Dr. Reddy's Laboratories Limited (500124) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the conference call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Richa Periwal. Thank you, and over to you, ma'am.

Thank you, Samar. A very good morning and good evening to all of you and thank you for joining us at such a short notice. Earlier today, we have entered into a definitive agreement with the Haleon plc to acquire Nicotinell and related portfolio. To discuss the acquisition, we have the leadership team of Dr. Reddy's comprising Mr. Erez Israeli, our CEO; Mr. Patrick Aghanian, our Head of Europe Generics Business; Mr. Parag Agarwal, our CFO; and the entire Investor Relations team. This call is being recorded, and the playback and transcripts shall be made available on our website soon. Please note that today's call is a copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlets without the company's express written consent. Before I proceed with the call, I'd like to remind everyone that the safe harbor contained in today's press release also pertains to this conference call. Now I hand over the call to Mr. Erez Israeli. Over to you, Erez.

Thank you, Richa. Good morning and good evening to all of you. Thank you for joining this call at such a short notice. We really appreciate it. I'm delighted to announce that today we signed an agreement with Haleon plc to acquire the global consumer health care portfolio in the nicotine replacement therapy or so-called NRT category. In line with our stated strategy, we have consistently maintained that in addition to focusing on our core business of generics, biosimilars and API, we would also be investing in growth drivers of the future in 3 areas. One is access to novel molecules like NCEs, NBEs, CAR-T; digital therapeutics; and consumer health care, including nutrition and OTC wellness products. We have been increasing our presence in consumer health care, including 2 recent acquisitions of women's health portfolio in the U.S., namely MenoLabs and Premama for menopause and fertility, respectively; a launch of anti-allergy medication like Histallay in the U.K.; and a nutraceutical joint venture with Nestle India to bring well-known global range of nutraceutical health solution of Nestle Health Science to India. Through these acquisitions, we are adding a market-leading brand, Nicotinell, along with 3 local market-leading brands such as Nicabate, Habitrol, and Thrive to our portfolio in all formats, such as lozenge, patch, gum as well as pipeline assets outside of the U.S. Nicotinell is the second biggest brand globally, excluding the United States, in the nicotine replacement therapy category. The brand has a successful footprint in 30-plus markets, mostly in developed markets like Europe, Canada, Australia, New Zealand, Japan and with the potential for expansion in emerging markets. Complementing and building on our existing global presence and capabilities, these acquisitions give us strong footprint in Europe as well as other global markets as well as access to key customers, making this a perfect anchor around which a global OTC platform will be built. The portfolio has maintained steady sales over the years, with revenue of GBP 217 million generated in 2023. The portfolio also has healthy profitability and is margin-accretive for Dr. Reddy's. The acquisitions will be for a total consideration of GBP 500 million, including an upfront cash payment of GBP 458 million and earnout payment of up to GBP 42 million payable in calendar year of 2025 and 2026. This acquisition will be funded through internal accruals. The closing of the transaction is subject to satisfactory completion of customary conditions and regulatory approvals. The transaction is expected to close in early Q4 of calendar year 2024. Operations will move to us in a phased manner, and we will leverage a solid supply relationship to ensure seamless transition. While the focus over the next few quarters will be on successful integration of this acquisition, leveraging our strong balance sheet and healthy cash flow that will continue to be generated, we will continue to identify and evaluate value-creating inorganic opportunities and business wins across geographies, including India. We have made progress on our pipeline, and over the next 2 to 3 years, we are planning certain key launches with a significant revenue contribution from complex generics, including peptides and biosimilars. Our in-house R&D efforts will also be complemented by collaborations. In recent months, we have successfully concluded multiple strategic collaborations for near-term and long-term business drivers, such as a deal to market Sanofi vaccines and Bayer's heart failure drug in India, strengthening our long-term collaborations with Amgen in India, initiating a joint venture with Nestle India for nutrition products, with Alvotech for their biosimilar denosumab in the U.S., U.K., and Europe, with Theranica for a drug-free migraine management device, Nerivio, in India, South Africa and multiple markets in Europe. This deal marks an important milestone in building global consumer health care business and taking a step closer toward our medium- to long-term goals. I would like to reiterate that the acquisition of a global portfolio, including brand Nicotinell, is a logical extension of our efforts for consumer health care OTC in the recent years. I am looking forward to strong execution and to continued growth and momentum in the base business as well as seamless integration of acquired assets in the coming quarters. With this, I would like to open the floor for questions and answers.

[Operator Instructions] Our first question is from the line of Kunal Dhamesha from Macquarie.

The first question is on the profitability of the acquired business. So while we have said that it is accretive to our profitability, can you provide some color as to what has been the EBITDA margin or operating margin for this business and how it has moved in the last 3 years?

Yes. Thank you, Kunal This asset is very profitable. We are going to use some of this profit also for investment in the brand, as we believe there is an opportunity to grow the brand as well as there are certain considerations of expenses that we'll have to incur at the beginning. So if you add all of that, it should be in line with our normal guidelines, even may be a plus of it -- of the 25%.

Sure. And secondly, when we look at our current OTC business, the first part is what is the size of our current OTC business and if you can give some color as to how it is split between U.S. and other than U.S. market? And then how does this acquisition fit into our current piece of OTC business? Do you see any cost synergies coming out of it and the revenue synergies coming out of it?

Sure. So it's primarily complementary to what we have. We have about $140 million of business today in OTC across markets. This is by design complementary to these efforts. This deal is not including the U.S., so this deal is primarily outside of the U.S., especially in markets in which we have OTC but it's not as big and strong. And it can serve as a platform because now we have access to customers and access to markets and access to talent that allow you to bring more products. So I'm just, Kunal, using your questions to explain. We call it an anchor, the winning bid. Around that, we can continue to add assets to it because we have the basic capabilities to invest behind it. So it's primarily complementary. The main synergies will come by the ability to grow the assets, to use it as a platform for additional products and to go to markets in which we now do not have the relevant presence, for example, EMEA, China and other markets, et cetera.

So it is more like what we have been doing with our generic portfolio, utilizing it for the U.S. portfolio, utilizing it for the other markets, similar kind of cross-selling opportunities, is the way to see it?

Yes. So we can absolutely use this portfolio for other markets, absolutely.

Kunal, I just want to clarify that Erez mentioned that our current OTC business is about $140 million. That's in our North American business. Globally, our OTC business is approximately 10% of our total business, which is in excess of $300 million. So I hope that clarifies.

Our next question is from the line of Neha Manpuria from Bank of America.

On the platform that we've acquired, how do you think this can grow? And if I were to take a slightly longer view on the entire OTC business, from the current $300 million, with the Nestle portfolio, the menopause acquisition in the U.S., how big can OTC be for Dr. Reddy's, let's say, in 2027-2028? How should we think about the size of this -- potential of this business, including the acquisitions in a few years from now?

Yes. So obviously, we are aiming for a very sizable opportunity. It depends on the time frame that we are discussing. So for the initial part of your question, it is primarily, this type of business was not a priority for Haleon. And they did not invest much in this business. We believe that there is an opportunity to grow this business by investing in it. That's why I also guided for the 25%. We want to use some of the money to invest in it. And this is in the current geographies. In addition to that, there is ability to come to other geographies, especially in Asia. And if you add the other component of the OTC, like you mentioned Nestle stuff, this is, of course, adding hundreds of millions of dollars to this, but some of it will build over time, because these are brands that needs to be introduced, being, of course, built organically over time. So what you're going to see, it's kind of an organic growth of those brands, but absolutely, we are aiming for a significant sizable team that one day, I hope, we speak in billions in the OTC after all of those moves we've had. But in terms of '26, '27, '28, it's about moderate growth on the introductions. The activities of products that we've not launched yet will not impact significantly by that period of time. It will take more time for them.

So essentially, for the existing $300 million base to double, it will take us longer. Is that a fair assumption?

It can be even triple. It's just a matter of what is the time that it will take. The current business is now growing in single digits, and we believe that we can grow it faster than what it is. All the places that are related to new brands, like in the case of Nestle, this will take more time, because we need to introduce them. And normally, it takes 3 to 4 years to establish a good brand in the markets like India.

My name is Patrick Aghanian, and I just wanted to add to what Erez was just mentioning. I think in this category, we need to look at it in 2 contexts. The first one is the macro drivers, both in developed and developing markets. Whilst in developed markets, classical smoking, meaning tobacco or cigarette smoking, sorry, has declined. It has, unfortunately, been overtaken by new introductions, such as vaping. And this phenomenon we see especially amongst younger populations in developed markets. Fortunately, governments are now beginning to take action against vaping, and we see our role to play in that. In developing markets, where still cigarette smoking is very prevalent, sin taxes as imposed by the governments are relatively low, certainly compared to developed markets. We still see a lot of opportunities in the years ahead as more and more governments take up the fight against smoking. Just to also mention that in addition to sin taxes and other regulations, simple legislation, such as prohibition of smoking in closed spaces also is hugely impactful in terms of driving this category.

Understood. And Patrick, thank you for that. But just to follow up, Erez also mentioned, adding more products to this platform. We already have an allergy medicine, OTC product in Europe. Is there a complementary aspect to adding more products, does the market access help? Is that why the growth will accelerate over time?

Sorry, your voice is not so clear. I understood the first part of the question, but not the second part. The first part was, are there any other products? And then the second part, I didn't catch. Sorry about that.

Does the platform really help to add products, add more assets to it? Does that accelerate the growth of the OTC platform, or does it have operating leverage benefits?

Okay. So first of all, this asset comes with a pipeline of the new launches. In consumer health care space, innovation is -- I suppose, innovation is critical in any business, but in consumer health care as well. So there is a pipeline of new products, which are already underway. In fact, they have just launched sprays at the beginning of this year in the Nordic countries in Europe. And sprays are indicated, for example, for vaping. And they are going to expand this. Other products are going to be also introduced in the next few years. So there is a pipeline of new products, which is coming with this asset. The second thing about this asset is that it straddles 30-plus countries. And although the top 12 account for roughly 80% of the business and the top 12 also straddle continents, starting from Canada all the way to Japan and Australia and New Zealand, the size of these businesses in each of those countries is not small, meaning this is not an asset where you have 1 country dominating and then you have a lot of small countries which are just as a tail. It's actually very healthy, sizable businesses in each one of those countries. Third, this is an asset that allows us to interface with retailers, whether it's pharmacy chains or mass market retailers. These are very sophisticated operators. And this particular category is very valued by them. It's very valued by them for 2 reasons: number one, because it actually promotes health, and this is very important from the point of view of the retailers for their point of view of self-image, I suppose; and the second reason is because it's a very high-priced item for their selection of products. And since we are the #2 brand in this category, it positions us very nicely to play a role and also have access to these retailers, which then, of course, allows us to leverage other products which we are developing, whether it's in this category or other categories in order to gain space on the shelf.

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

My first question is on the asset base. So the revenue part is quite understood. Are you also going to acquire the manufacturing unit or some sort of an asset base along with this entire business?

Erez, I can take this question.

Yes, please take it.

So this business is asset-light. There is no manufacturing facility which is associated with this business. It is served by CMOs, and these CMOs are located primarily in Europe. The production process for these products is actually a bit complicated and capital-intensive. There are not that many suppliers, and the relationship that this business has with the CMOs is longstanding. It stretches for more than 20 years, and we look forward to working with those CMOs in order to drive this business forward in line with our strategic aspiration.

All right, understood. And the second question is on what kind of approvals you will require before you do this transaction? Are there any major stringent government regulations which can be a potential hurdle for the completion of this acquisition?

I don't think we have anybody from legal on the line, but I can take the answer to the question. There are 4 approvals that we would need. We believe all of them are manageable. They are actually located mostly in emerging markets. Brazil, we need a Merger Control; Kingdom of Saudi Arabia, we need also and the United Arab Emirates is another one where we need it. And finally, there is one approval that we would need for Sweden. But other than that, there are no other approvals that are necessary for the completion of this transaction.

Our next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets India Private Limited.

My question is regarding the initial cost or investment which you might require to grow this particular franchise. So can you quantify what kind of spend you are foreseeing for this franchise? And do you think the margins can improve significantly from the current level, which you indicated at around 25%?

So I can try to answer this question. But first, before I try to answer your question, I'd like to speak a little bit about the specifics of this business. I feel you need to know a little bit why it is such an attractive asset, so that you may appreciate what I'm about to answer to your question. First of all, this is a business which by its very nature is very complex for the consumer. The consumer has a psychological factor at play when they are taking this therapy to stop smoking. They know it's harmful for them, but they still do it. And it takes anywhere between 8 to 30 attempts during the lifetime. I repeat again, there are different sources, but the data that at least we have analyzed shows that there are anywhere between 8 to 30 attempts during the lifetime before a consumer successfully quits smoking. So we see a very, very long-term play here with this category. I've already mentioned this business has not been a priority for Haleon for a while, and therefore, the investments have been kept at a level which is low. And for us to grow this business and also to address the unmet needs, we know that they exist, whether it's existing unmet need or future unmet need, for example, vaping I mentioned earlier. Clearly, we have to invest more and increase the level of investments, which we plan to do, in line with what our aspiration is. So indicatively speaking, we will be increasing our A&P investments, but also our capabilities in terms of understanding the consumer, which is very important. The marketing tools available today were not available 20 years ago. When you are trying to engage a consumer in a very complex psychological dynamic, what was available 20 years ago was a very simple, probably 30-second ad on TV and some advertorials. Today, we have a whole gamut of tools at your disposal, some of which are actually very cost-effective. They were not so cost-effective previously or they didn't exist. So yes, we will be seeking to invest to grow this business.

And just to add to Patrick, and this is why I guided that it is margin accretive and it is absolutely within the guidelines that we normally do. We will use that in the same way, meaning for us, the 25% is always a decision, not an outcome. Meaning we want to use the excess of this to invest into the future. And this is where we believe is the sweet spot that is also relevant for the asset. The asset has the potential to grow beyond that once we feel that we invest and we put everything in place. For the long term, for sure. But in the short term, the idea is that it will be accretive and it will enable us the growth that we want and the total shareholder return. But at the same time, we want to use the excess to reinvest in this business.

Sure. And my second question is very broad on OTC products. So in OTC, what will be the most important factor which you should focus to differentiate a product? You said that you're #2 for this franchise. So what will differentiate your #2 position versus the #1 position or #3 position?

So first of all, this brand, as I already indicated, occupies the #2 position in the markets that it operates. By the way, in one market, it's actually #1. In the Netherlands, it is #1 position. In other markets, it's a very strong #2, globally speaking. And it is a very, very resilient business. As I indicated, with low levels of A&P support, not only have the volumes and the value been maintained, they have even grown, in some cases, faster than the average for the category. Plus, as I already indicated, with the consumers going through a cycle of 8 to 30 quit attempts during the lifetime, it's a very sticky business, which is extremely interesting from a marketing point of view. So we need to build on what has been done in the past. We need to try to engage with existing consumers who are clearly loyal over the past 20 years or 25 years since this brand is in existence and also try to expand to new consumers. I mentioned vaping, especially amongst young people. It is really a phenomenon that is not very nice to see. People unfortunately have the impression that vaping is actually less harmful. It is not the case. There is simply not enough data yet, but that data is being generated. Anyway, when you speak to governments, clearly, they are beginning to understand that vaping is not as harmless as the tobacco companies have made it out to be. So we also have to start targeting those consumers. I already mentioned that Northstar or the NRT business of Haleon has launched a particular product in the Nordics specifically with an indication for vaping, the spray. That will be expanded to other markets in Western Europe. And then there is emerging markets. Emerging markets -- already this business has a good footprint in emerging markets in countries such as Brazil, Korea, in Southeast Asia, for example, Hong Kong and Singapore, et cetera. And there are clearly opportunities there that we see -- Saudi Arabia, I already mentioned, sorry, et cetera. So we have to do that build up and then target it to the consumers.

The next question is from the line of Bino Pathiparampil from Elara Capital. The line for the current questioner has been dropped. We will move on to the next question. The next question is from the line of Surya Narayan Patra from PhillipCapital India Private Limited.

My first question is about the NRT. What is the outlook of the NRT? Do you have any clarification to our earlier commentary that you mentioned NRT is declining in the advanced market, but it is progressing in the developing market? Is it right that understanding? And what is the growth outlook for your NRT as a therapy? And what is its positioning compared to alternate therapy for smoking cessation?

If I understood your question, the first question -- sorry, I have to repeat it so that I make sure I understood your question. Your first question was, what is the growth prospects? The second question was, what are the alternatives? Did I understand you correctly to NRT?

Yes.

Okay. So first of all, in terms of growth, I thought I heard you say that there has been a decline. I don't believe we said there has been a decline. The category actually has been growing across all geographies in mid-single digits, a little bit more than mid-single digits. Nevertheless, it's been growing. When you look forward, we believe that this growth will be accelerated, first of all. As I indicated, this business comes with new products, innovation. This business has not had any new launches over the last, I don't know, maybe 7 years, 8 years. So it's been starved of new launches, and now we have a pipeline of new launches that are going to be introduced. Furthermore, we're going to support the business in terms of additional A&P spend. So we believe that we're going to accelerate the growth across the different geographies. As said, there are also new segment opening up, which is around vaping. Vaping, as I indicated, is unfortunately a big issue that we are seeing in both developed and developing markets. We believe that developing markets will also start targeting classical smoking with additional sin taxes and also more restrictions on where people are allowed to smoke. This will definitely give a further push for people to try quitting to smoke. By the way, the NRT category is officially recommended and approved by the WHO. So this is a very important consideration for us in Dr. Reddy's. And in terms of alternatives, well, there are alternatives that are available. For example, there are prescription medications such as bupropion and varenicline. This is available for their prescription drugs. Their mode of action is different. They target the nicotine receptors in the brain, but nevertheless, that's an option. And there are, of course, behavioral therapies which people can use mostly in the area of psychological support and counseling. I hope I've answered your question.

Yes. So my second point was also about WHO's recommendation to include NRT as an essential list of medicine. What does that really mean in the emerging markets or markets other than the U.S.? And have you seen any benefit or have you seen any benefit happening to this NRT therapy post recommendation in 2020?

Sorry. Again, if I understood you correctly, you were asking whether this NRT therapy, we see opportunities in developing markets.

No, no, sorry. I'm repeating my question. How should one read this WHO recommendation that NRT is part of the essential list of medicines? So this has been recommended in 2020. Have you seen any benefit accruing to this NRT? And how should the progress of this recommendation should benefit us?

Yes. So definitely the WHO recommendation is what also makes it attractive for a company like Dr. Reddy's. We are a science-based company, and we deal with products which are very important in terms of their unmet medical needs. In terms of what we are seeing in emerging markets, we are seeing more and more government tenders. So for example, we've seen pretty big government tenders going up post 2020. The biggest that has happened recently is in Brazil where this business has won a significant tender with the Brazilian health authorities. But it is also the same, for example, in Saudi Arabia and in other geographies. And we believe there are other geographies where Haleon has not been present. Haleon being a British company, historically, has not been very active in, for example, French-speaking North Africa, such as Algeria, Morocco, Tunisia, et cetera. Now, we can potentially access those markets through our businesses that we have set up recently in those places. So yes, we do see increased interest by the side of governments.

Okay. Just last question from my side. It's a clarification, in fact. What you mentioned in the initial commentary that this is a business which will require investment to take it forward. But even after the investment, in terms of the profitability and margins, this will still have margins beyond 25%. Is that understanding right?

Yes, this understanding is right. We are saying always that we are comfortable around the 25% as a decision. And that's what we plan to maintain the business, at least in the initial stage.

Our next question is from the line of Bino Pathiparampil from Elara Capital.

Hope you can hear me.

Yes, sir. Please go ahead.

Okay. Great. First question. How does this product sell? Is it only through direct advertisement to the customer? And are there any regulatory restrictions around that?

So the product is primarily classified as an over-the-counter medication. In some instances, it is also classified as a prescription medication. It depends on the specific country regulation. But in most of the instances, it's an over-the-counter medication. In countries, for example, the developed countries, it is sold both in pharmacies as well as outside pharmacies. For example, in supermarkets, for example, in the U.K., there is a supermarket chain called Tesco or Sainsbury's. You will find the product in those type of outlets. I hope I answered your question.

Understood. So does this acquisition come with the necessary marketing and sales team? Because we will need a hybrid team for direct marketing as well as a team for prescription marketing to the physicians. So does this acquisition come with a team?

The transaction involves a combination of a transfer of certain employees from Haleon. I'm sorry, I cannot comment further on that because there is a consultation process in place. Actually, it started with the Works Council. So that's all I have to say in terms of the transfers from existing employees. And we also have to hire people in addition to that, yes.

No, but the answer to your question is there's not going to be a hybrid in most of the businesses as OTC, so we will manage it as OTC. In the countries in which we require salesforce, which is prescription, we will use either our people or use a partner for that. But it's not a hybrid. In each one of the countries, it's mostly OTC or prescription. But you don't need a hybrid model.

Understood. Second, the people who get to this product to stop smoking or vaping, how long do they typically use this product? Do they use it pretty much lifelong or is it like a few weeks and then they stop everything, all types of nicotine?

This is an excellent question. It's a very fast -- I wish we had a long time for me to answer this question because I have lots of slides that I can show you. There are different types of consumers. There are consumers who use this product as a stopgap measure. They use it so that they don't have to come back, meaning they have already quit, but they don't want to restart, so they don't want to be a relapser. So they use it in that context. There are those who don't want to quit, but they want to reduce the number of cigarettes that they are smoking. So there are many different types of consumers who actually use this product. It's not just 1 or 2. And that's what makes it so interesting and so attractive because each type of consumer has its own specific driver and need. On the average, when somebody, let's say, wants to quit, they consume the product from anywhere between 6 months to a year. Generally, what happens if it's the first or second time that they're trying to quit or even the third time, they go into a relapse, they start smoking again, then they are unhappy. They make a new commitment. They say, okay, I'm going to stop smoking. Then, they start again, and so forth and so forth. So it goes through this cycle of start, stop, repeat cycle. I want to just give a little bit of a humor. Hopefully, I know it's late for you, but just as a humor, Mark Twain, the American author, had a very interesting thing to say. He said, giving up smoking is the easiest thing in the world. I know because I've done it thousands of times. So this is, I think, the best way to describe what the consumer actually goes through when they're trying to stop smoking and use these products.

Understood. Finally, just one thing. If you could share some rough market share of the #1 player and yourself in the overall nicotine replacement market with the rough number indication, just to see how fragmented the market is?

Yes. So first of all, this is a highly stratified market, meaning, for example, we are #2. The difference between the #2 brand and the #3 brand is a factor of 4x. It's a factor of 4x. I repeat again, 4x. So this is very, very important. It shows the strength of the brand. And roughly speaking, depending on the geography, I think we are about 25% market share across the different geographies. There's one more thing I wanted to say, skips my mind, but if it comes back, I'll come back to you.

The next question is from the line of Shrikant Akolkar from Nuvama.

I was wondering if it is possible for you to look at the manufacturing back to India, if there are some CDMOs offering such services?

So this business has current CMOs setup. The relationship with the current CMOs is longstanding. They stretch back, as I indicated, many years; in some cases, going back to the 1990s. We are looking forward to continuing to work with these CMOs to first ensure a smooth transition and to look forward to building this business going forward. New products are very important, and the development of these new products also depends to a large extent on these relationships. So we are looking forward to that as well.

Okay. And the product development part is done by Haleon or the CDMO partner?

It's done by the brand owner together with the CMO, but the actual work is done at the CDMO. So if you will, the idea generation and this is coming from the brand owner, in this case, in the future, Dr. Reddy's, but the actual work is done, is outsourced to the CMOs.

Understood. Now, a little larger question. So last few months, we have seen several initiatives, such as Alvotech collaboration, Nestle, TB, and now this acquisition. We already have invested in the CDMO business, and then there are very important peptide biosimilar R&D projects. So what are the key priorities going forward with so many moving parts in the business? And if you can also -- towards the end of this question, if you can answer about the ROCE expectation over the next 4 to 5 years.

Sure. So as we stated in the past, we have 2 types of businesses, and I'm talking now in the high level. One is the B2B business, which is primarily a leveraged business, which is also a legacy business of generics and API, which we will continue to invest and grow primarily with productivity, with products, the launching in growth markets and gaining global market share as part of it. And we added to it the Horizon 2, which is to grow with primarily by collaborations of NCEs, NBEs, CAR-T, nutraceutical and OTC and this kind of this stuff as another growth driver. The focus of those are India, emerging markets as well as, of course, Europe and the rest of the activities. We are committed, by the way, to grow in India. We are committed to grow faster than the IPM. We are committed to be #5 in India. Most of those investments in something -- in products that are better than the standard of care will be in India as well as emerging markets, while OTC is more of a global play from the region that we discussed. So this is helping us to establish what we call an anchor business globally. In terms of guidance for the future, so the double-digit, the 25% EBITDA, as a sweet spot in which we can both give enough total shareholder return as well as have enough to invest in business to stay relevant. Again, this is an average. It's not every quarter. It's not every activity. Sometimes we are above it, sometimes below it. The same for the ROCE. So I think in the future, we are planning to be in the same range of double digits, 25% EBITDA, on average 25% ROCE on average. This business will absolutely add to this component. And we have enough financial capacity to go for additional businesses. So this is not the end of it. We are actually just at the beginning of the journey.

The next question is from the line of Tarang from Old Bridge.

Am I audible?

Yes, sir. You are audible.

Congratulations. A couple of questions. You spoke about investing more in the business in order to grow it further. What kind of investments are we talking about? Are we talking about so beefing up the product pipeline or more ad spends or probably entering into new markets? Would that largely be what you mean by more investment in the business?

Yes. It's a combination of all the 3.

Okay. Second, you just spoke about bridging on relationships with Haleon's customers. If you could elaborate a little more on this?

Yes. So this business is currently, as I said, sold through pharmacy chains and mass market retailers, depending on the geography. And it is a very important pillar for the success. And we are looking forward to continuing the business with those trade partners into the future. I already indicated the importance. I don't want to repeat again how important it is also for the retailers in this category.

Okay. So probably use that as a platform to probably introduce other products which will have approvals for in those markets.

Certainly, yes. So when we have access, and we are already at the table, let's say, with this category, it already makes it easier to talk about other things.

Our next follow-up question is from the line of Kunal Dhamesha from Macquarie.

Just one on the broader revenue split for the acquired business between Europe, emerging market and other developed countries. If you can split this GBP 270 million in this category?

So the business, about 60% of the business comes from Europe in terms of turnover. Then you have significant pieces coming from Australia, Canada, Japan. And these countries combined, meaning the European countries plus Australia, Canada and Japan and New Zealand, then takes it to 80% of the total turnover, 84%, let's say. And then you have other countries in the bank, such as Brazil, KSA and others, Hong Kong, et cetera.

This is really helpful. And then 2 more questions on the [indiscernible] business. So you've said that you had more product in the pipeline. Can you share what's the number of pipeline products? And is it more of a novel delivery system for the nicotine, is it way to think about it? Or there are at least in the Haleon's pipeline, whatever business you are covering? And second is, how did the ASP increase in this brand of nicotine replacement therapy category in the last 3, 4 years?

Sorry, I did not understand the last part of your question. Could you repeat it?

The average selling price increase in the category in the last 3 to 4 years?

Okay. So first of all, on the new launches, as we get closer to the launches, we will, of course, disclose them. There is a competitive landscape here as well that we have to take into consideration. As far as the pricing is concerned, pricing power in consumer health care is directly related to brand power. The more stronger your brand, the stronger your pricing power. As we already discussed earlier about the strength of the brand, so that's an iron law of consumer health care. You have a good brand, then you are more secure. You have a weaker brand, then you are less secure.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Ms. Richa Periwal for closing comments.

Thank you all for joining us for today's evening call. In case of any further queries, please get in touch with the Investor Relations team. Thank you once again on behalf of Dr. Reddy's Laboratories Limited. Over to you, Samar.

Thank you. On behalf of Dr. Reddy's Laboratories Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.