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Edited Transcript of DRREDDY.NSE earnings conference call or presentation 1-Nov-19 1:00pm GMT

Q2 2020 Dr.Reddy's Laboratories Ltd Earnings Call

Andhra Pradesh Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Dr.Reddy's Laboratories Ltd earnings conference call or presentation Friday, November 1, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Amit Agarwal

Dr. Reddy's Laboratories Limited - Director of Finance, FP&A and IR

* Erez Israeli

Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council

* Saumen Chakraborty

Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council

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Conference Call Participants

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* Abhishek Sharma

IIFL Research - VP & Head of Life Sciences

* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Anubhav Aggarwal

Crédit Suisse AG, Research Division - Associate

* Damayanti Kerai

HSBC, Research Division - Analyst, Healthcare and Hospitals

* Neha Manpuria

JP Morgan Chase & Co, Research Division - Analyst

* Nitin Agarwal

IDFC Securities Limited, Research Division - Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Ranvir Singh

IDBI Capital Markets & Securities Ltd. - Pharma Analyst

* Sameer Baisiwala

Morgan Stanley, Research Division - Executive Director

* Surajit Pal

Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst

* Surya Narayan Patra

PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Dr. Reddy’s Q2 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Amit Agarwal. Thank you. And over to you, sir.

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Amit Agarwal, Dr. Reddy's Laboratories Limited - Director of Finance, FP&A and IR [2]

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Very good morning, and good evening to all of you, and thank you for joining us today for the Dr. Reddy’s Earnings Conference Call for the Quarter ended 30th September 2019.

Earlier during the day, we have released our results and the same are also posted on our website. This call is being recorded. The playback and transcript shall be made available on our website soon. All the discussions and analysis of this call will be based on the IFRS consolidated financial statements. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy's, comprising Mr. Erez Israeli, our CEO; Mr. Saumen Chakraborty, our CFO; and the Investor Relations team.

Please note that today's call is the copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlet without the company's express written consent. Before I proceed with the call, I would like to remind everyone that the safe harbor language contained in today's press release also pertains to this conference call.

Now I hand over the call to Mr. Saumen Chakraborty. Over to you, sir.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [3]

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Thank you. Greetings to everyone. Let me take you through the key financial highlights for the quarter. This quarter, we had certain one-off items impacting revenues, gross profit margin and SG&A, which I would cover as part of the respective [section]. Herein, all the amounts are translated into US dollars at a convenient translation rate of INR 70.64, which is the rate as of 30 September 2019.

Consolidated revenues for the quarter are at INR 4,801 crores, which is $680 million, registering a growth of 26% year-on-year and 25% on a sequential quarter basis. It includes an amount of INR 723 crores, recognized as revenue towards the sale of 2 neurology brands of our Proprietary Products business.

Even after netting off this amount, revenue during this quarter has been the highest ever for Dr. Reddy's. This has been made possible by registering a good growth in the PSAI, Europe, Emerging Markets and India businesses. However, NAG performance could have been better.

Consolidated gross profit margin for the quarter is 57.5% with an improvement of 250 basis points on a year-on-year basis and 590 (sic) [580] basis points on a sequential basis. Gross margin for the Global Generics business was 55.5% and for PSAI business was 24.6%. While the overall gross margin has benefited due to revenue recognition of the PP neuro brand, it was impacted due to certain one-offs, including but not restricted to the impacts of the voluntary recall of Ranitidine in the U.S. market. Adjusted for the one-off, the normalized gross profit margin for the quarter is about 51.5%. The SG&A spend for the quarter is INR 1,678 crores, that is $238 million. As part of our quarterly impairment testing analysis, we concluded that the carrying value of the intangible asset is not reflective of the current market reality for 3 of the products namely, Tobramycin, Ramelteon and Imiquimod acquired from Teva.

While the first 2 products faced increased competition and substantial price drop during this quarter, we have taken a decision not to launch the third product. Accordingly an impairment charge of INR 355 crores has been considered in the current quarter. Beyond the impairment charge, there have been additional one-off over INR 100 crores, including but not restricted to the cost associated with the sale of 2 neurology brands. Adjusted for the one-off, the normalized SG&A spend is lower on a sequential quarter basis. R&D spend for the quarter is INR 366 crores that is $52 million and is at 7.6% of the sales for the quarter. The R&D spend is lower by 11% year-on-year, but higher by 1% on a sequential quarter basis.

Considering the current state of activities, we believe that the overall R&D for this fiscal would be in the range of $200 million to $240 million. The EBITDA of the quarter is INR 1,434 crores that is $203 million, which is around 29.9% of the revenue. The net tax for this quarter is a benefit of INR 326 crores due to recognition of deferred tax asset for INR 522 crores, primarily related to MAT credit.

Pursuant to the recent amendments in the taxes and laws in India, the MAT rate has been reduced from 21.55% to 17.47%. Consequently during the quarter, the company has evaluated the recoverability of the unrecognized MAT credit and are certain that it is likely to recover the MAT credit within the stipulated period as per Income Tax Act. Accordingly, the company has recognized a deferred tax asset of INR 499 crores, related to the unrecognized MAT credit in the current quarter. With this development the ETR for this financial year is expected to be less than 10%.

EPS for the quarter is INR 65.82. Operating working capital increased by around INR 350 crores, which is $49.5 million. This increase is attributable to an increase in receivables in line with the [sales intake]. The net working capital days has increased by 4 days against the last quarter. We invested INR 108 crores which is $15 million towards capital investment in this quarter. The free cash flow generated during this quarter was INR 874 crores, which is $124 million. Consequently our net debt-to-equity ratio has improved further and is at 0.01 as on 30 September 2019.

Foreign currency cash flow hedges for the next 6 months in the form of derivatives for US dollars are approximately $300 million, largely hedged around the range of INR 70.20 to around INR 73.95 to the dollar. In addition, we have balance sheet hedges of $564 million. We also have foreign currency cash flow hedges of RUB 1,650 million at the rate of INR 1.0813 to the ruble, maturing over next 6 months.

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

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [4]

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Thank you. Saumen. Greetings to all. We had a good quarter and are progressing well in implementing our strategy in the focus spaces we have communicated. In this quarter, we generated INR 870 crores in cash, which improves our financial strength and enables us additional means to grow in the future. This quarter, we had another one-off in the financial performance, but we believe that this is not going to impact our strategy and our future growth.

Now let me take you through the key highlights across our businesses. Please note that all the references to numbers in this section are in the respective local currencies.

Our North America generics recorded sales of $202 million for the quarter and declined by 1% (sic) [flat] year-over-year and 14% (sic) [13%] on a sequential quarter basis. The sequential decline was primarily driven by certain issues impacting the quarter such as a, provisions related to nationwide recall of Ranitidine product due to NDMA impurities limits following the FDA's caution note regarding the same. We now have completely suspended the sales of Ranitidine OTC and Rx product. And b, logistics-related challenges leading to temporary disruption in supplies, which has been addressed since. We expect the sales run rate to normalize from Q3 onwards.

During the quarter, we launched 8 new products, including some first-to-market and limited competition products like Carboprost injectable, Pregabalin, Fosaprepitant injectable and OTC Guaif / Psuedo. Overall, we launched 13 products in the first half of the fiscal. While we continue to work towards ramping up our market share across the key launches, we are on track to launch more than 30 new products in the current fiscal.

Our Europe business recorded sales of EUR 35 million with a strong year-on-year growth of 50% (sic) [44%] and sequential growth of 15%. This great performance was driven by increased contribution from new launches, coupled with base business performing well across all the European markets. We expect this business to continue to perform well during the balance of the year. Our Emerging Markets business recorded sales of INR 820 crores (sic) [INR 828 crores] with a year-on-year growth of 10% and sequential growth of 13%. Within EM segment, Russia business grew at 6% (sic) [8%] year-on-year and 2% (sic) [4%] sequential in constant currency. New launches and higher volumes contributed towards the overall growth, which were partially offset by lower realization in few of the markets. This quarter, we met a great milestone for our China business. As many of you may be aware, Dr. Reddy successfully emerged as one of the winners for the supply of olanzapine in the centralized drug procurement program, becoming the first Indian generic company to have prevailed in the new tendering process. This award is a testament to our focus and efforts towards building China as one of a key growth drivers for the company. We remain committed to building a healthy pipeline of products to enable us to support Chinese patients with more such opportunities going forward.

Our India business recorded sales of INR 751 crores with a year-on-year growth of 9% and a sequential growth of 8%. During the quarter, we launched 5 new brands. As per the [secondary research] reported by IQVIA, we registered a healthy growth of 13.4% ahead of total market growth of 13.1% for the quarter ended September 2019. We continue to focus and strengthen our presence in India market.

Our PSAI business recorded sales of $100 million with a year-on-year growth of 16% (sic) [18%] and sequential quarter growth of 54% (sic) [57%]. We had a strong quarter for the business, and we expect to build on this momentum going forward. On the R&D front, we filed one ANDA during this quarter and the filing run rate is expected to ramp up during the balance of the year. As of 30 September 2019, we have 99 cumulative filings pending for approval with the USFDA, including 96 ANDAs and 3 NDAs. During the quarter, we have also filed 8 drug master files globally. We continue to strengthen our product portfolio across all of our focus markets. On the quality and regulatory front, we had several audits during the year, carried by USFDA and other agencies. And I'm quite satisfied with the overall audit outcome. We believe that we should be able to appropriately address wherever they are open observations from these audits. As regards to the API, Srikakulam plant, what we call CTO-VI, we are expecting an inspection from the USFDA in the near future.

Our Proprietary Products business pursuant to the closure of the divestiture of our 2 neurology brands to Upsher-Smith, we recognized income of $105 million during this quarter representing the upfront consideration and discounted value of near-term milestones. Further we are happy to announce that TOSYMRA brand for intranasal Sumatriptan was launched by Upsher-Smith in the United States in October 2019. Going forward we remain focused on addressing unmet and under met medical needs of patients suffering from critical and chronic illness globally. We are focusing on our core capabilities in R&D to build a self-sustained business that can consistently deliver high-value, globally relevant, differentiated products that provide meaningful health economic outcome to patients and payers. The NDA for DFN-15 which is oral celecoxib has been accepted by the USFDA and progress on all of our other R&D program is on track. While we continue to progress well on the organic growth for each one of our focus businesses, we are also evaluating multiple inorganic opportunities, which can accelerate our growth journey further to reach more patient and create value for all stakeholders.

I am pleased with the shift seen in the organization behavior toward cost consciousness and higher prudence toward cash utilization. We are taking significant effort to improve on multiple [health] parameters in addition to financial performance. And believe that we are progressing well in the right direction.

Within this, I would like to open the floor for questions and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Prakash Agarwal from Axis Capital.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [2]

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Sir, question -- 2 questions, one is on the U.S. business. Just trying to understand the reasons that you have cited in terms of the logistics, the price erosion, volume erosion and some bit on Ranitidine, if you could just break it down so that we know that what is the normalized -- if things wouldn't have happened, what would have been the normalized U.S. sales run rate? Would it be similar to last quarter, a tad lower or much lower?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [3]

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It will be a bit lower than the previous quarter, not much lower.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [4]

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Okay. So are we quantifying the Ranitidine impact and the logistics impact, that would be really helpful.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [5]

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Ranitidine will be quantified when we are releasing 6-K very shortly, that you will find out there. Others are not quantified.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [6]

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Okay. And with respect to going -- coming back to the normalized run rate, do we expect going forward with these new launches to ramp up coming back to Q1 run rate? Or how should we think about the rest of the year?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [7]

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So -- we are planning to grow and we're not going to disclose specific numbers, as we normally do not do. So but absolutely, the performance of this quarter was impacted significantly, the main difference by the factors that we mentioned. On top of this, we had a price decrease on some of the products, so it was not the only reason for that. These 2 issues naturally will not be there in the Q3 and plus, I believe that we will ramp up, so it's supposed to be better. Overall, we are planning to grow in North America.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [8]

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Okay. And sir, second question on the key products. So if you could share any progress on our biosimilar portfolio, which is the XenoPort, rituximab and the peg?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [9]

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So on biosimilar, we're talking about rituximab, this is -- the trial is progressing well. On your first question, just to add, and naturally on top of it, we see an opportunity with Suboxone. And that there is a certain announcement that the AG will not be there, and naturally, it's opened an opportunity for us which we hope to exploit.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [10]

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So on XenoPort, I would tell you the status. We successfully completed the Phase IIb study. Now it really does support our belief that this will become the first approved oral prodrug of Monomethyl Fumarate [plus] for treatment of moderate to severe plaque psoriasis in U.S. We are in active dialogue with the USFDA right now for crafting the way forward with respect to the design of the Phase III trials.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [11]

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Okay. And you are also developing Pegfilgrastim, right?

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Unidentified Company Representative, [12]

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Fresenius.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [13]

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That is Fresenius Kabi. We earlier had an agreement with Merck Serono which was acquired by Fresenius Kabi, so they would have done [metastasis].

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Amit Agarwal, Dr. Reddy's Laboratories Limited - Director of Finance, FP&A and IR [14]

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Yes. So Phase III was completed. They are preparing that file for filing. We do not know the date but they should be filing.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [15]

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Okay. And we do have economic interest, right?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [16]

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Yes, yes.

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Amit Agarwal, Dr. Reddy's Laboratories Limited - Director of Finance, FP&A and IR [17]

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Absolutely.

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Operator [18]

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The next question is from the line of Anubhav Aggarwal from Crédit Suisse.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [19]

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First question is, can you just elaborate a little bit on this disruption which you mentioned, related to logistic issue? Is this Dr. Reddy's-specific issue or this was a industry issue?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [20]

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Dr. Reddy's-specific issues. We had the issue with the distribution of the products in the U.S. for a certain period of time.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [21]

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But this was across the basket or this is very few products, you had the issue?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [22]

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Across the basket, it was just the issue in the way we distributed products. Nothing special and we overcame it.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [23]

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But just -- I'm just trying to understand, so the way it's worded in the press release, it looks like the sales that were lower this quarter is the lost sales. So I'm just trying to understand, let's say x amount of dollar we lost -- we showed as lower sales in this quarter.

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [24]

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We had less days that we could ship product. So naturally, it resulted that for the quarter, we had lower sales.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [25]

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But you are right to interpret in terms of that since it has happened in the last month of the quarter, we could not get back to the normalcy during the quarter. Now things have become normal, so there have been some problem in shipping out of the warehouse during the last part of the quarter.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [26]

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So I'm just trying to understand a very simple question that lets say, x million dollars was the sales in each quarter. Are we going to -- over a period of 2, 3 quarters, are we going to get 3x let’s say over 3 quarters, so are we going to get 2x because of the supply issue?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [27]

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We did not lose sales because of the supply issues.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [28]

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But are we going to get, in the next quarter, is this...

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [29]

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Yes. Whatever, we could not shift in the last quarter, that part of the things we would have been shifted in the last month -- I mean in this quarter, early in the month of November -- sorry, October.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [30]

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So this quarter should show a higher sales for whatever we have done [lower] in the second quarter, right?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [31]

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This quarter should be better than -- than the second quarter, yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [32]

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Okay. So -- and second question was on generic Suboxone. I just wanted to check that can our capacity support, let's say if our market share were to double, do we have enough capacity to support that?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [33]

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Yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [34]

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And just one clarity on generic Suboxone. We did not get approval of this product. We were one of the [share] generics. Is that what -- what was the reason that we did not get approval of this product?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [35]

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Which product? And what product?

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [36]

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This is generic Uloric -- sorry, Uloric was the brand, generic Febuxostat.

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [37]

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Okay. I don't have the detail, I believe that maybe it's because of the CTO-VI situation, but I'm not sure about it.

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Amit Agarwal, Dr. Reddy's Laboratories Limited - Director of Finance, FP&A and IR [38]

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Maybe we can check and get back to you.

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Operator [39]

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The next question is from the line of Neha Manpuria from JPMorgan.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [40]

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Sir, first on the SG&A. On the INR 100 crores, I understand some part of it is transaction cost related to proprietary brand sales, but could you give us some color on what the other one-off was? And should we see the SG&A spend continue to decline from the current quarter level, like you've indicated or in the second quarter? Or this is -- adjusted for this INR 100 crores is the new level?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [41]

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So whatever we can disclose and we need to disclose, these are all to be there in the 6-K and there will be certain areas where there could be specific confidentiality and other that we cannot speak so directly. But the crux of the thing is at a normalized level, the SG&A, actually we are improving. And this quarter, at a normalized level is lower than the just the previous quarter, that means from the Q1, Q2 we have improved on SG&A, but because of the one-off it is looking higher.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [42]

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Okay. So sir, if I were to look at our margin trajectory, given that a lot of our growth is now coming from Emerging Markets, India. Is it fair to assume that this growth should help improve EBITDA margins? Is that the right way to look at our margins?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [43]

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Yes. Over the time, yes. Yes, go ahead.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [44]

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And when you say over time that would be couple of quarters or do you see that happening more gradually?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [45]

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So first, to first appreciate that over the last few years there have been continuous pressure of price erosion. And we, at other hand, we have been constantly -- continuously trying to improve productivity and have all the cost excellence program to neutralize the impact of so severe prices erosion, particularly in U.S. market. And we have been trying to keep the gross margin at that level. But at an EBITDA level, overall, since multiple things that we are doing, we have come to a level where we are not very far from the right kind of benchmark [for the pharma] industry what kind of EBITDA we should be having. So that -- what dropped for subsequent to the [warning letter] situation. I think we are recovering -- more or less we have recovered. And as we [raised yesterday] that if there is no other specific impact, which is dropping down, we hope to continuously improve.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [46]

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Understood. And my second question is on your use of cash, particularly after the cash flow in this quarter. You mentioned in the opening comments that you are evaluating quite a few opportunities. Again, are these focused on probably India, Emerging Markets, if you could give some areas, where we're looking at deploying this cash in?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [47]

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No, absolutely. We're looking to invest in our spaces, in all the relevant spaces. The primary focus is on branded generic markets, India, in particular. This is the primary focus. At the same time, the efforts and the discussions are in each one of the spaces in order to support the growth that is required in the strategy. We are doing it with the following [aims]. One, It has to support the strategy. It's something that will add capability, and it makes sense economically and is better for the shareholders, if we buy the capability then develop it ourselves. And it's complementary to the organic growth of [indiscernible] space. We'll continue to be an organic growth company. So this is a complementary. But naturally, the fact that essentially, we have no debt and this is going to improve even further in the future, if we find the opportunity to increase shareholder value by having a good deal, we'll not hesitate to do so.

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Operator [48]

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

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [49]

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Sir, can you elaborate a bit more about our progress in China? So are we targeting mainly that tender market or we're looking into other channels also? And any sales target, or any guidance we're having for China market in the next 3 to 4 years, if you can share that?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [50]

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Sure. So China is a very important market for us, it's one of our leading spaces. In China, we are working in the following channels. One, our regional channel that is primarily through our partnership or JV in China in KRRP. And this is selling and marketing of branded generic products. This is also progressing well and it's growing double digits, as we speak. In that space, we are 20 years now. And we'll continue to be in that space.

What was opened up to us and I discuss it in a couple of the investor meetings, given the new regulations in China, 2 channels are now open for us. One is direct sales of generic product is, [well], getting a [GA] recognition. And when you do that, the idea is to partner -- this is not through the partnership, this is where we partner a company that has the relevant sales force for this therapeutic areas, but we can compete on the slot of the innovator in that relevant hospitals. The third Channel is this new procurement program. This is a relatively new development in China, which is probably going to be scaled up and in which, if we have product that means with Strattera we will try to participate and win our share as well. And we want to grow in all 3 channels, not just in the last one. And we are happy that we had -- the olanzapine is the first time that we enter into the third channel that I mentioned. We are already in other 2.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [51]

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Okay. So any target we have in mind, as I said for near to medium term, where we would like to reach?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [52]

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Not something that we want to share because we are not giving guidance. But it's way, way, way higher than what we have now.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [53]

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Sure. And do you have any update for our key filings of NuvaRing and Copaxone from what we shared earlier? Or anything, any update there?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [54]

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On both we -- on NuvaRing and generic Copaxone, we are on CRL, and we are addressing it. We continue to address it. And we hope to file a response to that in the next few months.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [55]

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For both the products? Or first, NuvaRing or...

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [56]

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For both products. We don't -- we cannot yet commit to a specific date.

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Operator [57]

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The next question is from the line of Abhishek Sharma from IIFL.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [58]

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Can you hear me?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [59]

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Yes.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [60]

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Sir, two questions. First, on China tender market. Olanzapine, I was just trying to understand the dynamics of pricing there. How is the pricing for olanzapine in the tender market versus the private market?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [61]

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We are not telling specific numbers naturally of pricing the product. But as you can imagine, it's a tender process, so it was significantly lower.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [62]

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And would that mean that you would sort of look at sort of much higher volumes through the tender market? And is that how you're looking at it?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [63]

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Yes. Yes. It's a higher volume, it's lower prices but it's still very profitable. And you don't need to have the sales and marketing efforts, you don't need to go to physicians and use sales efforts, like you need to do for example, in the second channel that I mentioned. So it's more like, if you wish, other tender systems in other countries.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [64]

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So net profit is higher on that front.

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [65]

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Yes, net profit is actually higher.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [66]

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Right. All right. The other question was on receivables. There's a sharp jump this quarter, despite the fact that there has been a dip in the U.S., so just wanted to understand with respect to that?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [67]

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See on overall, working capital front, I already shared that there is only 4 days increase in the number of days. So we are not concerned about it. Whatever jump [in this rule] has happened, it is in line with the [sales].

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Operator [68]

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

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [69]

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Just wanted to have some more clarity on the Suboxone. Recently in the opioid lawsuit settlement, Teva, what has offered to supply subsidized Suboxone tablet for a longer period. So what is the business dynamic with Suboxone, the films will be releasing? And whether that would really impact the opportunity what we're targeting. Anyway we have so far progressed in terms of a market share around 15% only in the Suboxone. So what is also has restricted our penetration faster? Any -- something on the Suboxone side that you are -- you can.

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [70]

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So firstly, I would like to address our market share on Suboxone is higher than 15%. The second, the development that was shared by Indivior, I think even yesterday, about the potential exit of the AG, so naturally this has opened for us an opportunity that we are planning to pursue. As for the Teva deal I am -- naturally, we are not part of that activities. So I'm learning about it, and we are monitoring it in the same way as others, and once we will come, we will try to understand the outcome. I don't know what is the pace and how it will impact the market.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [71]

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Okay. Sir, is it right that -- hello? Hello?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [72]

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Go ahead.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [73]

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Yes, yes.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [74]

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Yes. so it right that -- earlier also it has been commented that way by industry people that hardly there is a difference in Suboxone tablet versus the film version, the sublingual. So is there any practical difference there? Or it is not and hence, there could be a kind of impact, if there is a subsidized supply by a large player?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [75]

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Naturally, the film is more advanced version and gives better outcome for the patient that are taking it. So that's why the film is growing versus the tablets originally. And in the natural course, so that this phenomena will continue. I don't have any visibility if any other developments in the market will happen. I cannot speculate on it.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [76]

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Okay. And second thing, one clarification about this $105 million what that you've received from the disposal of the 3 brands (sic) [2 brands]. So initially, you were talking about in 2 tranches, like, $70 million, $40 million. So that means it is clear that, okay, the entire of the $110 million something like that is already been factored in this quarter, right?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [77]

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Yes.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [78]

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Yes, yes.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [79]

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And regards to the European growth, sir, how should one really look at. I think it has -- on a -- sequential has improved significantly, but Y-o-Y it is still stronger double-digit kind of. So what is driving, whether it is on a relatively low base it is growing? Or it is -- any sense on that front?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [80]

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Sure. First, for many years also we -- we were not performing well in Europe, and we made certain adjustments to the portfolio, to the team and to the activities and I think now we are starting to bear the fruits of that. Overall, Europe will grow significantly of what we are now. The growth now is primarily due to launches of couple of very good products in various markets.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [81]

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Okay. Just one thing, sir. Is it fair to believe that NuvaRing is a product opportunity for FY '21?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [82]

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NuvaRing is an important product for us. And once we will get approval we will know. I absolutely hope so.

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Operator [83]

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

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [84]

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Sir, one question on China is to the extent that you are going to do local manufacturing out there, which I think would be a substantial part of your business. How does it make you more competitive than the other local Chinese players? And second, how do you bring to table India's cost competitiveness, when you're participating in Chinese market?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [85]

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Yes. Thank you, Sameer. We are making products now. We have a plant that is making product for China, primarily for the KRRP products, and we took a decision and we are implementing an expansion for that plant. So this will take some of the growth. On top of it, we are moving few products to a contractor, to make in China. There are certain advantages for example, exemptions from certain tests when you do a bio study and make products in China, and we will exploit that. And some products we will sell out of our Indian facilities. So it's a combination of the 3 of them.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [86]

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Okay. Great. And sir, second question is on the U.S. pricing environment. My understanding is over last 2 quarters, most companies both manufacturers as well as your customers have come back to say that the base business price erosion is roughly about, somewhere around mid-single-digit, call it 5% to 7%, but your commentary seems to be suggesting that it's much worse than that. Is it true? And is this anything specific to Dr. Reddy’s?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [87]

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Yes. So it's not an overall market dynamics. It's a specific situation in which -- in products that faced new competition, normally for that particular product there is a double-digit decrease in price in which you can either protect your share or this -- or drop the product. And now it depends what is the mix of those in your mix. In our case, for the quarter, it was relatively higher.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [88]

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Okay. And going forward, for the base business price erosion, what's the outlook for your portfolio?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [89]

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The same like we discussed in the past. I don't see any specific outcome for the base. The main erosions, I believe, going forward will be on new launches that naturally, over time the price that we launch with will be different as more competitors will join the game.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [90]

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Okay. And sir, just one final one from my side and that's about generic NuvaRing. I remember, in the last call you mentioned that until you get the full response from FDA and see the new queries from them, you would not know what's the time lines and what kind of complexity and what kind of work is required to be done? I'm sure -- I'm pretty much sure that now you've got all that information if you can add any more color to what you had already spoken on the call that would be great, sir?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [91]

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We got the CRL, if I'm not mistaken, in August, right? In August. And it was related to some specs of the products that we had to address in certain testing. For that, we had to do some experiments and to buy certain equipments. This is the work that will take few months starting from August. And if everything is successful we will address and answer the CRL and naturally, we are still very keen on this product.

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Operator [92]

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The next question is from the line of Ranvir Singh from IDBI.

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Ranvir Singh, IDBI Capital Markets & Securities Ltd. - Pharma Analyst [93]

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Sir, my question is related to the Proprietary Products thereafter divesting this 2 molecules, what is the outlook there? So what kind of investments we are making? And what we're doing actually there?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [94]

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Thank you. First, we still have a pipeline of products that we need to finish certain experiments and in order to further find the partner so that, is there a licensing in all [directions]. So we are looking for either get what you call long-term stream of revenue, which will be more of a licensing in nature of the product, or divestitures which means relatively high level of upfront and lower level of royalties going forward. So both models we're pursuing on the project that we have.

In addition to that, we're building this team to be -- to continue to develop product. This time, less dependent on the U.S. market, but rather more globally, in which we want to continue to develop products for unmet need with -- basically, if you wish the desire of the -- if you ask to have a meaningful stream of revenue from each one of this development, we can either develop directly partnering with a potential partner globally or do it after certain milestones, if there is an interest. The new model is pretty simple. Stream of revenue in, then it allow certain stream of revenue out and overall, this is going to be going forward a profit center for us rather than an investment for long term.

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Ranvir Singh, IDBI Capital Markets & Securities Ltd. - Pharma Analyst [95]

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Okay. So what portion of our R&D is going towards this Promius Pharma?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [96]

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Relatively small portion of it.

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Ranvir Singh, IDBI Capital Markets & Securities Ltd. - Pharma Analyst [97]

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Okay. Fine. And secondly, on Ranitidine, I think 2 events which we -- that we recalled and that we halted the sale on, I think last week of September. So in this quarter, virtually, what we have factored in is recalled value and then the discontinuance of sales. So what I wanted to understand that it's entire Ranitidine issue has been factored in this quarter or part of it is likely to come in subsequent quarter?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [98]

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No. We have covered whatever is impact of voluntary recall, so we have covered it fully.

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Ranvir Singh, IDBI Capital Markets & Securities Ltd. - Pharma Analyst [99]

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Okay. So what I see that a few other regulators like [Australia] has given go ahead with Ranitidine in present form to some of your competitor. What I wanted to understand that the standard that USFDA came out for this Ranitidine. Is there any further submission or something is happening there to lower their standard, so that the Ranitidine, the content of NDMA can be permissible going forward?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [100]

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I don't know what eventually will be the right level of NDMA and where it will lead for us. By the way it's globally. So we will not sell Ranitidine. We have one standard in that respect. We will not differentiate between countries as related to safety of patients. But overall, it will be interesting to see if there will be a consensus about certain level that is possible to sell this product. And then if we'll have the relevant API that can meet that, we can always consider to go back. But right now, we are not aware of that API and that limit.

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Ranvir Singh, IDBI Capital Markets & Securities Ltd. - Pharma Analyst [101]

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Fine, fine. And the last one. I couldn't understand that sharp jump in S&GA, so selling and administration expenses. Could you give some light on it?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [102]

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Sure. One, of it is the impairment effect, which we have taken during the quarter. And then I also explained there are certain one-offs which have contributed to more than INR 100 crores during this quarter. And then of course, there is also this cost of sales associated with the PP neuro brand and that amount already we have declared in the press release. So overall, that's why the SG&A has gone up but I also said that, if you normalize the one-off, actually there is an improvement in the SG&A productivity.

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Operator [103]

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

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [104]

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Just one clarification that whether the Carboprost, which is the [F-to-F] and the sort of exclusive product opportunity, whether we have gained meaningfully there by this quarter? Or the true benefit is yet to be seen?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [105]

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So this product, we have been able to get our market share. Those will ramp up further going forward. But largely, market share wise we are there.

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Operator [106]

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

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [107]

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Could you please tell me, there were 2 events. One is your logistical challenge, one is your recall of Ranitidine. Now these 2 events, will it lead to some bit of penalty payment going forward as in overhead costs say, in H2?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [108]

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No.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [109]

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None of them will lead to any kind of penalty payment?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [110]

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Whatever had the penalty was already booked in this quarter.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [111]

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Okay. So if there is any penalty, you have already booked.

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [112]

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Whatever is related to any activities that related to that, including penalties was included in the quarter.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [113]

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As you guided initially on this fiscal, what could be your current guidance in terms of launch of product in this year? And what could be the kind of growth we could expect from U.S. revenue year-on-year?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [114]

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So as I said in my (inaudible) it was 30 -- we are still on track for 30-plus products for this fiscal. As for guidance for sales, we're not giving guidance.

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Surajit Pal, Prabhudas Lilladher Pvt Ltd., Research Division - Assistant VP & Senior Research Analyst [115]

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Last question is that regarding Suboxone and their interchangeability between tabs and films. Do you think that this Teva deal could ultimately erode the sales of under Medicare, Medicaid program or some of the insurance formularies might be forcing the users to go for tablets from films?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [116]

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I mentioned it in previous question, we are not part of the discussion. I don't know what is the Teva deal. I'm reading about it in the media. And I cannot speculate what will be the outcome of it.

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Operator [117]

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

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [118]

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Saumen, on the SG&A, you talked about the adjustment of INR 100-odd crores in the current quarter to get a normalized number. So does this reflect a full impact of the discontinuation of the proprietary business from this quarter onwards?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [119]

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So of course, the -- when you say Proprietary Products business, there is no discontinuation of Proprietary Products business. And what we have done we...

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [120]

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I mean -- I meant the marketing part.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [121]

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There is a commercial arm including the sales and marketing from those neuro franchise now that has been reduced, so that impact is there. That's helping in terms of SG&A reduction.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [122]

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Okay. Adjusted for that, that's probably reflected in this quarter. Now going forward, how should we really look at the SG&A base. I mean you've done a very decent job on this cost over the last 3, 4 years. Do we still see an opportunity to keep SG&A in absolute terms at these levels, around these levels? Or you -- how one should budget in some amount of inflation as we go through the years?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [123]

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So if the sales force of our base has been reduced in is North America that is not one-off. [So that is unrelated], so that is going to stay. So why should we adjust that. And anyway what -- with the focus that we have for our productivity improvement and cost excellence has given us good results. But we believe that there is still further scope and we're continuing on that focus.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [124]

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Okay. And secondly, on the U.S. business, in the current quarter, we had about 8-odd new launches and despite that you've sort of mentioned that -- even adjusted for the 2 factors you mentioned, the business was lower on a Q-o-Q basis, the margin is lower on a Q-o-Q basis. So in this context, when you look at the business and you had a reasonable number of launches, what will really be required to move the needle on the business from a revenue growth perspective in the U.S.?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [125]

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We sell more.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [126]

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I mean do we need some big blockbuster launches, till the time they come through, we will not have a meaningful delta on the U.S. sales? How should one structurally look at this business. The way that this business is in the U.S. right now?

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Erez Israeli, Dr. Reddy's Laboratories Limited - CEO & Member of the Management Council [127]

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We have a great portfolio. We just need to sell more of it.

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Operator [128]

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We'll be able to take one last question. The last question is from the line of Aditya Khemka from DSP Mutual Funds.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [129]

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Erez or Saumen, could you just talk about the gross margin. So your adjusted gross margin for the quarter you said is 51.5%. And if I remember correctly, when we were speaking after the FY '19 results, the range that you had cited for your gross margin, over the past several quarters was between 53% and 56%. So clearly, we are lagging our historical range of 53% to 56% gross margin?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [130]

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So in the same quarter when I spoke, we also said that the way we put our business model is expected to deliver north of 50%, but it has been fluctuating between these 2. And yes, I agree, last couple of quarters, we are outside that range, and we are lower than 53%. But we'll hope to get back there, that's all I can say.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [131]

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Sorry. I couldn't catch that last bit. You expect to?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [132]

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I said we can hope to get back to this range, that's all I can say.

You have to also understand, there is -- there have been impact of price erosions in USA and also in Europe. So we have been improving on our cost structures [and all]. To be in that gross margin range. We're trying to do this [impossible], But there is still scope for improvement we'll have to do.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [133]

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Sure. I understand. My only doubt there was that since we are now more inclining towards branded generic businesses versus Europe and U.S. being more generic, generic businesses. So from that perspective, I believe our gross margin should have already started reflecting improvement versus what it historically was?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [134]

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But see what happened in this quarter, we had much higher PSAI. The last quarter, PSAI was lower. So when the mix changes that would also have an impact in the overall gross margin. So there's multiple factors, which contribute to the overall gross margin numbers.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [135]

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No, that's fair enough. Just another clarification on Ranitidine. Were you selling Ranitidine in Australia?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [136]

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No, [we say that it is categorically fit]. We have only one quality system which is global. So we don't go by respective regulators, and their [indiscernible] - if we have voluntary recall from U.S. market, that means we're not selling Ranitidine anywhere in the globe.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [137]

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No, my question was before the voluntary recall, were you selling Ranitidine in Australia?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [138]

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No, no. We were not.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [139]

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Okay. So sir, just last question then on R&D expenses. So could you help us with the budget number there for FY '20, '21, anyway you want to guide?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [140]

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FY '20, '21?

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [141]

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Yes. Your R&D budget for FY '20 and '21 if you could -- a percentage of sales or an absolute number.

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [142]

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We have -- I've not even started our budgeting process for FY '21. (inaudible) happened. Maybe next couple of quarters, we'll complete that.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [143]

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And FY '20?

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Saumen Chakraborty, Dr. Reddy's Laboratories Limited - President, CFO, Global Head of IT & Business Process Excellence and Member of the Mgmt Council [144]

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FY '20, as I said today that given the current set of activities in most likelihood in this fiscal, R&D will be anywhere between $200 million to $240 million.

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Operator [145]

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We'll take that as the last question. I would now like to hand the conference over to Mr. Amit Agarwal for closing comments.

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Amit Agarwal, Dr. Reddy's Laboratories Limited - Director of Finance, FP&A and IR [146]

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Thank you, everyone, for joining us today for the earnings call. In case of any further queries, please reach out to the Investor Relations team. Thank you.

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Operator [147]

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Thank you very much. On behalf of Dr. Reddy's, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.