I'm Aishwarya Sitharam, Head of Investor Relations at Dr. Reddy's.

Joining us today are members of the leadership team: Mr. Erez Israeli, our Chief Executive Officer; and Mr.

M.V. Narasimham, whom we call MVN, our Chief Financial Officer.

Our quarterly financial results have been published earlier today and are available on our website for your reference. We will start today's call with MVN providing an overview of our financial performance for the quarter.

Following that, Erez will share his insights on key business highlights, as well as the company's strategic outlook. We will then open the floor for questions.

All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed.

Reconciliations to the corresponding GAAP measures are included in our press release. I would like to remind everyone that the safe harbor provisions outlined in today's press release apply to all forward-looking statements made during this call.

Before we proceed, I would like to call out a few housekeeping points. All participants will be in the listen-only mode during the opening remarks.

Should you need any technical assistance during the call, please use the chat function on your Zoom application. The chat will not be monitored for any questions to the management.

This session is being recorded, and both the audio and the transcript will be made available on our website. Please note that this call is the proprietary material of Dr.

Reddy's Laboratories and may not be rebroadcasted or quoted in any media or public forum without prior written consent from the company. With that, let me hand the call over to MVN to present the financial highlights for the quarter.

Over to you, MVN.

Thank you, Aishwarya. Greetings, everyone, and thank you for being with us today.

It is my pleasure to take you through our financial performance for the second quarter of FY '27. The business reported a 1.5% year-over-year decline in revenue, while EBITDA margin was at 20.6% for the quarter.

Excluding lenalidomide in North America, the underlying base business maintained its growth momentum, delivering double-digit growth. All financial figures in this section are translated into U.S.

dollars using a convenience translation rate of ₹95.83, the exchange rate prevailing as of September 30th, 2026. Consolidated revenue stood at ₹8,671 crores, which is US$905 million, a decline of 1.5% on year-over-year and a growth of 7.4% on sequential basis.

Strong underlying base business performance across key businesses, except Europe and API, driven by new product launches and favorable forex movements helped mitigate the impact of lower lenalidomide sales. Consolidated gross profit margin was at 52.1%, an increase of 562 basis points sequentially and a decrease of 254 basis points year-over-year.

The year-over-year decline in margins during the quarter was largely on account of lower lenalidomide sales. As a reminder, margins in the preceding quarter were adversely impacted by a provision for inventory and other costs associated with semaglutide API-related challenges.

The reported gross margin for Q2 FY '27 was 56.2% for Global Generics and 11.8% for PSAI. The SG&A spend was at ₹2,808 crores, an increase of 6% year-over-year and a decline of 3% sequentially, accounting for 32% of revenue.

The year-over-year increase was primarily driven by higher personnel costs following annual increments, adverse forex movement, as well as elevated freight costs due to supply chain disruptions arising from the Middle East crisis. The R&D spend was at ₹524 crores, down by 16% year-over-year and 9% sequentially, accounting for 6% of revenues and primarily reflecting lower developmental expenditures in the generics as compared to the previous year.

The EBITDA, including other income, stood at ₹1,783 crores, which is US$186 million, a decrease of 614 basis points year-over-year and increase of 806 basis points sequentially, reflecting a margin of 20.6% of the revenues for the quarter. The profit before tax was at ₹1,228 crores, that is US$128 million, representing a margin of 14.2%.

Effective tax rate for the quarter was at 25.6% compared to 22.2% in the corresponding period last year. The ETR for the quarter was higher primarily due to an adverse jurisdictional mix for the quarter in comparison to the same period in the previous year.

Profit after tax attributable to equity holders of the parent for the quarter stood at ₹925 crores, which is US$97 million, a margin of 10.7% on revenues. Diluted EPS for the quarter is at ₹11.1.

Operating working capital as of 30th September 2026 was ₹14,650 crores, which is 1.53 billion U.S. dollar, an increase of ₹297 crores over 30th June 2026.

Capex cash outflow for the quarter stood at ₹186 crores, which is US$19 million. Cash flow during the quarter was ₹171 crores, which is $18 million.

As of 30th September, we have a net cash surplus of ₹2,502 crores, which is US$261 million. Foreign currency cash flow hedges executed through derivative instruments during the period are US$229 million, hedged using combination of forwards and risk reversal option scheduled to mature by March 2027.

These contracts are hedged at a rate of 93.03 to 95.54 per U.S. dollar.

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

Thank you, MVN. Good day and thank you for your continued interest in our company.

Apologize for my voice, I hope it will stay consistent. We remain consistent in our strategic priorities of delivering double-digit growth across geographies and sustainable profitability through strong execution in our core businesses, progress on key assets, continuous productivity improvement, and disciplined investment in future growth drivers, both organic as well as inorganic.

During the quarter, the underlying business that is excluding lenalidomide in North America continued to perform well, delivering a double-digit growth overall as well as across North America, emerging markets, and India. We achieved an EBITDA margin of 20.6%, supported by the strength of our base business and our continued efforts to drive productivity.

Subject to successful validation, we expect to relaunch semaglutide both directly as well as through our partners in November 2026, consistent with the timelines communicated earlier. We also remain focused on advancing abatacept and other complex generics as they move through the regulatory review process in the coming quarters.

Let me now walk you through some of the key highlights of the quarter. We partnered with Takeda to bring India's first approved dengue vaccine, we call it Qdenga, to the private markets in India in the first half of 2027.

We expanded our collaboration with Gilead Sciences to enable access to investigational once-yearly lenacapavir for HIV prevention in 120 countries. In collaboration with the GARDP Foundation, we secured approval for zoliflodacin, an antibiotic used in gonorrhea treatment in Thailand within 6 months of US FDA approval.

We received US FDA approval for rituximab biosimilar, which will be commercialized in the U.S. through our partner Fresenius Kabi.

We launched nivolumab in India, marking our entry to biosimilar immuno-oncology in India. Both rituximab and nivolumab are developed and manufactured in-house.

Generic semaglutide is now approved in 10 countries across Latin America, Africa, the Middle East, as well, of course, as Canada and India. Our CDMO business under Aurigene Pharmaceutical Services generated revenues over $100 million in the last 12 months.

We continued to receive global recognition for commitment for sustainability. FinanceAsia awarded a silver medal in the Best Large-Cap Company in India category as Asia's Best Companies 2026, reflecting strong endorsement by the Asian investor and analyst community.

We improved our CRISIL ESG score to 73 out of 100 from 66, becoming the only pharmaceutical company in the leadership category. Let me take you through the key business highlights for the quarter.

Please note that all financial figures mentioned are reported in the respective local currencies. Our North America generic business reported revenue of $264 million for the quarter, accounting for 29% of our overall revenues and reflecting a decline of 29% year-on-year and a growth of 12% sequentially.

The decline is attributed to lenalidomide sales versus last year. The underlying base business, excluding lenalidomide, continued to deliver strong double-digit growth, driven by new product launches.

During the quarter, we launched six new products, including first-to-market launch of sugammadex injection. We remain on track to launch additional products, including complex injectables, during the year.

Our branded franchise, comprising India, emerging markets, and consumer health business in nicotine replacement therapy, or NRT, together accounted for 53% of our overall revenue and continue to provide a strong foundation for stable margin for the company. Our emerging market business recorded revenue of ₹2,059 crores, accounting for 24% of our overall revenue and reflecting robust growth of 24% year-over-year and 12% Q-on-Q.

New product launches across markets, including acquisition coupled with favorable currency movement, drove growth during the quarter. We introduced 27 new products across countries in Q2 FY '27.

Our India business revenues were ₹1,851 crores, accounted for 21% of overall revenues, and consistently delivering a robust double-digit year-on-year growth of 17% and 8% sequentially. Growth was driven by recent launches, including acquired brands, along with price increases and higher volumes.

According to IQVIA September 2026 data, our IPM rank improved to eighth for the quarter and ninth for the year. We continue to outperform the Indian pharmaceutical market, IPM, with moving quarterly total growth of 21% versus 14.7% for IPM and moving annual total, MAT, growth of 19.4% versus 13.2% for the market.

Four of our brands feature in IPM top 50 new launches, and we launched four new brands during the quarter. Our European business, which include NRT, posted revenue of €127 million for the quarter, accounting for 16% of our overall revenues.

Revenues declined 6% year-over-year and 3% sequentially on account of price erosion in generics, partially offset by revenues from new product launches. Growth was further affected by the continued impact of the operating model changes post NRT integration, as highlighted last quarter.

During the quarter, we launched six new generic products across markets. Our PSAI business reported revenue of $88 million, accounting for 10% of the overall revenues; revenue decline of 19% year-over-year and 3% sequentially, primarily on account of lower API volume uptake.

Our CDMO business delivered double-digit growth this quarter. During the quarter, we filed 28 drug master files globally.

We remain committed to improving the health of our business and to delivering consistent growth and sustainable margins. As we continue to strengthen our core business, we are also investing in future growth driver across peptides, biosimilar, consumer health, and innovation.

Our focus remains on progressing key products such as semaglutide and abatacept, driving operational efficiency, and pursuing targeted inorganic opportunities to support long-term growth and shareholder value. With that, I invite your questions as we move into the Q&A session.

Thank you very much, Erez. We will now begin the question-and-answer session.

To join the question queue, please use the raise hand option available on the toolbar at the bottom of your Zoom application. If you wish to exit the question queue, you may click on the lower hand option.

Participants are requested to not ask more than two questions at a time and to rejoin the queue in case of any incremental queries. I would like to reiterate that the chat will not be monitored for any questions to the management.

However, in case of any technical concerns, please feel free to use the chat option to reach out to us. The first question is from the line of Neha Manpuria from Bank of America.

Neha, please go ahead.

Hi. Thanks for taking my question.

My first question is on sema. I think you mentioned that we are on track to resume sema in early November.

Erez, I think you had given us a volume guidance last time when we had announced the disruption in supplies. Two questions on sema.

First, is the resumption happening with our own API? Is it the same partner that we're using?

Second, given what has happened in Canada, with the one player which is already there, how confident are we of meeting the guidance that we'd given for sema?

I'm very confident. The confidence is based on orders that we already have.

We just obviously need to supply. The main issue was with our ability to scale up the API.

This problem is solved, and we shipped all the necessary API to our partner to do. We still need to have the results of the validation, this is still pending, but I'm confident that it will be successful.

Then we are ready to launch. Most of the quantities will go to Canada, and some of the quantities will go to Latin America, primarily to Latin America, and a little bit to Africa.

Understood. My second question is on the gross margin improvement that we've seen in the quarter.

MVN, if you could give us some color in terms of what's driving this gross margin improvement, and is it fair to assume that as sema comes through, this is the bottom in terms of gross margin and gross margin should only improve from here?

Yeah. Neha, just as we guided earlier, we want to be gross margin in the range 50% to 55%.

That's why this quarter what we see, 52.1%. This improvement from last quarter to even this quarter is a combination of the new products and business mix.

That's where I think we will be in this zone certainly in the coming quarters as well.

Your assumption is correct.

Yes.

It will only go better from here.

Yeah.

Understood. Thank you so much.

Thanks, Neha. The next question is from the line of Dr.

Kunal Dhamesha from Macquarie. Kunal, please go ahead.

Hey. Hi, thank you for taking my question.

First one on the, one cash flow line item, on other assets and liabilities, there is a large change that has happened around ₹1,370 crores. MVN, could you please help us what is driving that?

This is a one where this SSA claim what we had, I think the payments have happened this quarter. That is a one change, and then other balances due to various operations.

That is the biggest one. If you remember, $50 million what we have provided in the Q4...

Okay. Okay.

...during this H1.

The cash flow has happened now. Okay.

Great. Thank you.

Just continuing on the gross margin front, or the other way to look at is there's a sequential improvement in U.S. revenue, a meaningful improvement, right?

Would you be able to split between the new product launches driving that and the volume improvement in existing product or pricing improvement? How should we think of that delta in U.S.

business, and the similar driver and approximate split for the gross margin improvement on a Q-o-Q basis?

Certainly a new products what we have launched in bosentan, sugammadex, I think in the U.S., I think these products, as compared to our company average gross margins, I think certainly is on the higher side, as well as what we have launched, the nivolumab. Just the business mix also has contributed to this margins.

Kunal, the main driver is actually the business mix because now the businesses that are relatively with high profitability, meaning India, EM, and the NRT, all of them are much more profitable than our average, went to 53%. This is one contribution.

The second is what MVN said, that the U.S. is more profitable because of the contribution of the new products.

The combination of both gave that. The last, we did not increase the expenses.

Expenses are essentially flat this quarter. If you grow the sales double-digit and you don't increase the cost is obviously lead to this margin improvements.

Sure. Lastly from my side, would we have also seen some drag from the raw material price increase and given I think the oil prices are high and the chemical prices are also high, and then how should we look at that cost line item from the let's say second-half perspective?

Do you think that quarter two is when we have seen most of the increase or quarter three, quarter four we can see some drag?

Here just I think this because of the war, I can say increases what we have seen in the KSMs, and then the second one is solvents, and the third is logistics freight outwards what we are exporting material from India to all countries. We have seen the increase on the three fronts, and then overall it has an impact close to 100 basis points on the EBITDA.

We believe that is already part of the gross margins, and then we believe I think this trend will continue for Q3 and Q4 as well.

I don't anticipate additional goes unless of course there will be, as much as we can predict additional geopolitical issues. With our limited understanding, if it will stay the way it is now, we are in the same place.

Sure. I have more questions, I'll join back the queue.

Thank you and all the best. Thank you.

Thanks, Kunal. The next question is from the line of Damayanti Kerai from HSBC.

Damayanti, please go ahead.

Hi. Good evening, everyone.

Erez, a clarification on semaglutide resumption. You mentioned you have already started supply of API to your partner, fill and finish partner.

However, what is remaining is the validation. I actually am not clear.

I thought validation will be done and then you'll supply to your fill and finish partner. Can you just help us understand this?

Hey,

sure. You do validation as we had to come back and basically tweak the process on the API, then you do validation of the API.

Then when you ship it to our partner, you need now to do validation on the drug product using that API. This is a process that takes about 3 weeks.

Far, give or take, all the activities are on time. That's why it took us to November from the first place.

Far it is in line with action, but you have basically validation in each stage of the scale-up of the process.

Sure, that's helpful. Other point on semaglutide, as you mentioned, so far it's approved in around 10 countries.

Didn't you secure for more approvals in other markets while you are trying to resolve the API issue, or you want to go after you resume the supply in the existing or approved market? How do you plan, because you mentioned you'll be targeting to launch in more than 70 countries across the world, right?

Yeah. The right number is now 89 markets.

Just that all the markets that the process started, we did not stop. The scale-up issue has nothing to do with regulatory process, and we don't require any amendment to the file or anything like that, everything continued.

All the approvals we got, it was in accordance to the process in each one of those respective countries, and this will continue. Some of the approvals in some other markets got delayed because of the scale-up, as we needed to ship them samples of the products, and those samples will be now sent to these places.

We will continue with the process for all the other markets as well.

Sure. My second question is on your NRT, the nicotine business.

A flat performance for last two quarters, and you mentioned it was due to change in the business model. When we should see recovery in NRT business?

Last year or last quarter, if you recall, we had to carve out from Haleon. It means that Haleon used to do it, and we gave them certain margins for handling the business.

The new business model, it means that now we are selling it either by ourselves or through distributors, but the payment to Haleon is not there anymore. It means normally in this respect, less sales and more profit.

What I can say about it, it's the comparison year-over-year will be until we will finish the year, it's we have two more quarters like that. In general, the business is doing well.

It will grow in the same way that you saw until now, somewhere between high single-digit to maybe even double-digit, and the profitability is way above the expectations that we put in the business model. We're very, very pleased with this one.

Sure. Thank you.

I'll get back in the queue for more questions.

Thanks, Damayanti. The next question is from the line of Tausif Shaikh from BNP Paribas.

Tausif, please go ahead.

Good evening, and thanks for the opportunity. First question on abatacept, while the goal date is set for December, is there any incremental update that you would like to share with us, especially from the Bachupally plant?

Yes, the plant went for the inspection. We're still waiting for the EIR to come.

The goal date is indeed December 22nd, and we are hoping for an approval. It's obviously in the hand of the US FDA.

That's helpful. On the R&D spend, which seems lower compared to Y-o-Y and Q-on-Q, while you have mentioned is on account of lower spend on Global Generics, how do you see this trend going ahead?

Shall we assume this is of new base now?

This quarter is R&D is low, absolutely you're right, and then coming quarters, what we believe, our R&D is going to be in the range of 7%

to 8%. That's helpful.

I will get back in the queue.

Thanks, Tausif. The next question is from the line of Madhav Marda from Millennium.

Madhav, please go ahead.

Hi, good evening. Just one question.

If I understood right during the initial remarks, you mentioned about one or few complex injectable launches in the second half of the year. Could you just clarify if you could share some more views on that product?

Did I hear that right that we have some complex injectable lined up

near-term? We'll talk about it more when we get closer towards the end of the year.

We do have a few interesting products in our pipeline. We've always spoken about that.

We've done a bunch of launches, we want to continue with that momentum.

I'm kind of careful to promise because I got burned in the past when dealing with approval of complex generics, and some of you been with us for many, many years and you remember that. Let's say we have some exciting products ahead.

Sir, but back in 2022, we'd done the analyst meet in Bombay. I think that time we had shared names of a few products.

Is it from that list itself, like you all had disclosed 4-5 products in the pipeline, right?

You will know by the end of the year.

Okay. Fine.

It's a meaningful product for the U.S. market, is that right?

These are meaningful products, yes.

Got it. All right, great.

Thank you.

Thanks, Madhav. The next question is from the line of Foram Parekh from Bank of Baroda Capital.

Please go ahead.

Thank you for the opportunity. My first question is on Europe business, ex of NRT.

The growth seems to be declining there, probably because of Germany. How should we look at it?

NRT is also now flatish because of the change in business model, and ex of NRT also it's declining, which is taking a toll on the Europe business. Can we expect it to go back to double-digit?

It will. The NRT will grow.

The NRT is growing and obviously that part will positively impact also the relevant part of Europe. Absolutely you are correct about the performance of this quarter.

The next quarter should be better. Let's say the NRT I'm expecting again, either high single-digit growth or even double, depends on certain scenarios.

As for Europe, I'm expecting growth, but it will not be significant growth this year.

Sure. On ex of NRT, how should we look at growth ramping up?

Ex NRT Europe, you mean?

Yes.

It should grow, probably single-digit this year.

That's helpful. My second question is on SG&A cost.

Here also the contribution has come lower to 26% versus earlier trend of 29%. Would this be the new sustainable number to look at?

Overall just want to clarify, our SG&A percentage is 32%. Just here we've also spoken of the cost productivity what we are doing is now that is coming visible.

Even coming quarters also, at least in this year coming, you may not see a significant changes to this number. It's going to be at this level, around here and there I think small changes.

I just want to reiterate to take the opportunity. We believe that the level that we agree and we discuss it all the time actually with all of you is sustainable.

We think that the 20-plus, we actually aiming for the famous 25% that we are always discussing, EBITDA. This will continue, and we are planning to consistently continue to deliver of this number.

Sure, thank you. Last question is on the India business.

We have done good, and IPM growth also is inching up in double-digit and is likely to sustain at current levels for the remaining year. Can we expect current run rate of 17% to be the growth rate for the year?

It's gone obviously to stay a high level of double-digit. It may be a little bit less or a little bit more, but we are in the right neighborhood.

Also, our growth want to be higher than the market growth by few basis points.

Sure, that's helpful. Thank you.

Thanks, Foram. Participants are requested to restrict the number of questions to two to ensure that everyone in the queue gets an opportunity to interact with management.

The next question is from the line of Prakhar Nigam, who's from BNY Mellon. Prakhar, please go ahead.

Firstly, thanks for the question. Thanks for taking this questions.

What is the company's strategy for expanding the biosimilar business within research and development and partnership? Could you please shed some light on this?

Sure. We are going after both.

We're naturally leveraging our Bachupally facilities as well additional facilities what we'll build in the future. Abatacept is going to be the first meaningful product to be launched out of our own facilities.

Rituximab is obviously one of them, abatacept is going to be obviously meaningful, and more products to follow. In parallel to that, we are talking to partners around the world, and we're trying to license product in which we don't have in our own internal pipelines.

We have it whether globally or for specific regions. Both will continue.

Perfect, thanks. One more question: so what the revenue we can expect for the next 3 to 4 years?

It depends on the success of abatacept obviously in the next coming years because this is going to be a significant product for that. Abatacept should be in the hundreds, you should expect hundreds of millions of dollars.

Followed by abatacept, then we have a pembro and daratumumab also will come within 5 years.

Okay. Thank you so much.

Thanks for taking my questions.

Thanks, Prakhar. The next question is from the line of Abdulkader Puranwala from ICICI Securities.

Abdul, please go ahead. Abdul, you've been unmuted.

Just move on, then we'll come back.

Abdul, we'll come back to you. The next question is from the line of Vishal Manchanda from Systematix.

Vishal, please go ahead.

Hi, good evening, and thanks for the opportunity. On rituximab, would it be possible for you to share where are we in terms of market share in Europe?

We have a single-digit of market share in Europe.

Low single-digit or high single-digit?

Low single-digit.

Any timelines and any guidance as to where we can be, maybe a year or two year down the line? Do we have the capacities there?

Indeed we were constrained by capacity. We should be better once we will be able to add more qualified capacity for that.

At the same time, we're talking about a product with a high level of competition, I would not expect a significant change because of that.

Okay. Second, your JV entity in China got a first generic approval for a drug called icotinib in July.

Is that contribution part of your numbers in the current quarter, or will this come in subsequent quarters?

We are recording our share of the, we are not recording the sales, we're recording our share of the profit of that. It's part of Profit.

the profit, and our share in that, which is 51%.

This would be part of the JV, share of profits from JV?

Correct, correct.

Have we kind of started selling this, and have we ramped up to our full potential? Are we the only generic here, or there are other generics that have entered?

To the best of my knowledge, we started. I don't recall about the competition, so.

Okay. Just one final one on abatacept.

Once we get the approval, how long can we take to get listed on the formularies? Will it be 6 months, or we can start getting market share quickly post-approval?

The ramp-up, like you said correctly, will be after 6 months after we'll get all the codes and all the registration. We can initially sales smaller quantities from day one.

Expect that the launch will be upon approval, but the ramp-up will be correctly after 6 months.

Got it. If I can ask one more on sema, if you can guide on where generics are in terms of market share in Canada as on date?

As of date, there is only one generics in Canada.

Right.

I don't remember their market share. Let's say that the Canadian market will love to get us as well.

Got it. Thank you.

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

Surya, please go ahead. Surya, you've been unmuted.

While Surya joins back in, the next question can be from the line of Dr. Bino Pathiparampil from Elara Capital.

Bino, please go ahead.

Hi, good evening to all of you and congratulations on a great set of numbers. A couple of clarifications: I see from the footnotes this bendamustine deal and some milestones in Russia, which is part of revenue.

Where is it included in the revenue break-up? Is it part of U.S.

revenue and Russia revenue, respectively?

It is in the sales line.

Bendamustine is in the U.S. revenue and the milestones are in the Russia revenue, am I right?

That milestone of Russia is part of EM.

Okay. Second, what is this bendamustine deal about?

What was the logic behind selling the product rights?

Which one?

Bendamustine out-licensing.

That's where I think here we thought partner, we'll get overall as a deal, I think we get a better economics. That's why we have given this rights to the partner.

Got it. In the quarter, I see that the finance income is significantly lower versus ₹290 crores last quarter and kind of similar numbers in previous quarters.

This quarter is only about ₹90 crores. Is there any reason why the finance income is so much lower?

Here what the exposure we have on the balance sheet and the forex, especially the movements from June to September of the ruble spot rates, I think significant variance. I think that has given this P&L debit, I think, in this quarter as compared to the Q1.

Sorry, in this quarter it is lower compared to Q1?

Yes,

yes, yes. Got it.

I'm sorry, one last question: what would be the capex for the full year, because the first half I have seen is much lower than your typical run rate?

Earlier we have guided around ₹1,800 crores. My view it could be a little lower, but definitely I expect around ₹1,600 to ₹1,700.

Got it. Thank you.

I'll join back the queue. Yeah.

Thanks, Bino. The next question is from the line of Amlan Das from J.P.

Morgan. Amlan, please go ahead.

Sorry, just wanted one clarification on the abatacept scenario. Apart from the IV indication, we also heard from the previous calls that for the sub-Q indication you expect an approval in the U.S.

in 4Q FY '28, and in the non-U.S. markets for both indications in 1Q FY '28.

Do the timelines remain consistent or has there been any change in this?

Consistent. We stay consistent with that, yeah.

Thank you, thanks for that. The non-U.S.

market is also roughly $1 billion USD for the reference drug. How do you expect the ramp-up in the non-U.S.

markets for you for abatacept?

We believe that European market is a very important market for this. Is going to be launched a little bit after the United States, but the Europe is a we believe is a significant market.

Okay. Lastly, for these markets, the manufacturing will be done in Bachupally itself, right?

Correct.

Okay. Thank you.

Thanks for the opportunity.

Thanks, Amlan. The next question is from the line of Dhara Ganatra from UTI Pension Funds.

Dhara, please go ahead. Ask.

Am I audible?

Yes, we can hear you.

Thank you so much for taking my question. I had one question largely from the India market perspective.

What we have seen in the last 2 years is that IPM growth has been in single-digit, high single-digits. In the last six-odd months or last three-odd months, what we are seeing that the growth has accelerated versus the last 2 years.

The growth was more driven by pricing, this time around there's a lot more volume growth. Both for Dr.

Reddy's and for the industry, what do you think is changing and what is the outlook for the second half of the year and going forward?

One thing that changed significantly is obviously the launch of semaglutide and GLP-1 product. This is a significant addition both for volumes.

The second one is that you have more new products like us, innovative products that are coming to the market. In general, this is the main contribution.

I believe that if you take the GLP-1, you'll get either close to the single-digit or to high, I did not do the math, but this is the main contribution, I believe.

Okay. You don't see any smaller players vacating the market or slowdown in trade generics or that sort of that would be driving the IPM growth?

I don't. At least the way I see also that the main growth for us is in a places in which you have those utmost demand.

For us it's primarily the innovation. The branded generics, those that we're investing behind are doing well.

The rest are doing like in the market, normally, mostly driven by prices.

Sure. Thank you.

Thanks, Dhara. We're going to try and see if Abdul can join us now.

Abdul, can you please unmute yourself? Abdul, you've been unmuted.

Looks like there's continued technical issues at his end. The next question will be from the line of Vivek Agrawal from Citi.

Vivek, please go ahead.

Thanks, thanks, Aishwarya. My question is on abatacept.

Just want trying to understand what can be the fair market share of of your biosimilar in the U.S., let's say once the product is there across the formularies, even one year down one year down the line, because we have seen in a lot of biosimilars that sometimes the market share remain range-bound to around 10-15%, and some of the products get market share as high as around 50-60% kind of stuff. What is your assessment based on the opportunity itself, competitive dynamics, as well as your capacity and capability, that what kind of the market share is a fair market share for for this product for you?

Thank you. At least at the moment, assuming that we'll get approval, we are alone.

In terms of competitiveness, it's us and the innovator. It's a medical benefit product in the United States, the sensitivity to the price and to market share is not as big as in pharmacy benefit, and I know you know that well.

I believe that a fair market share can be any number for 15% to 25%, depends of course on the success of the launch. We need also to add that once the sub-Q will come to the market is obviously going to add to the market share, which will come later.

We are talking about February '28. This is give or take, it's primarily about the sweet spot between market share and prices.

Just a clarification: this 15-25% is the entire abatacept market you are talking about, or only the IV version?

Initially, it will be only the IV. It could be that there will be some movement on that, but we will start with the IV, and the sub-Q will come in February '28.

Understood. In terms of confidence on approval based on your discussion with the FDA, would you like to assign any kind of probability how comfortable you are based on your discussion with the agency, type of queries, etc.?

What kind of the chances that you have in terms of approval, or is there any possibility of getting CRL in December and the approval may get delayed by a few months, etc.?" I'm

33 years in this business, and I had my share scars from these predictions. We feel good about the product, we feel good about the inspection, we feel good about the correspondence with the US FDA.

We want and be preparing to launch in December. If you ask me is there a chance that we'll get a CRL, there is a chance.

Obviously none of us want it, but there is a chance.

Understood. The second question is on the U.S.

generic business trajectory, right? On a quarter-on-quarter, we have seen improvement, right?

A part of the improvement is also been driven by some of the products which may face competition in the incremental quarters, Q2 and Q3. Just want to get your understanding how we should look at the U.S.

numbers or the North America numbers on quarter-on-quarter? Is there any possibility of dip in 3Q, 4Q, or you can maintain the current trajectory even going forward in the second half?

For the U.S., one we discussed is abatacept, the other is obviously semaglutide that are going, it's not the U.S., but it's were going to be included in the North America sales, and also those complex generics that are on paper. If we will have that or the combination of that, we will actually grow versus the current state, and for sure sustain it.

I believe that the numbers are sustainable. Naturally, we have bortezomib obviously after the 6 months that SKU, we have one SKU that has 180 that will obviously go down.

I don't think it will impact significantly, we will be able to absorb without a problem. Overall, I'm optimistic, but it's obviously depends on our ability to be successful with those products that emerge.

Understood. Just last question on margins, because the reason I also asked question on the U.S.

business sustainability that in the coming quarter, you are also indicating earlier that the R&D spend is also expected to go up, right? I'm just wondering if R&D spend goes up, some of these products like bortezomib comes down, and in this quarter, you also had some impact of milestone incomes, etc.

Just trying to understand from where you are getting confidence that you will be able to maintain close to around 20% kind of margins in the second half?

First, we know our numbers. I'm sharing that confidence against.

We will reach that, and it will even go higher. The reason that we feel it, first of all, is the growth that we see in EM, in India, with the consumer health, as well as the United States.

Second is the way we control the expenses. Indeed R&D we will have more, but we will have on the other expenses less.

We are planning to continue to do that. It's primarily the mix, the growth, and obviously the continued launch of new products.

For me, by the way, 20% or 21% is not impressive. We always say that we want 25%.

We are recovering from lenalidomide, and that's what we are going to be. I said it also before, now I think people believe me, we will have 20%-plus, and if we will launch successfully the way I believe semaglutide, it will be more, it will be 21%-plus.

Thanks.

Thanks, Erez. Congratulations for the great set of numbers and best of luck.

Thanks.

Thank you so much.

Thanks, Vivek. The next question is from the line of Tushar Manudhane from Motilal Oswal.

Tushar, please go ahead.

Thanks for the opportunity. Just one question from my side: what kind of price erosion we have seen in case of sugammadex post launch?

I don't recall the price erosion.

There are no price, I think, whatever we have initial contract signed, I think it is getting continued, I think, the product launch.

Probably versus the innovator, I don't remember. Yeah.

Maybe I can get back to you on this later, Tushar.

Sure. Then that's it from my side.

Thanks for the opportunity.

The next question is, I think it's a follow-on question from Kunal, next question is from the line of Dr. Kunal Dhamesha.

Hey, hi, thanks for the follow-up. Just one on the abatacept sub-Q filing, where are we in that process?

We are supposed to submit it, if I remember correctly, in February.

February of 2027?

2027, if I remember correctly.

Yeah.

Aishwarya will keep me honest.

Yes, February or March, the same, I think around same period. That quarter.

In that quarter we are going to submit. Sure,

sure. Another one on the complex generics launch that we are basically looking forward in the second half, we are dependent on the IP outcome on those launches, or is it more just the approvals?

Approvals, FDA approvals.

Sure. Are these Paragraph IV filings?

Launch and approval situation, Kunal. Sure, sure,

sure. Lastly on abatacept, you suggested that the ramp-up will happen a couple of quarters later as we get included in the formulary.

Just one, when we launch, what kind of commercial infra do we require, especially for the U.S. market, and when do we start the build-out of that?

We started to do it already 3 years ago, the main framework of the sales and marketing in North America is already there. We will hire a couple of more sales team, the team that will cover a certain geographies, this is still pending, but the lion's share of the team is there.

Sure, there's not much incremental cost related to that?

No, not much.

Perfect. Thank you and all the best.

Thanks, Kunal. The next question is from the line of Aman Vij from Astute Investment Management.

Aman, please go ahead.

Good afternoon, team. Am I audible?

Yes,

yes.

Yes. My questions are on the semaglutide side.

First, given we expect the validation to be completed by November, where are we in terms of launches in other big markets like Brazil and Turkey in terms of approval timelines and launch timelines, any rough estimate?

Brazil, likely in Q4, the beginning of Q4. The rest of the markets, we are going to launch in all the smaller markets either in the end of Q3 or at the beginning of Q4.

This is primarily the timelines that from the time that we finish validation and we start to sell batch by batch, some of it may come to the markets in Q3, some will come in January. All of it will be in that time framing, some in December, some in January.

Sure, that helped. Second question is we talked about we are still adhering to our guidance of 6 to 7 million devices this year.

What are the latest estimates say for next 1 to 2 years, FY '28 and '29? Where do you see this number?

It's obviously depends on the success of this 6 to 7, but like I mentioned in the past, the run rate of 12 to 15 million pens that we discussed in the past, it's still my estimate. Obviously, it can fluctuate as we understand better the markets once we get all the approvals, and we'll understand the competition in each one of the markets.

Right now take it as a very tentative number, but this is what we are preparing for the, let's say, the 12 months from April.

You had mentioned this number last time also. I just wanted to understand: are you more positive on the number or slightly negative?

That point.

I did not change my attitude. It's because we need to see the success of and the market share that we will take, as well as the success and the market share of our partner.

I don't have any additional information. Right now it's the same, consistent with what we discussed in the past.

Thank you for answering the questions.

Thanks, Aman. In the interest of time, we will take one last question from the line of Saion Mukherjee from Nomura.

Shyam, please go ahead.

Thanks for taking my question. Just one question on the PSAI segment: the growth has been muted for a while, how you see that growth playing out?

You also mentioned CDMO revenues at $100 million-plus. If you can give some color on the nature of this revenue, is it generics or innovation-related?

Also the new contract that you signed, when you expect that to kick in? Is that meaningful?

Any other CDMO contracts that can be added over the next year or so? Thank you.

Now thank you, Shyam. On the CDMO, I believe that the growth trajectory will come.

It's a combination of growth in discovery, what you call innovation, this is growing in double-digit. We have also certain contracts with big companies in which they want to transfer their production into our lines, we have several of these projects.

As well as a normal CDMO, meaning that we are doing project for Phase III, Phase II for innovative companies. I believe that this business should grow and should reach two to three times of this numbers in the next 3 to 4 years.

This is still our plan. I believe that we should get there.

On the API side, part of it is that our older products have less demand. Part of it is because most of our launches and most of our activities are done more of as a B2B of a finished product.

This is actually going well. Part of it we are recognizing as part of PSAI, and part of it we are recognizing as part of the relevant EM or North America.

Overall, the B2B is actually growing. The API merchants part of it is declining because most of the product, the peptides and this kind of stuff, people prefer to buy the finished good rather than to buy the API.

Understood. Thanks, Erez.

Thank you.

Thanks, Shyam. That was the last question.

Thank you, all, for joining us today. We value your time and participation on this call.

If you have any further questions or need any additional information, please do feel free to reach out to me. With that, we conclude today's earnings call.

Thanks, everyone.

Thank you.

Thank you.