR to be in the range of 25% to 26%. Profit after tax for the quarter stood at INR1,247 crores that is $151 million. Before this, EPS for the quarter is INR74.95. Operating working capital decreased by INR490 crores, which is $59 million against that on September 30th, 2022. The decrease is majorly due to higher collection of receivables and some increase in payables. Our capital investment during the quarter stood at INR292 crores, which is $35 million. We generated healthy free cash flow during the quarter of INR1,975 crores, which is $239 million. Consequently, we had a net cash surplus of INR3,401 crores that is $411 million as at the end of the quarter. As of 31st December, 2022, foreign currency cash flow hedges in the form of derivatives for the US dollar are approximately $51 million, largely heads around the range of INR80.3 to INR83.3 to the dollar; RUB2,975 million at the rate of rupees 0.9661 to the ruble; AUD1.8 million at the rate of rupees 56.20 to Australian dollar; and ZAR34 million at the rate of rupees 4.812 to South African rand maturing in the next 12 months. With this, I now request Erez to take us through the key business highlights.

Thank you, Parag. Good morning and good evening to everyone. I hope you and your loved ones are keeping well. I'm glad to report that we continue to disclose [ph] financial performance in the current quarter as well as with record sales, profit, and cash flow generation. We made good progress in our productivity journey, which allow us to remain competitive and grow in our markets. We have been able to identify several new business opportunities which refer to as Horizon 2 business and have started building this. We have also made good progress against most of our ESG goals. Let me share with you some of the key highlights of the current quarter. One, strong revenue growth driven by continued traction US and Russia markets; second, high cash generation leading to net cash surplus of more than $400 million at the end of the quarter. Three, significant progress made for biosimilars, completion Phase III clinical study with rituximab, and completion of Phase I clinical studies for tocilizumab. Let me cover a business-wise key highlights in a bit more details. Please note that all references to the number in this sections are in representative local currencies. Our North America generics business recorded sales of $375 million for the quarter with a strong growth of 51% year-over-year and 7% on sequential basis. Sequentially, the sales continue to grow in the US market with a positive traction seen in both base business and recent launches including sorafenib, [Indiscernible] Contributions from [Indiscernible] capsules may fluctuate from quarter-to-quarter, we expect it to remain meaningful over the next few quarters. In this quarter, we launched five new products and expect the launch momentum to continue during balance of the year. Our euro business recorded sales of €51 million this quarter with year-on-year growth of 8% and sequential quarter decline of 2%. During the quarter, we launched 11 new products across various countries within Europe. We expect to continue with the gross momentum in the rest of FY 2023. Our emerging market business recorded sales of INR1,310 crores with the year-on-year growth of 14% and sequential growth of 7%. Within the emerging market segment, Russia business grew by 29% on a year-to-year basis and 8% to quarter-to-quarter basis in constant currency. This strong growth was supported by higher sales of biosimilar products in Russia. During the quarter, we launched 29 products across various countries of the emerging markets. We expect these businesses to continue the growth momentum during the balance of the year. Our India business recorded sales of INR1,127 crores with the year-over-year growth of 10% and sequential decline of 2%. During the quarter, we launched two new products in the Indian markets. We are creating several growth engine for India business for Horizon 1 and Horizon 2, which includes ramping up internal portfolio, collaborations, innovation, and inorganic opportunities. Our PSAI business recorded sales of 95 million with the innovative decline of 2%, however strong growth of 18% on sequential quarter basis, contribute by an improvement of the volume pick up. This business is starting to show signs of recovery and we expect this momentum to continue in the coming quarters as well. We are progressing well on our pipeline products. The number of filings in several of our key markets have been improving. The ANDA and drug master filings are expected to significantly improve during Q4. We are evaluating several inorganic opportunities across businesses in line with our strategy. We believe all of these will lead to several growth opportunity for us both in the short-term, as well as in the long-term. I'm confident that we'll be able to continue the growth momentum supported by our strong cash position, focused management team, and robust governance and processes. Within this, I would like to open the floor for questions-and-answers.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Kunal Dhamesha from Macquarie Group. Please go ahead.

Yes, good evening, and congratulations for the great set of numbers. So, the first question on REVLIMID, I think I missed your comment, while you said the REVLIMID revenue could kind of fluctuate on a quarter-to-quarter basis. But is there any kind of outlook that you are providing for let's say, quarter four and FY 2024 in terms of the quantum -- relative quantum vis-à-vis quarter two and quarter three, what we are seeing?

So, we cannot share as a part of the agreements that we have. But that's what I said, it's -- what will determine the size of the opportunities, of course, the timing of the orders that will come from the customers that may vary from month-to-month or quarter-to-quarter. But overall the product will continue to be meaningfully contributing to our business and we are very confident about it.

Okay. And is it kind of fair enough to assume that the contribution is expected to increase next year?

We cannot share guidance in this respect because it's part of the agreement. That's why I'm sharing what I'm able to share at this stage.

Sure. And second question on [Indiscernible] while we have shared that our capital deployment priority is kind of India followed by the branded market and likewise, but I think we are generating significant cash flow and we are not seeing any activity on that front. So, is there a basic timeline, which you are looking at to deploy this cash or elsewhere considering any other option to know about returning this to shareholders?

We engaging in the multiple business opportunities and actually we'll be able to share that when we'll sign the deals. Like we discussed in the past, we knew that this is coming and we knew the type of capital that we are going to create. So, for us, it's well within our plans -- our strategic plans. The priorities will continue to be similar to what we have discussed in the past. We want to engage it in this development, which is not a shopping spree or big deals, but rather complimentary deals that will enable our strategy and create capability or brands that we don't have, or areas in which we can create more meaningful contribution to our -- all stakeholders, customers, shareholders et cetera. The second is to continue to invest in both Horizon 1 and Horizon 2 and CapEx and R&D. That we use of the money. We believe that we will have a good support [ph].

Sure. I'll join back the queue. Thank you.

Thank you very much. Next question is from the line of Damayanti Kerai from HSBC. Please go ahead.

Hi, thank you for the opportunity. My question is in India business. So, although on year-on basis, you have seen good growth, healthy growth, but sequentially it has declined. And what we have seen in some market databases that Dr. Reddy's growth has been lagging against the broader market growth. So, how should we see growth outlook for your India piece, given it's the most important segment for you and what will be key growth drivers from here on?

The main growth will come from investment in differentiated product and the specialty products and collaborations that we are working. So, we are planning to introduce a lot of innovation in India, and we are building it. In addition to that, we will continue to focus on the brands that we believe can contribute in short-term, but much more in the long-term. And we will continue also to invest in the capabilities to market within the most productive manner using all the relevant digital tools and the ability to maximize the return on the investment. We are going to see also in India continue divestiture of the brands that we are not planning to invest behind. If we believe that the returns that will come from those divestitures will be more than what we will get if we continue to market it. So, in that respect, we are well within our strategy. And maybe the results here and there will fluctuate because of brands, but overall I'm very confident that will be top five as per the targets that we shared with you [Indiscernible].

Sure. And in the [Indiscernible] portfolio, which you have done some time back, are the results in line with your initial expectation, or do you think you have further headroom to see better sales for some of the top brands?

The [Indiscernible] product sales, they're not serving us very well. I'm very happy with these acquisitions there. It's already exceeded expectations.

My last question is on Russia, [Indiscernible] besides a very strong quarter which you mentioned there were biosimilars, which contributed, so do we assumed it to be sustainable sales or this is driven by someone one-time pick up and we might see moderation from here on?

Russia will continue to be strong for us. Quarter wise, it will fluctuate. This quarter it’s a timing of the bits with the government on biosimilars for example. So, unlikely that we will see that in the other quarter. So, it will fluctuate, but overall we are going to see in the local currency growth and as related to the protection the ruble, I think we have very lucky for this year. We're very good the protection on the ruble itself. So, we are -- I am optimistic from both -- from even with the scenarios that there will be a significant devaluation of the ruble.

That’s helpful. Thank you very much. I'll get back in the queue.

Thank you. Next question is from the line of Surya Patra from Philip Capital. Please go ahead.

Yes, thank you, sir. Thanks for the great set of numbers. Just on the REVLIMID side, if you could say something more on the kind of visibility in terms of -- like -- it seems that first two quarters -- or in the last two quarters, whatever number that we would have generated, it seems that we have already achieved around 5% odd mid-single-digit kind of volume set in the product opportunity. So, considering that, is it fair to think that fourth quarter and first quarter possibly could be a relatively low number that we could see from REVLIMID?

I cannot share any numbers about that, so--

Okay. But could you give some sense about let's say, in terms of the volume set, whatever that is fixed for the first year, how different the volume share number would be for second year? Ballpark indicate--.

Again, it's not because I would love to share, but I can't. We have an agreement and I have to honor the agreement. So, please bear with me on that.

Okay, sure sir. Then sir the extended question relating to this that see the cash flow generation what we are witnessing. So, considering that, so, the near-term priorities -- could you share the near-term priorities that you would be having? Because, what I have seen that you have already indicated that and you are likely to be -- or you're likely to remain active in terms of inorganic growth as well as the R&D spend also, rate, if I see, it has just moved on, along with the kind of ramp up in the revenues. So, considering these two things, what priorities that would be there for us in the next 12 to 15 months or 18 months' period going ahead?

So, as we discussed in the past, our priority is productivity in the short-term. So, it needs to grow what we call Horizon 1 which is meaning the current business that we have, including investment in those productivity investment in our portfolio, in the ability to get some of those complex genetic faster to the market, some of those biosimilars faster to the market. As well in Horizon 2 building those new businesses that will give us the growth in the future. As we showed in the past, we assume that we will be able to generate enough cash and enough profit to finance for those activities and so far it is going well for us. The extra cash that we will have, we will use for business development and for investment in capabilities in the business, especially digital and mechanization, automation, and artificial intelligence. The -- and in line of what we have discussed, so I say the old guidance remain the same, we are comfortable on the long-term basis with the 25% EBITDA and 25% ROCE, double-digit growth and no debt. This continue to be the guidance that from time-to-time will be above it like this; from time to time, we'll be below it like some couple quarters ago. But overall, I think it's allow us to both to be very healthy company and to grow very, very well and we have potential upside even to exceed these numbers. But so far, we are very much into that, that makes up for the quarter, but if you see record for the last few years, we are very much where we said we are going to be.

Sure sir. So, then the revenue -- US revenue excluding REVLIMID, if you consider, we have seen this year as a kind of we all know we maintained the revenue run rate excluding REVLIMID. But there were challenges and a couple of our key products also witnessed competition from others largely from Indian players only. So, for this revenue piece, could you give some sense that okay next year, what is the visibility that you are having? Are you likely to see the sustained competition and all that impacting the business or some sense about growth that you can indicate for the US business excluding REVLIMID?

Next -- in FY 2024, we are planning to launch at least 30 products give or take. And we are planning to continue the growth that we saw in the last couple of years. So, we indicated that we believe that the baseline of 6% -- not 6%, that single-digit growth, 6% was the past. Single-digit growth will likely to happen and maybe more than that. And from time-to-time, we'll have a product or products that will create much better growth. And that like I said to us in the last couple of months, and those products at a certain point in time also will go down with [Indiscernible]. So, overall, the trend is growing. In addition to that, we believe that once Horizon 2 will kick-in also the US will go in double-digit, but this is in a later stage towards five, six, seven years from now. So, now, it may fluctuate because of pressure. Usually come to predict the market share, it's hard to predict. So, unfortunately, I cannot -- I don't know what will be quarter-on-quarter, but absolutely, we are planning to growth in United States.

Okay. And is it fair to believe so, the next year, we will see a kind of a meaningful ramp of in the kind of spend towards Horizon 2 plans -- growth plans versus current year?

We don't like to ramp up spend, we are planning to spend in accordance -- in a very disciplined manner in accordance to our growth. At the time, we indicated that we are going to have more expenses both on the SG&A as well as the R&D, but within the range of profitability that I mentioned in the past, so we will be able with our growth and our cash to finance the investment, it will not be extra, and -- because of the profit [ph].

Sure sir. Okay. Thank you. Wish you all the best.

Thank you. [Operator Instructions] Next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Yeah hi. Thanks for the opportunity. Good evening. Just wanted to understand one is the industry level question. So, we've been seeing a lot of USFDA issues going to the next level and we've been hearing that there's a volume distribution that is happening to the large Indian and global players in the US generic side, are we seeing that happening to us also? We are getting some volumes for our base business, would that be correct understanding?

We too have a growth in volumes. I cannot attribute necessarily for that in the growth at least we are facing is from activities that were initiated primarily. Naturally, we are watching carefully all the results of all the inspections that are happening in India and outside of India. So far for us, knock on wood, all of our plans are operating in full compliance.

Okay, okay. And with that kind of volume gain, et cetera, do you think there is some improvement in pricing on base business or it still remains mid to high single-digit for the base portfolio?

I'm not aware of any, let's say, special phenomena that can indicate both on price or quantities as related to that.

It remains similar to the--

Maybe marginal. Maybe.

Okay, okay. Fair enough. So, would it be fair to say that the incremental growth, you had some approvals and launches for sure. But with the price erosion, it nets off and the incremental sales momentum is coming from this product itself?

I believe that growth is coming because we are giving better service to our customers and they appreciate it.

Okay, okay. And last one on the capital allocation, we've seen some companies being successful in late-stage innovator led programs, are we thinking about it? Or in the past, we had done 505(b)(2), and then we move to self-sustaining and selling those assets. So, what is the plan for both these -- I mean, if there's any plan on both these strategies?

We are not planning to come back to the 505(b)(2), we worked hard to get out. Horizon 2 contains activities that are differentiated by design. So, we are talking about the 11 spaces in India and a couple of spaces outside of India, in Aussie market, Europe, as well as United States. We do have NCE as part of our origin discovery, especially in the area of cancer. We do have activities in cell gene therapy, in therapeutic management, in [Indiscernible], in pharmaceuticals, as well as in other innovation in go-to-market, this is part of the Horizon tool that we have, but not 505(b)(2).

Okay, lovely. Thank you, sir. Thank you and all the best.

Thank you. Next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Thank you very much and good evening, everyone. The first question is on government grant looks like in 3Q, you did INR43 crores in first half, some INR240 crore odd. So, I guess your product mix is not changing that much. So, what's driving this?

So, the grants are -- obviously, we file the applications as for the government's scheme, Sameer, and it depends on the eligibility of the products and the scales that we are making. So, depending on the underlying numbers, the grant is recognized. So, it's obviously something that will continue but will fluctuate from one quarter to another.

Okay, no fair enough, I get that. But is the product mix changed so much? The products which were eligible, you didn't do those sales in three--

Yes, product mix changes and the sales level of various products also changes, so that that determines the incentive.

Okay, okay. Cool. And the second question is on biosimilars, you clearly are focused on that, but if I look at your pipeline, I mean, first of all, good job on Rituxan for Phase III. But to succeed in this market, you need good five, 10 products, of fairly vibrant pipeline, several products in Phase III type of situation. So, can you talk a bit about it, how will you make a mark in this space?

If you recall, we decided at the time to skip the products that will be a with the product expiration until 2027 because we felt that we'll be late to the market. And we have a [Indiscernible] portfolio for the pattern click that is after that, even larger number of what you've just said. We kept rituximab as it was already there. We already -- we're already selling in 27 countries. And by having the USFDA approved, it will allow us to sell it in many more countries and we have also agreement with the third-party in the US market. Rituximab also will be the USFDA and we will be able to prove the relevant facts from a GMP point of view. So, to your question, we are committed. We are committed to a larger number of molecules than that and other times we are going to sit and in accordance to the relevant data that we need to launch the product. And -- but we absolutely are going to play biosimilars to be a significant player, especially in emerging markets.

Okay, got it. And one final one is on [Indiscernible], it's been some time that we are stable at 14%, 15% market share. So, what's the outlook on this?

And we'll continue to try our best to gain as much market share as possible. It's fluctuated in according to decisions of the customer.

It's not about supply chain or raw material issue?

No, no issues. This was sold years ago.

Okay, got it. Thank you so much.

Thank you. [Operator Instructions] Next question is from the line of Kunal Dhamesha from Macquarie Group. Please go ahead.

Yes, thank you for the follow-up. So, I think on the biosimilar products that we are -- whenever we have got the good trial data et cetera, do we have the existing capacity which can support let's say fair market share in this product or would we need to invest more? And if yes, would it be the same facility where we would seek expansion or it could be a greenfield facility?

We are investing in capacity for the last five years and continue to invest, likely to see our facilities investment growing every year. Yes, we have enough capacity to capture market share globally.

And what would be our current biologics capacity -- reactor capacity in total, in terms of kilo-liters? And the gross block related to?

I don't remember the kilo-liters, but we can produce, let's say, many, many hundreds of kilos.

And in terms of our cost structure, would you have benchmarked that cost of production versus let's say, Korean and Chinese player? And where we stand there versus NIM?

We believe that we're very competitive in terms of the cost structure, part of it is because the technology we are using, part of it is the calculation that we have on the product and part of it is the fact that we are in India, and leveraging the economy of India.

Sure. Thank you.

Thank you. Next question is from the line of Prashant Nair from Ambit Capital. Please go ahead.

Yes, hi, thanks for taking my question. My question is only PSAI business. So, we've seen recovery here, is it fair to assume that the disruption in this business is behind us? And there is -- this will continue to normalize as we go forward? And the second question is on the gross margin side, again, this used to be mid-20 percentage gross margin business in the past, can it still get to those levels, or would it settle a bit lower?

I believe that it should go there and we are in the right direction to be done. And I also believe that the challenges that we faced in the last 18 months or so are behind us. And like I mentioned, we do see very good signs of recovery, and there is still room for improvement on that side, which I believe that we will achieve.

Yes, thank you. That’s it from me.

Thank you. Next question is from the line of Saion Mukherjee from Nomura. Please go ahead.

Yes. Thanks and good evening. Erez can you update us on China filing and how the business is doing? And when do you expect meaningful traction in revenues?

So, we continue with the process. It's going well, Amit [ph] can help me, but I think we are talking about 14 or 15 products--

Every year now, Saion we are started filing more than double-digit -- double-digits filings have started. As we speak, we have about 20 filings pending approval and in the next few years. So, going by this run rate, obviously, there will be 40, 50 filings over the next three four years. So, typically, after filing, it takes 18 to 24 months for a product to get approved. So, last year, we got like approval for four products. This year, we expect similar run rate and going forward, even it to become better and better. So, all I think statistics are working as we are expected and the sales also should start picking up faster. So, we are already growing in double-digit, but that can start growing faster, maybe somewhere second half of 2024, 2025 onwards.

Second half FY 2024.

FY 2024, we should see growth, FY 2025 even more.

Okay. And is this also on the Russia I mean how -- I mean I know this quarter is good, you had biosimilar contract, but in general, the market dynamics are you seeing more traction for Indian companies in terms of procurement by the government, or market demand in general? I'm just looking at how should we think about constant currency growth in Russia from a slightly longer term perspective maybe for the next couple of years?

I don't see anything special as related to company or country in the -- everybody just expect to my opinion are waiting to see how events will fold in the country. And to the best of my analysis, if people did not leave the market as of yet and so it's not a growth that's coming because other than -- it's real growth that’s coming from the consumption of [Indiscernible]. So, the way we are looking at it as part of our products, our OTC which have seasonality to them and the biologics -- different seasonality that are related to the timing the government is fulfilling it and they are exposed that very much the same demand over the years. So, so far is behaving very normal to what we see and the growth is attribute primarily to our productivity and not to external elements.

Okay. And one last question, if I can for India, adjusted for the acquisitions, Cidmus, et cetera, can you share how the organic growth has been? And I think couple of quarters back, you indicated Cidmus to be a big drag on your gross margins, now with the patent of how should we think about the situation on that product?

So, this product will be profitable for us, the cost structure will be better in the future and the brand is well accepted by the community is actually number one in the future as we speak. And we are going to continue to see growth in India, in all the places in which we are focusing. So, the -- like we indicate, I'm expecting India to continue to be double-digit growth also in the future and on top of it, we will see both inorganic move, investment in collaborations and divergence. So, all of these movements will happen in India also in the near future as well as the longer term.

Okay. And can you share the growth number adjusted for acquisition and divestments just to understand the organic growth in India this quarter?

Saion we look at the entire business as a portfolio. So, we don't analyze including and excluding acquisitions. I think overall, we reported a growth of 10%. And as Erez said, we are confident that we'll be able to continue to drive growth in India given the growth levers.

Okay. Thank you.

Thank you. [Operator Instructions] Next question is from the line of Sumit [ph] from RDA. Please go ahead.

Thank you for the opportunity. Is AMITIZA still meaningful opportunity for us as sales are declining and few companies have already discontinued the product?

So, your voice is not clear. Can you repeat the question?

Is AMITIZA still meaningful product for us? As sales are declining. Hello?

Which product?

AMITIZA?

The voice is cracking, sorry, we cannot hear the question. Can you repeat please?

Is AMITIZA still meaningful opportunity for us as sales are declining and few companies have already discontinued the product?

Yes, so we have launched this product in US I think in quarter one. I think there are significant number of players if I'm not wrong, about eight to 10 players have launched. And with price erosion I think has been fairly decent, so we are having a decent pace, but it's not a very large product for us.

Okay.

Market share we are doing good.

Okay. So, my other question is on [Indiscernible]?

[Indiscernible]?

Yes.

Sorry to interrupt you. Sumit, may I request to speak with the handset please, your voice is not coming clear.

Okay. I will turn back in queue.

Thank you. Next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Yes, just a quick follow-up just trying to understand the smaller strengths where we had exclusivity, when is the competition expected to come for REVLIMID?

The voice is breaking up. Something is wrong with the line. We can't hear you well.

Can you repeat the question please?

Sure sir. Am I audible now?

Yes, please.

Yes, I'm just trying to understand when are we expecting competition on the smallest trends for REVLIMID, where we have exclusivity?

We have exclusivity for 180 days. So, therefore, it's a 181 probably it will come.

Okay. And would that be decent -- a meaningful contributor to the run rate -- whatever run rate we are doing on REVLIMID sales? Or these are the small shares?

Your voice is breaking; could we just repeat the question again please?

I'm asking would that be meaningful contribution the overall sales, REVLIMID or US sales or is it just small share?

A cannot share the information that SKU. Like I mentioned before, indeed exclusivity will go in that period of time and the for that will continue to be meaningful to us. Sorry that I cannot share, I understand.

Sure. No, if you can repeat what you said, it will continue to grow?

It will continue to be meaningful for [Indiscernible], that's what I said.

Okay, lovely. Thank you so much.

Thank you. Next question is from the line of Rahul from IIFL Securities. Please go ahead.

Yes. Hi. Sir, can you provide an update to with respect to some of these complex US generic assets, which you had disclosed during your analyst meet last year. So, when do we expect launches for these complex assets to begin for us in the US market? Given one of your peers recently indicated that market formation has begun for a product regarding [Indiscernible]?

Yes, Rahul, so, we also have approval of this product. So, I think it is linked to the IP. So, as it allows us, we have a settlement also with the innovator. So, as per the settlement terms, we will be able to launch.

And for your border questions, we are very much on track of what we share then also we are planning to launch complex products that was not shared on the investor meeting. So, the pipeline of complex product is robust and getting better.

Sure sir. So, any timelines which you can share in terms of products like Octreotide or liraglutide or teriparatide, when do you expect these launches to begin? So, would these launches be over the next 12 to 18-month period or beyond that?

No, so specific timelines, we're not sharing Rahul. So, some of these products, we have filed, some of these products are under development. And obviously, the launch is linked to both IP scenario as well as we being able to secure the approval. So, while some of these should start coming to the market may be FY 2025, FY 2026 onwards, but that is what we believe. We do not have any firm timeline because all these are linked to both approval and IP.

Okay, sir. And this mid-single-digit growth, which you're talking about the US portfolio on an ex-REVLIMID basis. So, that essentially will be driven by these 25, 30 launches, which we are talking about?

Again, I know you you're putting with and without the product, we are not looking at in this way. By the time that the price of origins will come to this product, which will be naturally part of today's. So, we are not looking at the market with and without. And absolutely these products that we mentioned will be part of the [Indiscernible] the growth in the United States and from time-to-time because of the nature of such a product we will see blinks that will be much more than the single-digit which we discussed. So, we are reiterating that we will see growth on the continuous basis, and from time-to-time we will see upside.

Sure sir. Thank you. That's it for my side.

Thank you. Next question is on the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Yes, thank you for taking my question. Just the first one is on this recent launch by Amazon in the US for this RX pass. Right. So, they have started a subscription based in a $5 per month for the most common like 60 odd generic medicines. I know, it was launched only yesterday across the entire United States. But it isn't team any early thoughts on you know, how the supply chain could potentially change? Given that if they start making meaningful progress is that -- is the uninsured or the out-of-pocket population? Is it significant? You think, because it seemed doesn't seem to include Medicaid, Medicare. So that's one your initial thoughts just on the industry development.

So, initial, it's definitely at the channel that was not there before and then there will be -- and it will be impactful, I believe. And all the time, whatever is not covered, I believe will be covered. So, it supposes it's likely to have and it will make the retail more competitive. And it will be dealt with opportunities as well as trips to [Indiscernible] for the industry. And so, we also saw this kind of stuff that is happening in other countries. But let's say as initial so primarily, I see it as another channel that we can use.

Got it. So, I now know that -- we now know that Amazon doesn't directly deal with manufacturers, they probably go through the existing supply chain. But it is do you foresee or have you seen examples globally, where you know, somebody like that directly deals with manufacturer, so you think those kinds of business models can't evolve?

I believe this -- wind will be also direct the interactions with the manufacturer.

Got it. Thank you. And my second question just on some of the commentary around the SG&A. In your press release, you've talked about one of expenses in the SG&A both I think sequentially and y-or-y so what are these? And is it -- if you could quantify or qualify please? Thank you.

The SG&A is used for Israel supporting our brands or supporting our capabilities, especially in us related to technology, digital, et cetera. As well as the ability to launch a new product. The SG&A will grow as related to both version one and version two. But there will be more growth that will come from the sales as it will support it. So, I see -- that's why I kind of say that it's all about the mountains. And we that's why we're still committed to the same mountains that we committed.

And I was just referring to referring to just the one-off expenses, just a one-off expenses, is what I'm wondering what it is?

Yes, approximately, it would be it would be less than 100 basis points of sales approximately. And what is it for?

I don't think we can disclose the nature of this. This is something normal person the business but it's not likely to recur.

Got it. Thank you and all the best. Thank you.

Thank you. [Operator Instructions] The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.

Yes. Thanks for the follow-up. Just one clarification as on the commentary on the US business when you talk about single-digit growth. What I understand is you've been talking about this even without REVLIMID before so let's say before REVLIMID kicked in, you were doing let's say $250 million a quarter, a $1 billion a year. So, is that the base we should take for next three, four years to see single-digit growth and there will be volatility at around that due to REVLIMID. Is that what you meant? Or you're saying that on this larger base that you have used, you can grow single-digit in the US?

I believe that we can grow than on the cover base over time.

Okay. And just to follow-up on you talking about 30 odd product launches. How many of them you think would be complex? And is there any improved visibility over the past a year or so based on your FDA interaction, that you're more clarity on these launches next year? And basically, if you can give some color on the quality of launches versus the CRU [ph], is it going to improve remain the same if you can give some color on that?

If I'm not taking into account [Indiscernible] the quality of the launches will be better. And some of them will be bigger quarter, some of them smaller. In terms of pipeline of complex products or products that can be very big, this pipeline is going up as we speak and we are working very hard on it. I believe that we'll have a very, very interesting pipeline in the next few years of complex. I don't know exactly what will be the onset of which one of them, but it's a very interesting portfolio.

Okay. Thank you. That’s helpful. Thank you.

Thank you. I now hand the confidence over to Ms. Richa Periwal for closing comments.

Thank you, everyone, for joining us today. If you have any follow-up questions, 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. You may now disconnect your lines. Thank you.