Dr. Reddy's Laboratories Limited Q3 FY2026 earnings call

• The business had a resilient performance in Q3 FY '26 with 4.4% revenue growth and steady profitability despite product-specific headwinds. The underlying base businesses, excluding Lenalidomide, delivered double-digit growth aided by favorable Forex. - Key business highlights included a strategic collaboration with Immutep for commercialization of a novel immunotherapy oncology drug, launch of Hevaxin, progress on pipeline products like semaglutide and abatacept, integration of the acquired Nicotine Replacement Therapy business with 85% of the business by value under operational controls, and regulatory milestones such as marketing authorization for semaglutide injection in India and approval of denosumab biosimilar in Europe. - Aurigene Pharmaceutical Services Limited served as an exclusive API manufacturer for 2 of the 46 novel drugs approved by the USFDA in 2025, and the company announced a science-based net zero climate target.

Consolidated revenues for the quarter stood at INR 8,727 crores (USD 971 million), registering a 4.4% year-over-year growth and a 0.9% sequential decline. North America Generics business generated revenues of $338 million for the quarter, a decline of 16% year-on-year and 9% sequentially. European generic business reported revenue of $140 million for the quarter, a growth of 4% year-on-year and sequentially. Emerging market business delivered revenue of INR 1,896 crores in Q3 FY '26, showing a robust 32% year-on-year and 15% sequential growth. India business reported revenue of INR 1,603 crores in Q3 FY '26, achieving a healthy double-digit 19% year-on-year growth and 2% sequential increase. PSAI business reported revenue of $92 million in Q3 FY '26, resulting in a 5% year-on-year and 15% sequential decline.

• SG&A spend growth is expected to moderate with the post-Lenalidomide era, with the pace of cost growth being less than half of the top-line growth. - R&D spend is expected to remain in the range of 7% to 8%. - Expect sustainable growth in base businesses and progress on differentiated pipeline products like semaglutide and abatacept, along with driving operational efficiencies and pursuing value-accretive acquisitions and partnerships.

• Regulatory approval delays for products like semaglutide in Canada, denosumab in the US, and rituximab. - Pricing and competition risks for semaglutide in key markets. - Impact of new labor law codes on expenses, with a one-time provision made related to changes in implied benefit obligations.

Q: On India business growth, how should one think about organic growth as the Stugeron acquisition was a contributor?

A: It's somewhere between 17% and 18% organic without acquisitions Q: On semaglutide approval in Canada, what's the expected timeline?

A: Any time between end of February to May, expecting to launch in Canada Q: On sustainability of India business growth and GST spillover?

A: Growth is absolutely sustainable and there's no major spillover from GST implementation Q: On semaglutide pricing and competition in key markets?

A: Expectations haven't changed much, with most markets expecting lower end of the pricing spectrum and preparing for competitive markets Q: On generic Lenalidomide contribution to EBITDA margins and U.S. decline?

A: Decline in U.S. is both y-o-y and q-o-q, and the amount related to Lenalidomide is such that without it, growth wouldn't have occurred Q: On timelines for denosumab and rituximab in the U.S.?

A: Denosumab's approval likely in second quarter of FY '27 or later due to deficiency letter, rituximab response expected in next 2 weeks with reinspection likely in next 6 months or more Q: On semaglutide in other countries and capacity?

A: India launch on March 21, Canada launch between end of February to May, and capacity of 12 million cartridges remains for now with more capacity expected later Q: On new labor code related provision and its nature?

A: It's a retrospective recomputation of wage definition in line with new labor law codes, with future impact likely less than 50 basis points Q: On biosimilar abatacept launch in European markets?

A: Expect launch in Europe in July 2027 for both IV and subcu versions Q: On NRT growth in constant currency and profitability?

A: Constant currency growth is 8% y-o-y, profitability is above expectations with EBITDA percentage higher than initially thought Q: On SG&A spend outlook?

A: SG&A spend growth will moderate, with pace of growth less than half of top-line growth Q: On emerging markets growth sustainability?

A: Growth in emerging markets like Russia is sustainable with healthy double-digit growth expected Q: On sema tablets filing in India and litigation overhang?

A: No major concerns on approval timeline for sema tablets filing in India and no litigation overhang for launch Q: On Aurigene CDMO opportunity and revenue contribution?

A: Aurigene CDMO is a growing opportunity with expected $100-plus million in revenue in next 2-3 years, though currently small Q: On ForEx impact on financials?

A: ForEx impact is not very significant Q: On India market growth in FY '27 and European region ex-NRT growth?

A: India market growth expected to be above 15% with sustainable growth, European region ex-NRT has potential for double-digit growth if scenarios align Q: On Global Generics gross margin post-Lenalidomide?

A: Expect gross margin in range of 50%-55% without Lenalidomide sales