NYSE:RDY Dr. Reddy's Laboratories Q3 23/24 Earnings Report $11.54 -0.03 (-0.26%) As of 04:00 PM Eastern Earnings HistoryForecast AudioEye EPS ResultsActual EPS$0.20Consensus EPS $0.18Beat/MissBeat by +$0.02One Year Ago EPSN/AAudioEye Revenue ResultsActual Revenue$867.00 millionExpected Revenue$827.81 millionBeat/MissBeat by +$39.19 millionYoY Revenue GrowthN/AAudioEye Announcement DetailsQuarterQ3 23/24Date1/31/2024TimeDuring Market HoursConference Call DateTuesday, January 30, 2024Conference Call Time9:00AM ETUpcoming EarningsAudioEye's Q1 2025 earnings is scheduled for Tuesday, April 29, 2025, with a conference call scheduled on Tuesday, April 22, 2025 at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by AudioEye Q3 23/24 Earnings Call TranscriptProvided by QuartrJanuary 30, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Please note that this conference is being recorded. I now hand the conference over to Ms. Operator00:00:05Richa Periwal. Thank you, and over to you, ma'am. Speaker 100:00:10Thank you. A very good morning and good evening to all of you and thank you for joining us today for the Doctor. Reddy's earnings conference call for the quarter ended December 31, 2023. Earlier during the day, we have released our results and the same is also posted on our website. This call is being recorded and the playback and transcript shall be made available on our website soon. Speaker 100:00:35Further discussions and analysis of this call will be based on the IFRS consolidated financial statements. The discussion today contains certain non GAAP financial measures. For a reconciliation of GAAP to non GAAP measures, Please refer to our press release. To discuss the business performance and outlook, we have our CEO, Mr. Iraj Vazwaini and our CFO, Mr. Speaker 100:00:59Paraz Abhilwan and the entire Investor Relations team. Please note that today's call is a copyrighted material of Doctor. Reddy's and cannot be rebroadcasted or attributed in trends in text or media outlets without the company's Great 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 pertaining to this conference call. Now, I hand over the call to Mr. Speaker 100:01:28Parag Agarwal. Over to you, Parag. Speaker 200:01:31Thank you, Richa, and greetings to everyone. A warm welcome to our quarter 3 FY24 earnings call. Thanks for joining. I'm pleased to take you through our financial performance for the quarter. For this section, all amounts have been translated into U. Speaker 200:01:46S. Dollar at a convenience We continued our growth trajectory in the 3rd quarter and delivered another quarter of financial results with highest ever sales and robust operating profit. Consolidated revenues for the quarter stood at INR 7,215 crores, which is US867 million dollars and grew by 7% on year on year basis and by 5% on a sequential basis. The growth is led by the generics business in Europe and Europe with contributions from both base business and new product launches. Consolidated gross profit margin stood at 58.5% for the quarter, A decrease of 73 basis points over previous year and 18 basis points sequentially. Speaker 200:02:36The decrease was on account of Price erosion for certain of our existing products, partly offset by improvement in product mix and productivity. Gross margin for the Global Generics And PSCI Businesses were 61.9 percent and 29.4 percent, respectively. The SG and A spend for the quarter is This is INR 2.43 million dollars an increase of 12% year on year and 8% quarter on quarter. Year on year increase is primarily on account of investments in sales and marketing activities, digitalization capabilities and new business and innovation initiatives. The SG and A cost as a percentage of sales were 28.0% and is higher by 148 basis points year on year and 72 basis points quarter on quarter. Speaker 200:03:28The R and D expense for the quarter has received INR5.67 crores, which is $67,000,000 an increase of 15% year on year and 2% quarter on quarter. The R and D expense is at 7.7 percent of sales and is higher by 60 basis points year on year and lower by 20 basis points quarter on quarter. The investments are driven by ongoing clinical trials on differentiated assets as well as other developmental efforts to build a healthy pipeline of new products across our market for both small molecules and biosimilars. The other operating income for the quarter is INR97 crores as compared to operating expense of INR73 crores for the same quarter last year. The other income was higher on account of sale of non current assets. Speaker 200:04:16The EBITDA for the quarter is INR 2,111 crores, which is $254,000,000 posting a growth of 7% year on year. The EBITDA margin stood at 29.3%. Our profit before tax for the quarter stood at INR1826 crores, which is US219 million dollars posting a growth of 12% year on year and a decline of 4.6% over previous quarter. The net finance income for the quarter is INR 96 crores as The effective tax rate was marginally higher in comparison to the same period last year, mainly due to an increase in the proportion Of the company's profits coming from higher tax jurisdictions, partly offset by adoption of corporate tax rate under Section 115 BAA of the income tax as of India. We expect our normalized EBITDA for the year to be in the range of 24% to 25%. Speaker 200:05:23Profit after tax for the quarter stood at INR 13.79 crores, which is US166 million dollars posting a growth of 11% year on year and a decline of 7% over previous quarter. Reported EPS for the quarter is INR 82.7. Operating working capital increased by INR1227 crores, which is US148 million dollars against that on September 30, 2023, Mainly due to increase in inventory and receivables, our capital investment stood at INR307 crores, which is US37 $1,000,000 in this quarter. The free cash flow generated before acquisition related payout during this quarter was at INR 22 crores, which is US2.6 million dollars Consequently, we now have a cash net surplus cash of INR 5,907 crores, which is $710,000,000 as of December 31, 2023. Foreign currency cash flow hedges in the form of derivatives for the U. Speaker 200:06:24S. Dollar At approximately US672 million dollars held around the range of INR 83.4 to INR 84.6 and A1.1 million dollars at the rate of A58.32 dollars maturing in the next 15 months. With this, I now request Ray to take us through the Speaker 300:06:46key business highlights. Thank you, Parag, and very warm welcome to everyone joining us today. I am delighted to report yet another quarter with the highest ever revenues in robust operational performance. We made the progress during the quarter We have a strategic collaboration to win novel therapies in India and to improve our position in new avenues, of course, globally. We are also humbled by the completions received by for the progress we have made on our sustainability agenda. Speaker 300:07:19Let me take you through some of the key highlights of the quarter. Sales and EBITDA grew by 7% each. The sales growth was primarily driven by improved market share for our existing products in the U. S, continued momentum in our Europe business, Contribution from new products, partially offset by price erosion in certain existing products yield to competitive landscape. We generated healthy EBITDA margin at 29% and annualized ROCE at 37%. Speaker 300:07:53Net cash surplus was $710,000,000 at the end of the quarter. We entered An exclusive development and commercialization deal with the U. S.-based Hoia Therapeutics for the product Hoia's 3 or 2. It is an investigational combination biologics for treatment of neurodegenerative disease, ALS. We received an approval from UK MHRA for proposed VIVA CIGILAB biosimilar. Speaker 300:08:27We acquired a leading women healthy and dietary supplement portfolio of brands called Menulab in the U. S. With recent recent entry into the Nu. K. Consumer led first with the launch of anti A Fever medicine, Pistol Iris MOPC, And we have taken steps to strengthen our distributors globally. Speaker 300:08:48The U. S. FDA completed a routine CTMP inspection of our formulation manufacturing facility at facility at year 3 in October 2023 as well as GMP and credit approval inspection PI At our R and D facility in December 2023. We issued 4th Victoria 3 with 10 observations until Q3 and clear observation at our R and D facilities. We have submitted a response within the speaker at the time frame. Speaker 300:09:19Our efforts in sustainability and EOG continue to gain momentum and external recognition. We are becoming the 1st Indian pharma company to feature the Total Sustainability World Index of 2023 And retaining our place in the emerging markets index for the 8th year in the world. We awarded gold medal status by EcoBuddies. We upgraded MSCI ESG rating from BB to BBP. We are awarded the Golden Tree Hawk for corporate social responsibility in 2023. Speaker 300:09:58Further, we are the First Indian company to collect the plantation initiative covering 2,900 hectares by 2028 Now let me take you 2 of the key business highlights for the quarter. Please note that all the references to the numbers in these sections are in respective local currencies. Our North America generic business recorded sales of $400,000,000 for the quarter with a growth of 7% compared to the year And Mr. Christian, please refer to 4%. The benefit of market share extension in certain existing key products, revenue from new launches An indication of the acquired portfolio was partially offset by price erosion due to competitive environment. Speaker 300:10:48We launched 4 core new products during the quarter. We recently acquired Manulife portfolio of women's health and dietary customer brands in the U. S, Which complements well with our U. S. Healthcare and Wellness business portfolio. Speaker 300:11:03Our European generic business recorded sales of €55,000,000 this quarter with year over year growth of 8% and sequential decline of 6%, The contribution from new product launches has been proven in the base business volume and offset price erosion. During the quarter, we launched a total of 6 products across market. Earlier this month, we entered the UK of the consumer health market with the launch of Our emerging market business recorded sales of INR1283 Good morning, Rupees. A marginal year over year decline of 2% and sequential increase of 6%. The benefits of new products and price increase in certain markets was more than offset by unfavorable products. Speaker 300:11:55We are on the track to deliver double digit growth for the year. We launched 13 new products during the quarter across various countries of the emerging market. Within the emerging market segment, the Russia business grew by 3% on year on year basis, 67% On a sequential basis in constant currency. Our India business recorded sales of INR184 and reported year over year growth of 5% and the margin sequentially declined. We anticipate the BEST business to deliver double digit growth in the coming quarters. Speaker 300:12:31We are focusing on licensing and collaborations to bring innovation to India. Rollout of the medical market, which made our entry into the digital therapeutics. We are seeing adoption by doctors and repeat doses indicate high patient satisfaction scores. We remain the priority market And we will continue to reinforce the presence of both NANDs business while investing and building the innovation spaces in line with our strategy. Our PCAI business recorded sales of $94,000,000 with a strong sequential growth of 11% And the marginal year on year decline of 1%. Speaker 300:13:11Excluding sales of COVID products in the same period last year, sales growth was up in high single digits. We expect sales to improve on the depth of strategic collaboration with regional and global players. Last This quarter, we invested 7.7% of revenue to strengthen our R and D capabilities. Our efforts are focused on developing complex value of treated products, Including several generic injectables and biosimilars in line with our patient centric strategy to enable access And affordability. We also continue to invest in innovative solutions to strategic partnerships such as safety collaboration with Core Laboratories On investigational therapy. Speaker 300:13:55We have done 9 global general signing of 30 2 ANDAs in the U. S. In Q3 FY 'twenty four. We have been recently ramping up inventory to reduce the risk of supply chain disruption And building inventory for our pipeline products. We are also strengthening our position by building best in cash capacity in commercial infrastructure to leverage our portfolio Thanks, Alberto. Speaker 300:14:20We continue to develop our pipeline and scale up our biosimilar business being our pivot Our ability to source external innovation through strategically developing collaboration will enable us to address unmet needs and patient support Operator00:14:46Thank you very much. We will now begin the question and answer session. The first question is from the line of Balaji Prasad from Barclays. Please go ahead. Speaker 400:15:29Hi, this is Mikaela on for Balaji. Thanks for taking our questions. Just two from us. First one is, what is your latest thinking on generic pricing trends, particularly in the U. S? Speaker 400:15:40And could you provide a bit more color on how you see this trending going forward? And second one, what are your thoughts around the Chinese pharma market in 2024? Thanks so much. Speaker 300:15:51I did not get the second one. What is Speaker 400:15:56The second one was what are your thoughts on the Chinese pharma market in 2024? Speaker 300:16:01So the first question, we'll give the continuation of the pricing environment that we saw in the last half What else? We are given the same environment, meaning that relatively to other reasons is Yes, there is a huge degree, more focus on service, sustainability of supply And but obviously, the business model did not change. And in every place that competitors is coming, we see Parcelo and that's In the same Edward, we have discussed in previous quarters. As for China, We do see a very good tracking of our approvals. We got 9 approvals since the beginning of this fiscal Operator00:17:06Do you have any more questions from the line of Manaji Prasad? Speaker 400:17:10No, that was it. Thanks so much. Operator00:17:12Thank you. The next question is from the line of Kunal Damesha from Macquarie. Please go ahead. Speaker 500:17:20Hi. Thank you for taking my question and congratulations on good set of numbers. First on the U. S. Product launch and filing momentum, so if I look at the 1st 9 month data, we have launched 12 products in the U. Speaker 500:17:33S. And we have just made new filings and our total pending year and years also have come down from 90 in quarter 4 FY 'twenty two to now 79. So is it because we are focusing on few therapy areas more complex? If you can provide some color there would be helpful. Speaker 300:17:55So yes, we do have less Filings, let's say, overall, because we are good focused products, we believe it's clinical, but it's still in healthy The numbers of files, I believe that you see in the next coming months more filing with our timing of timing On the launch piece, we will have more than 20 this year. And it looks like the HD number that is in the U. S. That is in the type of other plants, the number It won't take by total, it's 84. Speaker 500:18:36Sure. And then just So follow-up on that, we are now we have acquired this NanoLab. If you can provide some clarity as Stu, how does this fit into our strategy? What was probably the last 12 months sales for these brands? And What is the acquisition value that we update? Speaker 500:18:56And does the increase in borrowing quarter on quarter relate to this? Speaker 300:19:04So the as part of the time of What we call Horizon 2, we decided to focus in general as a company on 3 types of segments, NC and NPE. I'm talking primarily collaborations with the acquisitions, focusing on the social channels And this is Hector Apoetics. Specifically, for the U. S, we decided to focus on On our private label as well as brands in human health, So we acquired the Pimama in the past and now we have the complementary Products that are brand that like I did, the idea is to create a franchise In women's supplement, so that kind of diversified the U. S. Speaker 300:20:09Business To areas that different pattern of the demand and supply and the brand awareness. I don't recall exactly the sales of NIMO Lab Before, we are talking about the range of means of dollars. So this is where we will get a sort relative this point, we will believe that we can take it from there. Speaker 500:20:37And after this, what would be our U. S. Revenue contribution from the Wellnex product or UTC product? I think earlier we used to provide it in 20 F or The quarterly filing, I'm not sure now will you provide that? Speaker 300:20:52So the OTC, if I'm On an annual basis, it should be about 10% give or take of the overall U. S. Business. Speaker 500:21:07Sure. Thank you. I have more questions. I'll jump back quickly. Operator00:21:12Thank you. The next question is from the line of Tushar Manutane from Motilal Oswal Financial Services. Please go ahead. Speaker 200:21:22Yes. Thanks for the opportunity. So firstly on the receivables which have increased on a quarter on quarter basis, is this on certain select Products or is it across the portfolio and for which markets? No, receivables increase is Primarily in line with the top line increase. So it's nothing unusual. Speaker 200:21:44It's across the market, but largely concentrated in the U. S, It's in line with the normal top line increase. Okay. Secondly, gross Margin for VSAI segment has been higher for the quarter compared to the previous quarters. So anything specific, sir, you'd like to comment? Speaker 300:22:05Yes, we are going because of the nature of the business that it says normally high level of fixed cost. So when you are increasing the sales, you normally will have better margins. So it's just a reflection of the growth. I'm happy that we are back to growth. It took us quite some time to achieve that. Speaker 300:22:29I think now we are to accept in the right direction. Speaker 200:22:35Okay. Because second quarter This year revenue was 9.60 crores with 13% gross margin and now it is 10.40 and the gross margin has improved almost 22%. Speaker 300:22:48Yes, it's a combination again of the mix and the combination of the more sales. And there was nothing unusual in that, it's just the type of Okay. Speaker 200:23:05And just lastly, considering the launches and the filings and the market share gains for the existing product, if Speaker 300:23:26We are not getting guidance, but we are supposed to continue to do well All deliveries. So far it looks healthy for both Commercial product service to the customer, pricing environment, Thank you. Operator00:24:02The next question is from the line of Neha Mankuria from Bank of America. Please go ahead. Speaker 300:24:09Thank you Speaker 200:24:09so much for taking my question. Guys, Speaker 100:24:12if I were Speaker 200:24:13to look at the SG and A spend increase that we have seen in the quarter or even if I were to look at over a 3 year period. I know you've mentioned that we've been investing in Horizon 2 products, a project that you talk about. But from a monetization point of view, when should we start seeing this contributing to revenue? I'm just trying to understand When should we start seeing operating leverage in the higher spend? And do you think this number continues to trend up from where we are? Speaker 300:24:43Yes. So part of it, which is related to the investment we put Now in certain brands in India, we'll give the results already in FY 'twenty five Because that's the nature of the game. So we are creating demand. Some of it is related to investments That will take more time as we are putting money into Building products that will be launched in FY26, 2025, 2020 6, 1127. So likely that this level of debt level in the at least On value wise, we'll continue to be a bit higher, but I do see No growth in revenue. Speaker 300:25:41So overall, it should be in the same environment that it used to be in the past Meaning before that. But let's say to your questions, part of it will be already in FY 'twenty five and part of it will be in FY 'twenty six Speaker 200:25:58And if I were to dig a little deeper on the points on the launches, I know in your Analyst Meet, you've mentioned certain areas that you're working on. But out of the 2025 launches that you talk about in the U. S, Can we try to understand as to how many of these could be the bread and butter launches that we need to offset the base business and how many of these could be meaningful products? Some color there would be helpful. Speaker 300:26:26Yes. So we have, overall, About 26 products that can be launched, we will get approval. We know We're winning all the houses, the normal houses in the market that can be launched and I'm talking about products that can be Meaningful, what meaning for me is probably change the nuance and more than that. This is what let's say for the second discussion. The question is what combination of that will actually get to the market and what will be the sale price, of course, I don't know. Speaker 300:27:06But we are building on that to offset The period after the development. And in addition to that, we of Of course, we are planning to have the growth in the other levers as well as potential digital food count. So the combination of those is supposed to You didn't address that. Speaker 200:27:33And just to follow-up on that, the 26 products would be over the next 2 years, 3 years, how should I look at the timeline for that? Speaker 300:27:42Potentially, with all the cautious about this kind of products, I refer to products that are It's been an experience, 25% and 26%. If it's going to 27%, we have more products. Of course, subject to approval subject of premium co pays and subject to all the Normal challenges that you are very important to the market, but let's say it's an healthy list Of a task to make task to develop products. Speaker 200:28:17Understood. And my last question on the BioSynliv pipeline. Could we talk about how many products we are developing for the U. S. And European market? Speaker 200:28:29And when should we start expecting some sort of a timeline or let's say A progress update on the pipeline that we're looking at for biosimilars? Speaker 300:28:42Yes. So we are talking about 6 products by Equatorial, again subject to receiving approval in this time and subject to Patrick, to give you the back increases, but at least this is what we are aiming for. If you recall at the time when We had the change that we made after the arrangement that we had at the time with the next ceremony. We decided to skip a couple of years and to move the products that we have to change to the customer care, which is the strategy. The first product should come in calendar the beginning of calendar 2027 And then the rest of the product by FY 'seventy. Speaker 300:29:35Then of course, we have a bunch of products So that's right now the case that we are planning for. Speaker 200:29:50Understood. Thank you so much, Avid. Operator00:29:53Thank you. The next question is from the line of Dhamayanti Kirai from HSBC Securities and Capital Markets India Private Limited. Speaker 200:30:06My first question is for your India business. So you obviously You mentioned you're working on some innovative product, digital therapies, etcetera, to improve market offering. But I just want to understand like how far these opportunities are right now for you because it appears that These kind of product uptake might take some time. And meanwhile, your India business is, I'll say, growing slowly within the market. So how do you bridge your growth versus market growth till the time those innovative products start delivering results? Speaker 300:30:48Sure. First, just to calibrate, powerful reason that people see Single digits is that shipments, the brand that we acquired and The price erosion that we had, which we anticipated is out of the business plan that we took into account when we acquired this brand, contribute about 3% For that decline, lastly the base of last quarter last year, we had also products that we divested. So If we are taking those, we are already in the face of double digits. But I'm But going forward, more importantly, we identify brands that should grow even faster than the markets. I'm talking about the brands that we grow at the pace of 1.5 times the market, those specific brands that we are building behind them. Speaker 300:31:52And in addition to your point, indeed, those pick up may take time, but it's very significant pipeline that we are building now. All the products that we are doing in innovation are better than the current standard of care. So it will be meaningful growth Now in the medium term, in FY 'twenty five, I'm expecting to see double digit growth in the business, the firm deposits. Speaker 200:32:22Okay. That's comforting to hear. My second question is on your U. S. Business. Speaker 200:32:27So obviously, you delivered very good set of numbers. So few reasons you mentioned pick up in market share for some key products, etcetera. So just want to understand Was revenue contribution for Q3 even much higher than what we saw in the 1st and second quarter? And have you seen Alec, what kind of pickup you have seen on the main portfolio? Speaker 300:32:54So you know that I cannot speak unfortunately on quantities on nidodilamide. I can also I can also say that it's absolutely within our expectation and I'm expecting to be meaningful also in the future. As for Mainly, we see pickup, we see that It is growing. So far, it is within our expectation. I'm happy for this acquisition. Speaker 200:33:25Okay. Thank you. And my last question is, can you talk about your progress in some of GLP-one products, specifically for anti obesity indication, which you might be targeting for, say, U. S. Or other export markets? Speaker 300:33:45So we It's in our interest from both of us. We are very much into anti diabetics projects in India, but also Actually globally, we build ourselves and the second is the peptides As a family, we believe that it's a core strength of our growth on the API as well as On the Stivalax facility that we have, so the combination of what we want to play in this market very much And also to address some of their needs. So we are planning to launch Globally, we mean in all the countries that we have reached these products and the relevant market situation will allow us to Operator00:34:53Thank you. The next question is from the line of Surya Patra from Philip Capital Markets Limited. Please go ahead. Speaker 500:35:02Yes. Thanks for this opportunity. Speaker 600:35:04So my first question is on the U. S. Business. In fact, the base U. S. Speaker 600:35:11Business, excluding, let's say, Revlimid and the recently acquired Managed portfolio, It looks like that Y o Y, we are kind of a CMIC flattish performance despite the improved pricing scenario in the U. S. So could you qualify that whether that is the kind of Trend what we have also seen and what is the kind of growth that we are anticipating for the base business? Speaker 300:35:44So I can confirm that the best business is growing and we start to look into our ability to In the efforts that we put on both end of sales and service and obviously relationship with customers, I anticipate that this trend will continue. Also, also in the future and Naturally, the geopolitical situation and in certain areas, they are concerned about Sustainability of supply is important for customers and we see ourselves as a partner to help them Speaker 600:36:36Okay. Regards to, let's say, the recent M and As what we have See, let's say, leveraging the cash flow generation from the Rev Limid, I think we have done couple of acquisition And already announced 3, 4 odd kind of mainline selling arrangements. So Cumulatively, all these initiatives should have also contributed to the growth in the base business. So, In fact, could you share that, okay, what is the kind of incremental growth that such M and A initiatives would have added to the base business? And going ahead over a period of, let's say, next 3, 4 years, I mean beyond Pravlimed So what base business growth that you are anticipating out of the M and A activities? Speaker 300:37:35So M and As are not saying I'm not calling it base business. It's by design, new stuff that we are adding to the company. The most of the M and A is actually in St. S. M and A, since we have All kinds of collaboration, license to name, JVs, also M and A. Speaker 300:37:58All of that is primarily presented the future portfolio as per the strategy, whether it's in Like I mentioned, it can be on the base product like mine, but mostly it is about actually what we call as in 2, again, NCMB, So, actually most of the efforts are coming from that. In addition to that, we are always looking for opportunities. By the way, it's not the money from Regal Amel, it's the money between the cost of Regal Amel, but also from How much is the competitive as much as we get at this time? We potentially have a significant financial capacity And we are very active in the market. At the same time, we are not buying for the sake of buying or Speaker 600:39:14Sure, sir. With regards to the inspection outcomes for the virtual facility, so what risk that one should assign to it? Ort, what is your practical assessment here? So do you find any risk to the existing business Given the kind of number of observations that has been issued to you and The nature of the observation that has been highlighted? Speaker 300:39:43Yes. So we are talking about So first of all, what is the risk that we will get in Is there a possibility for that? Yes. There is a possibility. There is always a possibility, but there is a possibility that it will happen. Speaker 300:40:06I'm what I can update is that firstly, address All the evaluation in the people at the time. After that, we did twice 2 directly With the blessing also of external consultants data that shows that the Capa that we put in place is working. This year is happening in 2 installments, 1 in December and 1 in January. And I believe that it's a robust Speaker 600:40:45So just one last clarification from my side. Whether you have commented on the Immuno Labs Size and the potential contribution to our U. S. Business? Speaker 300:40:59No, I did not because I don't remember the numbers, I apologize for Speaker 100:41:05this. And we will disclose the numbers, but As Erez mentioned, couple of millions is what you said. And as the business progresses, we'll keep updating Speaker 600:41:15Sure. Yes. Thank you, ma'am. Thanks a lot for all your responses. Operator00:41:24Thank you. The next question is from the line of Bino Phee from Elara Capital. Please go ahead. Speaker 500:41:33Hi. Good morning. Good evening. Just a couple of quick questions. 1, You have this product, Lumify, which we have been licensed in the U. Speaker 500:41:42S. So is there any time line we can get regarding the approval of the same? Speaker 300:41:48Which product? Sorry, I didn't. GENRIT Lumify. Sorry, which one? I don't have any information. Speaker 300:42:01So that is one. Speaker 100:42:04Okay. So that is there actually in the pipeline, so that we'll keep updating once the same Speaker 500:42:16Okay. 2nd on biosimilar rituxan, Could you give some color on what sort of timelines you have in mind for the launch also given the recent inspection of Yes, FDA and the outcome, etcetera? Speaker 300:42:36So we got We submitted in April. We booked the FDA inspection actually on time in October. We addressed the FDA observation. We do not receive any additional information. So if everything will be without any CRL or any The earliest that we can get approval is the end of April, But of course, it may be it will get any query or sharing. Speaker 500:43:13Understood. Okay. And what is your mentioned about this biosimilar pipeline, which kind of starts from Speaker 300:43:30Products which could be the among the first wave or the first biosimilar to some of the products within that? This is the intent. All the products that we are developing, we are developing with the intent to be either 1st or in the first Operator00:43:56The next question is from the line of Shyam Srinivasan from Goldman Sachs. Speaker 500:44:06Erez, just the first one is on the overall CDMO kind of space. I know you have a subsidiary. I just want to understand, are you able to see more demand coming from global innovators towards India based Companies including companies like yourself or your subsidiary. So that's the first question. And are you investing in capacities either on the Small molecule side or the biologic side for manufacturing for CDMO? Speaker 300:44:40So just for both, The caveat is that still our business is not that big. So I cannot say that it's an overall global trend, The trend that we see is growth. And indeed, we do invest in capacity both in the lab as well as For production, for products that we have contracts and we know that it will be So the capacity will be, of course, be paid by those contracts. Speaker 500:45:14So, Arun, I'm just Trying to understand from a capital allocation standpoint, will this be significant for you or you think we have enough other projects in the pipeline For us to be or do you think this will be small part and will not be ramping up? The CDMO Speaker 300:45:33It's not in the overall scheme of same product characterization will not be big, but it's a business that should go from tens of millions of dollars to 100 of 1,000,000 of dollars, that's expectation. But in the overall scheme of things of this, the overall size of the Speaker 500:45:52Got it. Helpful. Just a second, just a financial question to Parag. I'm just looking at your disclosure around Net cash generated after removing taxes and looking at FCS, right? So it's been The conversion has been low. Speaker 500:46:09So just want to understand, I know there has been an acquisition you have paid out for in the quarter 1. But just want to understand either in terms of CapEx Or in terms of intangible buildup, is that something that we need to keep in mind? Speaker 200:46:22So I think the only thing I would point out is What it is mentioned, which is we are investing in strategic inventory buildup. So we are investing in We provide pipeline buildup. Also in because of the supply chain, the sea routes disruption, we don't want to lose any sales. So we are also improving inventory in our front end markets. So it's primarily the working capital impact apart from Yes. Speaker 200:46:53See, there is increase, which is in line with normal sales. So that's the key reason. Otherwise, our cash flows On various fronts, continue to be healthy. The conversion is healthy. Speaker 500:47:04Got it, Bharat. Thank you and all the best. Operator00:47:11Thank you. You may now disconnect your question. The next follow-up question is from the line of Kunal Damesha from Macquarie. Please go ahead. Speaker 500:47:25Thank you for the opportunity again. Just continuing on the last question on the inventory buildup. So how much of our product would be probably be going to Sea Route now and anything going to Red Sea Route Isaac, now? So the majority of Speaker 300:47:45the products are going to the series. Actually, But of course, this is a very high situation and may change. But in general, we are trying to press the majority. Majority is needed for us, it should be 80% plus. The second one is that we are trying to have as much inventory in the U. Speaker 300:48:14S. Very close to the customers, part of our service to address the customer need with Pivot as I said advantage for us as we can give the customer a service that they may cannot get from others. Speaker 500:48:41Sure, sure. And just one related question in U. S, I don't know what the, let's say, last 3 to 4 quarters, How has the one time or short term supply opportunities behaved for you? Are those Supply opportunity is increasing, mainly coming to you or decreasing in the last three, four quarters? Speaker 300:49:04I would say that the one time situation is not risk and there is no, It's a tangible trend in that. So it makes more of the fact that If we are gaining share, we are gaining for the long term. This is more something that we are focusing and most of the growth that we have Now, this product is more younger than in itself, rather than in time back. Speaker 500:49:37So is it fair to say that now the agreements that are being done for a little longer period of time versus what it used to be, let's say, 2 years Speaker 300:49:47back. Every customer For So we are trying to reposition us a partner It's for all customers and certainly maybe a great question. Speaker 500:50:17Sure. And one on the India business. So we have said that we want to focus on our key brands. We have In India, where you want to grow 1.5x the market rate, could you provide some ballpark number as to how much of These key brands will be contributing to our India business? Speaker 300:50:38So most of the conditions to be affordable double digit that India is Speaker 500:50:55Sure. And the last one, because you're focusing on the GLP-one opportunities, Can you provide some color on how much is that protect manufacturing capacity? And are we manufacturing anything currently for regulated or semi regulated market? Speaker 300:51:24To your point, yes, we are making, but most of the volume is used to be launched It's by fastener, experiment fastener. Speaker 500:51:46Sure. And but any capacity that you want put out like some of the other global players have put out that they can manufacture their 32,000 retail capacity to manufacture GLP-one. I Speaker 300:52:00mean, you said that we invested a lot in our capacity, both in the API as well as on the Speaker 500:52:16Sure. Thank you and all the best. Operator00:52:21Thank you. The next follow-up question is from the line of Neha Manpuria from Bank of America. Please go ahead. Speaker 200:52:29Yes. Thanks again for taking my question. Just to confirm, out of the 26 Products that you mentioned, the rest and the U. S. Pipeline, which are meaningful, none of these would be from Bajapali, would that be a fair assumption? Speaker 300:52:44None of these following? Speaker 200:52:46From Batupoli, Speaker 100:52:48FTO3? Speaker 300:52:52In the Q3, we do have, I think, 2 products that are part of that. And So in the case that we will have an issue, we will have to move it to another site that we have, if it will come into that situation. Speaker 200:53:07Okay. From a pipeline dependent, upcoming launches, how important would STO3 be? Just to understand the Just in Speaker 300:53:15case of an adverse outcome? Not significant. Most of the products are O and S, most of them commercial. Obviously, we don't want it. It's not nice to your reputation, etcetera. Speaker 300:53:32It's not significant, and most of the growth we have to buy back, but not so much. Speaker 200:53:38Got it. And Parag, On the moderation in the gross margin that we have seen in the generics business, how much of that would The I mean, the quarter on quarter moderation, would all of that be because of pricing pressure? Or is there any other big factor there? I think FX would be the other one, I'm assuming. It's more of a mix issue, Neha. Speaker 200:53:59I mean, pricing is obviously there, but it's very stable. So Pricing doesn't stand out, but it's just that it will be offset from new product launches from the product mix has been a bit lower. That's all. So it's not that the price erosion is higher, price erosion still remains at the same level. It's the upside from the other things that we see in terms of Productivity in terms of product mix, there is some timing issue, I would say. Speaker 200:54:28So overall, well within the normal range. So Aishwarya, you shouldn't assume that the incremental business that we have seen in U. S. Etcetera is a lower margin business and hence that's reflected in my gross margin? No, that's not right. Speaker 200:54:41Yes, you should not assume that. Okay, got it. Thank you so much. Operator00:54:48Thank you. Ladies and gentlemen, that was our last question for today. As there are no further questions, I would now like to hand the conference Over to Mr. Hachap Mehriwal for closing comments. Speaker 100:55:01Thank you all for joining us for today's evening call. In case of any further queries, please get in touch with the Investor Relations team. Thank you once again on behalf of Doctor. Reddy's Webroot Limited.Read moreRemove AdsPowered by Conference Call Audio Live Call not available Earnings Conference CallAudioEye Q3 23/2400:00 / 00:00Speed:1x1.25x1.5x2xRemove Ads Earnings DocumentsInterim report AudioEye Earnings HeadlinesZacks Industry Outlook Dr. Reddy's, Sandoz and Teva PharmaceuticalsApril 16 at 6:41 AM | uk.finance.yahoo.comDr. Reddy's Laboratories rises Wednesday, outperforms competitorsApril 16 at 6:41 AM | marketwatch.comNew “Trump” currency proposed in DCAccording to one of the most connected men in Washington… A surprising new bill was just introduced in Washington. Its purpose: to put Donald Trump’s face on the $100 note. All to celebrate a new “golden age” for America. April 16, 2025 | Paradigm Press (Ad)Dr Reddy’s denies reports of cost cut through workforce reductionApril 14 at 10:42 PM | seekingalpha.comDr Reddy’s initiates 25% workforce reduction, report suggestsApril 14 at 10:42 PM | msn.comDr. Reddy’s Laboratories (RDY): Among the Best Indian Stocks to Buy According to BillionairesApril 14 at 10:42 PM | msn.comSee More Dr. Reddy's Laboratories Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like AudioEye? Sign up for Earnings360's daily newsletter to receive timely earnings updates on AudioEye and other key companies, straight to your email. Email Address About AudioEyeAudioEye (NASDAQ:AEYE) provides patented, internet content publication, distribution software, and related services to Internet and other media to people regardless of their device, location, or disabilities in the United States. Its software and services enable conversion of digital content into accessible formats and allows for real time distribution to end users on any Internet connected device. The company offers AudioEye, an always-on testing, remediation, and monitoring solution that improves conformance with web content accessibility guidelines; identifies and fixes the accessibility errors and addresses a range of disabilities, including dyslexia, color blindness, epilepsy, and others; and provides additional solutions to provide for enhanced compliance and accessibility, including periodic auditing, human assisted technological remediations, and legal support services, as well as PDF remediation services, Native Mobile App and audit reports to help customers with their digital accessibility needs. 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There are 7 speakers on the call. Operator00:00:00Please note that this conference is being recorded. I now hand the conference over to Ms. Operator00:00:05Richa Periwal. Thank you, and over to you, ma'am. Speaker 100:00:10Thank you. A very good morning and good evening to all of you and thank you for joining us today for the Doctor. Reddy's earnings conference call for the quarter ended December 31, 2023. Earlier during the day, we have released our results and the same is also posted on our website. This call is being recorded and the playback and transcript shall be made available on our website soon. Speaker 100:00:35Further discussions and analysis of this call will be based on the IFRS consolidated financial statements. The discussion today contains certain non GAAP financial measures. For a reconciliation of GAAP to non GAAP measures, Please refer to our press release. To discuss the business performance and outlook, we have our CEO, Mr. Iraj Vazwaini and our CFO, Mr. Speaker 100:00:59Paraz Abhilwan and the entire Investor Relations team. Please note that today's call is a copyrighted material of Doctor. Reddy's and cannot be rebroadcasted or attributed in trends in text or media outlets without the company's Great 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 pertaining to this conference call. Now, I hand over the call to Mr. Speaker 100:01:28Parag Agarwal. Over to you, Parag. Speaker 200:01:31Thank you, Richa, and greetings to everyone. A warm welcome to our quarter 3 FY24 earnings call. Thanks for joining. I'm pleased to take you through our financial performance for the quarter. For this section, all amounts have been translated into U. Speaker 200:01:46S. Dollar at a convenience We continued our growth trajectory in the 3rd quarter and delivered another quarter of financial results with highest ever sales and robust operating profit. Consolidated revenues for the quarter stood at INR 7,215 crores, which is US867 million dollars and grew by 7% on year on year basis and by 5% on a sequential basis. The growth is led by the generics business in Europe and Europe with contributions from both base business and new product launches. Consolidated gross profit margin stood at 58.5% for the quarter, A decrease of 73 basis points over previous year and 18 basis points sequentially. Speaker 200:02:36The decrease was on account of Price erosion for certain of our existing products, partly offset by improvement in product mix and productivity. Gross margin for the Global Generics And PSCI Businesses were 61.9 percent and 29.4 percent, respectively. The SG and A spend for the quarter is This is INR 2.43 million dollars an increase of 12% year on year and 8% quarter on quarter. Year on year increase is primarily on account of investments in sales and marketing activities, digitalization capabilities and new business and innovation initiatives. The SG and A cost as a percentage of sales were 28.0% and is higher by 148 basis points year on year and 72 basis points quarter on quarter. Speaker 200:03:28The R and D expense for the quarter has received INR5.67 crores, which is $67,000,000 an increase of 15% year on year and 2% quarter on quarter. The R and D expense is at 7.7 percent of sales and is higher by 60 basis points year on year and lower by 20 basis points quarter on quarter. The investments are driven by ongoing clinical trials on differentiated assets as well as other developmental efforts to build a healthy pipeline of new products across our market for both small molecules and biosimilars. The other operating income for the quarter is INR97 crores as compared to operating expense of INR73 crores for the same quarter last year. The other income was higher on account of sale of non current assets. Speaker 200:04:16The EBITDA for the quarter is INR 2,111 crores, which is $254,000,000 posting a growth of 7% year on year. The EBITDA margin stood at 29.3%. Our profit before tax for the quarter stood at INR1826 crores, which is US219 million dollars posting a growth of 12% year on year and a decline of 4.6% over previous quarter. The net finance income for the quarter is INR 96 crores as The effective tax rate was marginally higher in comparison to the same period last year, mainly due to an increase in the proportion Of the company's profits coming from higher tax jurisdictions, partly offset by adoption of corporate tax rate under Section 115 BAA of the income tax as of India. We expect our normalized EBITDA for the year to be in the range of 24% to 25%. Speaker 200:05:23Profit after tax for the quarter stood at INR 13.79 crores, which is US166 million dollars posting a growth of 11% year on year and a decline of 7% over previous quarter. Reported EPS for the quarter is INR 82.7. Operating working capital increased by INR1227 crores, which is US148 million dollars against that on September 30, 2023, Mainly due to increase in inventory and receivables, our capital investment stood at INR307 crores, which is US37 $1,000,000 in this quarter. The free cash flow generated before acquisition related payout during this quarter was at INR 22 crores, which is US2.6 million dollars Consequently, we now have a cash net surplus cash of INR 5,907 crores, which is $710,000,000 as of December 31, 2023. Foreign currency cash flow hedges in the form of derivatives for the U. Speaker 200:06:24S. Dollar At approximately US672 million dollars held around the range of INR 83.4 to INR 84.6 and A1.1 million dollars at the rate of A58.32 dollars maturing in the next 15 months. With this, I now request Ray to take us through the Speaker 300:06:46key business highlights. Thank you, Parag, and very warm welcome to everyone joining us today. I am delighted to report yet another quarter with the highest ever revenues in robust operational performance. We made the progress during the quarter We have a strategic collaboration to win novel therapies in India and to improve our position in new avenues, of course, globally. We are also humbled by the completions received by for the progress we have made on our sustainability agenda. Speaker 300:07:19Let me take you through some of the key highlights of the quarter. Sales and EBITDA grew by 7% each. The sales growth was primarily driven by improved market share for our existing products in the U. S, continued momentum in our Europe business, Contribution from new products, partially offset by price erosion in certain existing products yield to competitive landscape. We generated healthy EBITDA margin at 29% and annualized ROCE at 37%. Speaker 300:07:53Net cash surplus was $710,000,000 at the end of the quarter. We entered An exclusive development and commercialization deal with the U. S.-based Hoia Therapeutics for the product Hoia's 3 or 2. It is an investigational combination biologics for treatment of neurodegenerative disease, ALS. We received an approval from UK MHRA for proposed VIVA CIGILAB biosimilar. Speaker 300:08:27We acquired a leading women healthy and dietary supplement portfolio of brands called Menulab in the U. S. With recent recent entry into the Nu. K. Consumer led first with the launch of anti A Fever medicine, Pistol Iris MOPC, And we have taken steps to strengthen our distributors globally. Speaker 300:08:48The U. S. FDA completed a routine CTMP inspection of our formulation manufacturing facility at facility at year 3 in October 2023 as well as GMP and credit approval inspection PI At our R and D facility in December 2023. We issued 4th Victoria 3 with 10 observations until Q3 and clear observation at our R and D facilities. We have submitted a response within the speaker at the time frame. Speaker 300:09:19Our efforts in sustainability and EOG continue to gain momentum and external recognition. We are becoming the 1st Indian pharma company to feature the Total Sustainability World Index of 2023 And retaining our place in the emerging markets index for the 8th year in the world. We awarded gold medal status by EcoBuddies. We upgraded MSCI ESG rating from BB to BBP. We are awarded the Golden Tree Hawk for corporate social responsibility in 2023. Speaker 300:09:58Further, we are the First Indian company to collect the plantation initiative covering 2,900 hectares by 2028 Now let me take you 2 of the key business highlights for the quarter. Please note that all the references to the numbers in these sections are in respective local currencies. Our North America generic business recorded sales of $400,000,000 for the quarter with a growth of 7% compared to the year And Mr. Christian, please refer to 4%. The benefit of market share extension in certain existing key products, revenue from new launches An indication of the acquired portfolio was partially offset by price erosion due to competitive environment. Speaker 300:10:48We launched 4 core new products during the quarter. We recently acquired Manulife portfolio of women's health and dietary customer brands in the U. S, Which complements well with our U. S. Healthcare and Wellness business portfolio. Speaker 300:11:03Our European generic business recorded sales of €55,000,000 this quarter with year over year growth of 8% and sequential decline of 6%, The contribution from new product launches has been proven in the base business volume and offset price erosion. During the quarter, we launched a total of 6 products across market. Earlier this month, we entered the UK of the consumer health market with the launch of Our emerging market business recorded sales of INR1283 Good morning, Rupees. A marginal year over year decline of 2% and sequential increase of 6%. The benefits of new products and price increase in certain markets was more than offset by unfavorable products. Speaker 300:11:55We are on the track to deliver double digit growth for the year. We launched 13 new products during the quarter across various countries of the emerging market. Within the emerging market segment, the Russia business grew by 3% on year on year basis, 67% On a sequential basis in constant currency. Our India business recorded sales of INR184 and reported year over year growth of 5% and the margin sequentially declined. We anticipate the BEST business to deliver double digit growth in the coming quarters. Speaker 300:12:31We are focusing on licensing and collaborations to bring innovation to India. Rollout of the medical market, which made our entry into the digital therapeutics. We are seeing adoption by doctors and repeat doses indicate high patient satisfaction scores. We remain the priority market And we will continue to reinforce the presence of both NANDs business while investing and building the innovation spaces in line with our strategy. Our PCAI business recorded sales of $94,000,000 with a strong sequential growth of 11% And the marginal year on year decline of 1%. Speaker 300:13:11Excluding sales of COVID products in the same period last year, sales growth was up in high single digits. We expect sales to improve on the depth of strategic collaboration with regional and global players. Last This quarter, we invested 7.7% of revenue to strengthen our R and D capabilities. Our efforts are focused on developing complex value of treated products, Including several generic injectables and biosimilars in line with our patient centric strategy to enable access And affordability. We also continue to invest in innovative solutions to strategic partnerships such as safety collaboration with Core Laboratories On investigational therapy. Speaker 300:13:55We have done 9 global general signing of 30 2 ANDAs in the U. S. In Q3 FY 'twenty four. We have been recently ramping up inventory to reduce the risk of supply chain disruption And building inventory for our pipeline products. We are also strengthening our position by building best in cash capacity in commercial infrastructure to leverage our portfolio Thanks, Alberto. Speaker 300:14:20We continue to develop our pipeline and scale up our biosimilar business being our pivot Our ability to source external innovation through strategically developing collaboration will enable us to address unmet needs and patient support Operator00:14:46Thank you very much. We will now begin the question and answer session. The first question is from the line of Balaji Prasad from Barclays. Please go ahead. Speaker 400:15:29Hi, this is Mikaela on for Balaji. Thanks for taking our questions. Just two from us. First one is, what is your latest thinking on generic pricing trends, particularly in the U. S? Speaker 400:15:40And could you provide a bit more color on how you see this trending going forward? And second one, what are your thoughts around the Chinese pharma market in 2024? Thanks so much. Speaker 300:15:51I did not get the second one. What is Speaker 400:15:56The second one was what are your thoughts on the Chinese pharma market in 2024? Speaker 300:16:01So the first question, we'll give the continuation of the pricing environment that we saw in the last half What else? We are given the same environment, meaning that relatively to other reasons is Yes, there is a huge degree, more focus on service, sustainability of supply And but obviously, the business model did not change. And in every place that competitors is coming, we see Parcelo and that's In the same Edward, we have discussed in previous quarters. As for China, We do see a very good tracking of our approvals. We got 9 approvals since the beginning of this fiscal Operator00:17:06Do you have any more questions from the line of Manaji Prasad? Speaker 400:17:10No, that was it. Thanks so much. Operator00:17:12Thank you. The next question is from the line of Kunal Damesha from Macquarie. Please go ahead. Speaker 500:17:20Hi. Thank you for taking my question and congratulations on good set of numbers. First on the U. S. Product launch and filing momentum, so if I look at the 1st 9 month data, we have launched 12 products in the U. Speaker 500:17:33S. And we have just made new filings and our total pending year and years also have come down from 90 in quarter 4 FY 'twenty two to now 79. So is it because we are focusing on few therapy areas more complex? If you can provide some color there would be helpful. Speaker 300:17:55So yes, we do have less Filings, let's say, overall, because we are good focused products, we believe it's clinical, but it's still in healthy The numbers of files, I believe that you see in the next coming months more filing with our timing of timing On the launch piece, we will have more than 20 this year. And it looks like the HD number that is in the U. S. That is in the type of other plants, the number It won't take by total, it's 84. Speaker 500:18:36Sure. And then just So follow-up on that, we are now we have acquired this NanoLab. If you can provide some clarity as Stu, how does this fit into our strategy? What was probably the last 12 months sales for these brands? And What is the acquisition value that we update? Speaker 500:18:56And does the increase in borrowing quarter on quarter relate to this? Speaker 300:19:04So the as part of the time of What we call Horizon 2, we decided to focus in general as a company on 3 types of segments, NC and NPE. I'm talking primarily collaborations with the acquisitions, focusing on the social channels And this is Hector Apoetics. Specifically, for the U. S, we decided to focus on On our private label as well as brands in human health, So we acquired the Pimama in the past and now we have the complementary Products that are brand that like I did, the idea is to create a franchise In women's supplement, so that kind of diversified the U. S. Speaker 300:20:09Business To areas that different pattern of the demand and supply and the brand awareness. I don't recall exactly the sales of NIMO Lab Before, we are talking about the range of means of dollars. So this is where we will get a sort relative this point, we will believe that we can take it from there. Speaker 500:20:37And after this, what would be our U. S. Revenue contribution from the Wellnex product or UTC product? I think earlier we used to provide it in 20 F or The quarterly filing, I'm not sure now will you provide that? Speaker 300:20:52So the OTC, if I'm On an annual basis, it should be about 10% give or take of the overall U. S. Business. Speaker 500:21:07Sure. Thank you. I have more questions. I'll jump back quickly. Operator00:21:12Thank you. The next question is from the line of Tushar Manutane from Motilal Oswal Financial Services. Please go ahead. Speaker 200:21:22Yes. Thanks for the opportunity. So firstly on the receivables which have increased on a quarter on quarter basis, is this on certain select Products or is it across the portfolio and for which markets? No, receivables increase is Primarily in line with the top line increase. So it's nothing unusual. Speaker 200:21:44It's across the market, but largely concentrated in the U. S, It's in line with the normal top line increase. Okay. Secondly, gross Margin for VSAI segment has been higher for the quarter compared to the previous quarters. So anything specific, sir, you'd like to comment? Speaker 300:22:05Yes, we are going because of the nature of the business that it says normally high level of fixed cost. So when you are increasing the sales, you normally will have better margins. So it's just a reflection of the growth. I'm happy that we are back to growth. It took us quite some time to achieve that. Speaker 300:22:29I think now we are to accept in the right direction. Speaker 200:22:35Okay. Because second quarter This year revenue was 9.60 crores with 13% gross margin and now it is 10.40 and the gross margin has improved almost 22%. Speaker 300:22:48Yes, it's a combination again of the mix and the combination of the more sales. And there was nothing unusual in that, it's just the type of Okay. Speaker 200:23:05And just lastly, considering the launches and the filings and the market share gains for the existing product, if Speaker 300:23:26We are not getting guidance, but we are supposed to continue to do well All deliveries. So far it looks healthy for both Commercial product service to the customer, pricing environment, Thank you. Operator00:24:02The next question is from the line of Neha Mankuria from Bank of America. Please go ahead. Speaker 300:24:09Thank you Speaker 200:24:09so much for taking my question. Guys, Speaker 100:24:12if I were Speaker 200:24:13to look at the SG and A spend increase that we have seen in the quarter or even if I were to look at over a 3 year period. I know you've mentioned that we've been investing in Horizon 2 products, a project that you talk about. But from a monetization point of view, when should we start seeing this contributing to revenue? I'm just trying to understand When should we start seeing operating leverage in the higher spend? And do you think this number continues to trend up from where we are? Speaker 300:24:43Yes. So part of it, which is related to the investment we put Now in certain brands in India, we'll give the results already in FY 'twenty five Because that's the nature of the game. So we are creating demand. Some of it is related to investments That will take more time as we are putting money into Building products that will be launched in FY26, 2025, 2020 6, 1127. So likely that this level of debt level in the at least On value wise, we'll continue to be a bit higher, but I do see No growth in revenue. Speaker 300:25:41So overall, it should be in the same environment that it used to be in the past Meaning before that. But let's say to your questions, part of it will be already in FY 'twenty five and part of it will be in FY 'twenty six Speaker 200:25:58And if I were to dig a little deeper on the points on the launches, I know in your Analyst Meet, you've mentioned certain areas that you're working on. But out of the 2025 launches that you talk about in the U. S, Can we try to understand as to how many of these could be the bread and butter launches that we need to offset the base business and how many of these could be meaningful products? Some color there would be helpful. Speaker 300:26:26Yes. So we have, overall, About 26 products that can be launched, we will get approval. We know We're winning all the houses, the normal houses in the market that can be launched and I'm talking about products that can be Meaningful, what meaning for me is probably change the nuance and more than that. This is what let's say for the second discussion. The question is what combination of that will actually get to the market and what will be the sale price, of course, I don't know. Speaker 300:27:06But we are building on that to offset The period after the development. And in addition to that, we of Of course, we are planning to have the growth in the other levers as well as potential digital food count. So the combination of those is supposed to You didn't address that. Speaker 200:27:33And just to follow-up on that, the 26 products would be over the next 2 years, 3 years, how should I look at the timeline for that? Speaker 300:27:42Potentially, with all the cautious about this kind of products, I refer to products that are It's been an experience, 25% and 26%. If it's going to 27%, we have more products. Of course, subject to approval subject of premium co pays and subject to all the Normal challenges that you are very important to the market, but let's say it's an healthy list Of a task to make task to develop products. Speaker 200:28:17Understood. And my last question on the BioSynliv pipeline. Could we talk about how many products we are developing for the U. S. And European market? Speaker 200:28:29And when should we start expecting some sort of a timeline or let's say A progress update on the pipeline that we're looking at for biosimilars? Speaker 300:28:42Yes. So we are talking about 6 products by Equatorial, again subject to receiving approval in this time and subject to Patrick, to give you the back increases, but at least this is what we are aiming for. If you recall at the time when We had the change that we made after the arrangement that we had at the time with the next ceremony. We decided to skip a couple of years and to move the products that we have to change to the customer care, which is the strategy. The first product should come in calendar the beginning of calendar 2027 And then the rest of the product by FY 'seventy. Speaker 300:29:35Then of course, we have a bunch of products So that's right now the case that we are planning for. Speaker 200:29:50Understood. Thank you so much, Avid. Operator00:29:53Thank you. The next question is from the line of Dhamayanti Kirai from HSBC Securities and Capital Markets India Private Limited. Speaker 200:30:06My first question is for your India business. So you obviously You mentioned you're working on some innovative product, digital therapies, etcetera, to improve market offering. But I just want to understand like how far these opportunities are right now for you because it appears that These kind of product uptake might take some time. And meanwhile, your India business is, I'll say, growing slowly within the market. So how do you bridge your growth versus market growth till the time those innovative products start delivering results? Speaker 300:30:48Sure. First, just to calibrate, powerful reason that people see Single digits is that shipments, the brand that we acquired and The price erosion that we had, which we anticipated is out of the business plan that we took into account when we acquired this brand, contribute about 3% For that decline, lastly the base of last quarter last year, we had also products that we divested. So If we are taking those, we are already in the face of double digits. But I'm But going forward, more importantly, we identify brands that should grow even faster than the markets. I'm talking about the brands that we grow at the pace of 1.5 times the market, those specific brands that we are building behind them. Speaker 300:31:52And in addition to your point, indeed, those pick up may take time, but it's very significant pipeline that we are building now. All the products that we are doing in innovation are better than the current standard of care. So it will be meaningful growth Now in the medium term, in FY 'twenty five, I'm expecting to see double digit growth in the business, the firm deposits. Speaker 200:32:22Okay. That's comforting to hear. My second question is on your U. S. Business. Speaker 200:32:27So obviously, you delivered very good set of numbers. So few reasons you mentioned pick up in market share for some key products, etcetera. So just want to understand Was revenue contribution for Q3 even much higher than what we saw in the 1st and second quarter? And have you seen Alec, what kind of pickup you have seen on the main portfolio? Speaker 300:32:54So you know that I cannot speak unfortunately on quantities on nidodilamide. I can also I can also say that it's absolutely within our expectation and I'm expecting to be meaningful also in the future. As for Mainly, we see pickup, we see that It is growing. So far, it is within our expectation. I'm happy for this acquisition. Speaker 200:33:25Okay. Thank you. And my last question is, can you talk about your progress in some of GLP-one products, specifically for anti obesity indication, which you might be targeting for, say, U. S. Or other export markets? Speaker 300:33:45So we It's in our interest from both of us. We are very much into anti diabetics projects in India, but also Actually globally, we build ourselves and the second is the peptides As a family, we believe that it's a core strength of our growth on the API as well as On the Stivalax facility that we have, so the combination of what we want to play in this market very much And also to address some of their needs. So we are planning to launch Globally, we mean in all the countries that we have reached these products and the relevant market situation will allow us to Operator00:34:53Thank you. The next question is from the line of Surya Patra from Philip Capital Markets Limited. Please go ahead. Speaker 500:35:02Yes. Thanks for this opportunity. Speaker 600:35:04So my first question is on the U. S. Business. In fact, the base U. S. Speaker 600:35:11Business, excluding, let's say, Revlimid and the recently acquired Managed portfolio, It looks like that Y o Y, we are kind of a CMIC flattish performance despite the improved pricing scenario in the U. S. So could you qualify that whether that is the kind of Trend what we have also seen and what is the kind of growth that we are anticipating for the base business? Speaker 300:35:44So I can confirm that the best business is growing and we start to look into our ability to In the efforts that we put on both end of sales and service and obviously relationship with customers, I anticipate that this trend will continue. Also, also in the future and Naturally, the geopolitical situation and in certain areas, they are concerned about Sustainability of supply is important for customers and we see ourselves as a partner to help them Speaker 600:36:36Okay. Regards to, let's say, the recent M and As what we have See, let's say, leveraging the cash flow generation from the Rev Limid, I think we have done couple of acquisition And already announced 3, 4 odd kind of mainline selling arrangements. So Cumulatively, all these initiatives should have also contributed to the growth in the base business. So, In fact, could you share that, okay, what is the kind of incremental growth that such M and A initiatives would have added to the base business? And going ahead over a period of, let's say, next 3, 4 years, I mean beyond Pravlimed So what base business growth that you are anticipating out of the M and A activities? Speaker 300:37:35So M and As are not saying I'm not calling it base business. It's by design, new stuff that we are adding to the company. The most of the M and A is actually in St. S. M and A, since we have All kinds of collaboration, license to name, JVs, also M and A. Speaker 300:37:58All of that is primarily presented the future portfolio as per the strategy, whether it's in Like I mentioned, it can be on the base product like mine, but mostly it is about actually what we call as in 2, again, NCMB, So, actually most of the efforts are coming from that. In addition to that, we are always looking for opportunities. By the way, it's not the money from Regal Amel, it's the money between the cost of Regal Amel, but also from How much is the competitive as much as we get at this time? We potentially have a significant financial capacity And we are very active in the market. At the same time, we are not buying for the sake of buying or Speaker 600:39:14Sure, sir. With regards to the inspection outcomes for the virtual facility, so what risk that one should assign to it? Ort, what is your practical assessment here? So do you find any risk to the existing business Given the kind of number of observations that has been issued to you and The nature of the observation that has been highlighted? Speaker 300:39:43Yes. So we are talking about So first of all, what is the risk that we will get in Is there a possibility for that? Yes. There is a possibility. There is always a possibility, but there is a possibility that it will happen. Speaker 300:40:06I'm what I can update is that firstly, address All the evaluation in the people at the time. After that, we did twice 2 directly With the blessing also of external consultants data that shows that the Capa that we put in place is working. This year is happening in 2 installments, 1 in December and 1 in January. And I believe that it's a robust Speaker 600:40:45So just one last clarification from my side. Whether you have commented on the Immuno Labs Size and the potential contribution to our U. S. Business? Speaker 300:40:59No, I did not because I don't remember the numbers, I apologize for Speaker 100:41:05this. And we will disclose the numbers, but As Erez mentioned, couple of millions is what you said. And as the business progresses, we'll keep updating Speaker 600:41:15Sure. Yes. Thank you, ma'am. Thanks a lot for all your responses. Operator00:41:24Thank you. The next question is from the line of Bino Phee from Elara Capital. Please go ahead. Speaker 500:41:33Hi. Good morning. Good evening. Just a couple of quick questions. 1, You have this product, Lumify, which we have been licensed in the U. Speaker 500:41:42S. So is there any time line we can get regarding the approval of the same? Speaker 300:41:48Which product? Sorry, I didn't. GENRIT Lumify. Sorry, which one? I don't have any information. Speaker 300:42:01So that is one. Speaker 100:42:04Okay. So that is there actually in the pipeline, so that we'll keep updating once the same Speaker 500:42:16Okay. 2nd on biosimilar rituxan, Could you give some color on what sort of timelines you have in mind for the launch also given the recent inspection of Yes, FDA and the outcome, etcetera? Speaker 300:42:36So we got We submitted in April. We booked the FDA inspection actually on time in October. We addressed the FDA observation. We do not receive any additional information. So if everything will be without any CRL or any The earliest that we can get approval is the end of April, But of course, it may be it will get any query or sharing. Speaker 500:43:13Understood. Okay. And what is your mentioned about this biosimilar pipeline, which kind of starts from Speaker 300:43:30Products which could be the among the first wave or the first biosimilar to some of the products within that? This is the intent. All the products that we are developing, we are developing with the intent to be either 1st or in the first Operator00:43:56The next question is from the line of Shyam Srinivasan from Goldman Sachs. Speaker 500:44:06Erez, just the first one is on the overall CDMO kind of space. I know you have a subsidiary. I just want to understand, are you able to see more demand coming from global innovators towards India based Companies including companies like yourself or your subsidiary. So that's the first question. And are you investing in capacities either on the Small molecule side or the biologic side for manufacturing for CDMO? Speaker 300:44:40So just for both, The caveat is that still our business is not that big. So I cannot say that it's an overall global trend, The trend that we see is growth. And indeed, we do invest in capacity both in the lab as well as For production, for products that we have contracts and we know that it will be So the capacity will be, of course, be paid by those contracts. Speaker 500:45:14So, Arun, I'm just Trying to understand from a capital allocation standpoint, will this be significant for you or you think we have enough other projects in the pipeline For us to be or do you think this will be small part and will not be ramping up? The CDMO Speaker 300:45:33It's not in the overall scheme of same product characterization will not be big, but it's a business that should go from tens of millions of dollars to 100 of 1,000,000 of dollars, that's expectation. But in the overall scheme of things of this, the overall size of the Speaker 500:45:52Got it. Helpful. Just a second, just a financial question to Parag. I'm just looking at your disclosure around Net cash generated after removing taxes and looking at FCS, right? So it's been The conversion has been low. Speaker 500:46:09So just want to understand, I know there has been an acquisition you have paid out for in the quarter 1. But just want to understand either in terms of CapEx Or in terms of intangible buildup, is that something that we need to keep in mind? Speaker 200:46:22So I think the only thing I would point out is What it is mentioned, which is we are investing in strategic inventory buildup. So we are investing in We provide pipeline buildup. Also in because of the supply chain, the sea routes disruption, we don't want to lose any sales. So we are also improving inventory in our front end markets. So it's primarily the working capital impact apart from Yes. Speaker 200:46:53See, there is increase, which is in line with normal sales. So that's the key reason. Otherwise, our cash flows On various fronts, continue to be healthy. The conversion is healthy. Speaker 500:47:04Got it, Bharat. Thank you and all the best. Operator00:47:11Thank you. You may now disconnect your question. The next follow-up question is from the line of Kunal Damesha from Macquarie. Please go ahead. Speaker 500:47:25Thank you for the opportunity again. Just continuing on the last question on the inventory buildup. So how much of our product would be probably be going to Sea Route now and anything going to Red Sea Route Isaac, now? So the majority of Speaker 300:47:45the products are going to the series. Actually, But of course, this is a very high situation and may change. But in general, we are trying to press the majority. Majority is needed for us, it should be 80% plus. The second one is that we are trying to have as much inventory in the U. Speaker 300:48:14S. Very close to the customers, part of our service to address the customer need with Pivot as I said advantage for us as we can give the customer a service that they may cannot get from others. Speaker 500:48:41Sure, sure. And just one related question in U. S, I don't know what the, let's say, last 3 to 4 quarters, How has the one time or short term supply opportunities behaved for you? Are those Supply opportunity is increasing, mainly coming to you or decreasing in the last three, four quarters? Speaker 300:49:04I would say that the one time situation is not risk and there is no, It's a tangible trend in that. So it makes more of the fact that If we are gaining share, we are gaining for the long term. This is more something that we are focusing and most of the growth that we have Now, this product is more younger than in itself, rather than in time back. Speaker 500:49:37So is it fair to say that now the agreements that are being done for a little longer period of time versus what it used to be, let's say, 2 years Speaker 300:49:47back. Every customer For So we are trying to reposition us a partner It's for all customers and certainly maybe a great question. Speaker 500:50:17Sure. And one on the India business. So we have said that we want to focus on our key brands. We have In India, where you want to grow 1.5x the market rate, could you provide some ballpark number as to how much of These key brands will be contributing to our India business? Speaker 300:50:38So most of the conditions to be affordable double digit that India is Speaker 500:50:55Sure. And the last one, because you're focusing on the GLP-one opportunities, Can you provide some color on how much is that protect manufacturing capacity? And are we manufacturing anything currently for regulated or semi regulated market? Speaker 300:51:24To your point, yes, we are making, but most of the volume is used to be launched It's by fastener, experiment fastener. Speaker 500:51:46Sure. And but any capacity that you want put out like some of the other global players have put out that they can manufacture their 32,000 retail capacity to manufacture GLP-one. I Speaker 300:52:00mean, you said that we invested a lot in our capacity, both in the API as well as on the Speaker 500:52:16Sure. Thank you and all the best. Operator00:52:21Thank you. The next follow-up question is from the line of Neha Manpuria from Bank of America. Please go ahead. Speaker 200:52:29Yes. Thanks again for taking my question. Just to confirm, out of the 26 Products that you mentioned, the rest and the U. S. Pipeline, which are meaningful, none of these would be from Bajapali, would that be a fair assumption? Speaker 300:52:44None of these following? Speaker 200:52:46From Batupoli, Speaker 100:52:48FTO3? Speaker 300:52:52In the Q3, we do have, I think, 2 products that are part of that. And So in the case that we will have an issue, we will have to move it to another site that we have, if it will come into that situation. Speaker 200:53:07Okay. From a pipeline dependent, upcoming launches, how important would STO3 be? Just to understand the Just in Speaker 300:53:15case of an adverse outcome? Not significant. Most of the products are O and S, most of them commercial. Obviously, we don't want it. It's not nice to your reputation, etcetera. Speaker 300:53:32It's not significant, and most of the growth we have to buy back, but not so much. Speaker 200:53:38Got it. And Parag, On the moderation in the gross margin that we have seen in the generics business, how much of that would The I mean, the quarter on quarter moderation, would all of that be because of pricing pressure? Or is there any other big factor there? I think FX would be the other one, I'm assuming. It's more of a mix issue, Neha. Speaker 200:53:59I mean, pricing is obviously there, but it's very stable. So Pricing doesn't stand out, but it's just that it will be offset from new product launches from the product mix has been a bit lower. That's all. So it's not that the price erosion is higher, price erosion still remains at the same level. It's the upside from the other things that we see in terms of Productivity in terms of product mix, there is some timing issue, I would say. Speaker 200:54:28So overall, well within the normal range. So Aishwarya, you shouldn't assume that the incremental business that we have seen in U. S. Etcetera is a lower margin business and hence that's reflected in my gross margin? No, that's not right. Speaker 200:54:41Yes, you should not assume that. Okay, got it. Thank you so much. Operator00:54:48Thank you. Ladies and gentlemen, that was our last question for today. As there are no further questions, I would now like to hand the conference Over to Mr. Hachap Mehriwal for closing comments. Speaker 100:55:01Thank you all for joining us for today's evening call. In case of any further queries, please get in touch with the Investor Relations team. Thank you once again on behalf of Doctor. Reddy's Webroot Limited.Read moreRemove AdsPowered by