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

Good day, everyone, and welcome to Quarter 1 FY '27 Earnings Call of Dr. Reddy's Laboratories Limited. We appreciate your continued interest in our company. I'm Aishwarya Sitharam, Head of Investor Relations at Dr. Reddy's. Joining us today are members of the leadership team. Mr. Erez Israeli, our Chief Executive Officer; and Mr. M.V. Narasimham, MVN, our Chief Financial Officer. Our quarterly financial results have been published earlier today and are available on our website for your reference. We will start today's call with MVN providing an overview of our financial performance for the quarter. Following that, Erez will share his insight on key business highlights as well as the company's strategic outlook. We will then open the floor for questions. All commentary and analysis during this call are based on our IFRS consolidated financial statements. Please note that certain non-GAAP financial measures may also be discussed. Reconciliations to the corresponding GAAP measures are included in our press release. I would like to remind everyone that the safe harbor provisions outlined in our press release today apply to all forward-looking statements made during this call. Before we proceed, I would like to call out a few housekeeping points. [Operator Instructions] The session is being recorded and both the recording as well as the transcript will be made available on our website shortly. Please note that this call is the proprietary material of Dr. Reddy's Laboratories Limited and may not be rebroadcasted quoted in any media or public forum with our prior written consent from the company. With that, let me hand the call over to MVN to present the financial highlights for the quarter. Over to you, MVN.

Thank you, Aishwarya. Greetings to everyone on the call. It is my pleasure to walk you through our financial performance for the first quarter of FY '27. The business reported revenue decline of 5.6% and an EBITDA margin of 12.5% for the quarter, reflecting the impact of lower limit revenues, which contributed to the corresponding period last year as well as a provision of INR 240 crores for inventory and other costs associated with the recent semaglutide EPA-related challenges. Notably, the underlying base business, excluding Lenalidomide, continued to deliver healthy double-digit growth across all key geographies, including North America, supported by new product launches and favorable currency movements. All financial figures in this section are translated into U.S. dollars using a convenience translation rate of INR 94.66, the exchange rate prevailing as of June 30, 2026. Consolidated revenues stood at INR 8,071 crores, which is USD 853 million, a decline of 5.6% year-over-year and a growth of 7.4% on a sequential basis. Strong performance across key markets, further aided by favorable ForEx was offset by lower Lenalidomide sales. And other revenues declined primarily due to change in operating model post integration under which rebates and discounts are offered to distributors and recognize net up revenues. As compared to the transition period when sales were managed by the seller, [indiscernible] this change in operating model is profit neutral. Consolidated gross profit margin was at 46.5%, a decrease of 1,000 basis points year-over-year and an increase of 169 basis points sequentially. The decline in margins during the quarter was largely on account of lower Lenalidomide sales, the semaglutide EPA-related production mentioned earlier as well as higher solvent costs on our account of Middle East conflict. The reported gross margin was 51.6% for Global Generics and 4.5% for PSAI. Excluding the semaglutide EPA-related production mentioned earlier, the overall margin was 49.4%, while that for Global Generics was 53.8% and for PSAI was at 12.9%. The SG&A spends was at INR 2,082 crores, an increase of 12% and 4% sequentially, accounting for 36% of revenues. The year-over-year increase was primarily driven by higher personnel costs due to annual increments, adverse ForEx movement, targeted investments in the branded business as well as elevated freight cost arising from disruptions related to the Middle East crisis. The R&D spend was at INR 577 crores, declined by 8% year-over-year and up 6% sequentially, accounted for 7.1% of revenues and reflecting lower biosimilar development expenditure as compared to the previous year. The underlying EBITDA, including other income, stood at INR 1,009 crores for the quarter, which is USD 107 million, a decrease of 14, 16 basis points year-over-year and 55 basis points sequentially, reflecting a margin of 12.5% of the revenues, excluding the semaglutide EPA-related potion, the margin was at 15.4%. As a result, the profit before tax was INR 553 crores, that is USD 58 million, representing a margin of 6.8%. Excluding the semaglutide EPA-related production, the margin was at 9.8%. Effective tax rate for the quarter was 21.3% compared to 26% in the corresponding period last year. The ETR for the quarter was lower primarily due to reversal of previously recognized tax promotions, no longer required, consequent to the favorable resolution of the tax assessment pertinent to earlier year and favorable durational mix for the quarter in comparison to the same period in the previous year. Profit after tax attributable to equity holders of the parent for the quarter stood at INR 443 crores, which is USD 47 million, a margin of 5.25% on the revenues before adjusting for the semaglutide EPA-related provision mentioned earlier. Diluted EPS for the quarter is INR 5.32. Operating working capital as of 30th June 2026 was INR 14,353 crores, which is USD 1.52 billion, a decrease of INR 81 crores for 31st March 2026. CapEx cash outflow for the quarter stood at INR 307 crores, which is USD 32 million. Cash flow during the quarter before acquisition-related payout was negative INR 216 crores, which is negative of [ $23 million ]. As of June 30, 2026, we have a net cash surplus of INR 3,057 crores, which is [ $323 million ]. Foreign currency cash flow hedges executed through derivative instruments during the period are as follows: USD 354 million hedged using a combination of forward risk reversal options, scheduled to mature by March 2027. These contracts are hedged at the rate of USD 92.34 to USD 94.634, global USD 2.8 billion hedged at FX rate of [indiscernible] with majority falling within the next 3 months. With this, I now request Erez to take us through the key business highlights.

Thank you, MVN, and good day for all of you. We appreciate you joining us today, and thank you for your continued interest in our company. We remain consistent in our strategic priorities and committed to delivering growth and profitability to disciplined execution as the operating environment continue to evolve. We are focused on strengthening our base business and building future growth engines in peptides, biosimilar, consumer health and innovation, while pursuing targeted business development initiative to augmented organic growth efforts. The underlying base business delivered healthy double-digit growth across all key geographies, including North America. The quarter's EBITDA margins were adversely impacted by semaglutide related challenges, including lower sales provision for injected benches, loss of production linked incentives and other associated costs. As well as the conflict in the Middle East. Excluding this impact, we estimate that the EBITDA margin would have been in the high teens. We are working towards resolving the issue and are planning to resume semaglutide commercial supplies by November. Importantly, there is no risk to any patient who has consumed the product. Patient safety and product quality remains our highest priorities and will continue to guide us in every decision we make. We remain confident of a strong second half of the fiscal with the resumption of semaglutide supplies. The strength of our base business and our ongoing productivity initiatives will continue to support double-digit base business growth and steady margin improvement. Let me now walk you through some of the key highlights of the quarter. We commercialized a few key complex generic products, including the anticancer drug, [ Bosutinib ], a first-to-market launch with 180 days of generic drug exclusivity for the 400-milligram strengths and [indiscernible] used in a treatment of lung disease in the United States. In Canada, we are the first company to secure approval for the launch of semaglutide for the treatment of type 2 diabetes. We launched over semaglutin India and remain committed to building this important metabolic franchise complemented by nutrition offerings such as Celevida GLP+ to our collaboration with Nestle. We continue to make process bringing innovation to patients in undeserved markets through partnership, our in-license novel therapy toripalimab for treatment of nasopharyngeal carcinoma has entered the INR 100 CR club in less than 2 years of launch in India. During the quarter, we partnered with Innoviva Specialty Therapeutics to develop and commercialize [indiscernible] used in treatment of hospital-acquired bacterial pneumonia in selected markets across South and Central America, the Caribbean, Russia and CIS countries. Through our collaboration with [indiscernible] and our subsidiary, Origin Pharmaceutical Services, we achieved an important milestone in access [indiscernible] approval for [ zaliflordacin ], a first-in-class treatment for uncomplicated Gonorrhea. The approval came just 6 months after USFD approval, making Thailand the first LMIC country to approve the product. On the regulatory front, the U.S. FDA completed a pre-license inspection PLI at our biologics manufacturing facility in Bachupally, Hyderabad in June 2026 and issued a [indiscernible] observations, which we already responded well within the stipulated time lines. Our commitment to good governance and sustainability continue to be recognized globally. During the quarter, we celebrated 25 years of our new Stock Exchange listing, reinforcement our distinction as the first non-Indian pharmaceutical company listed at exchange as well as our commitment to global best parties in governance, compliance and capital market access. FTSE Russel placed us as the top 1% worldwide while TIME-Statista ranked as 165th globally and 5 among in companies among the world's most sustainable companies. Let me take you through the key business highlights for the quarter. Please note that all the financial figures mentioned are reported in their respective local currencies. Our North American generic business reported revenue of $236 million for the quarter, accounting for 27% of overall revenue and reflecting a decline of 41% year-over-year and a growth of 19% sequentially. The year-on-year decline was primarily on account of lower revenue [indiscernible]. The underlying base business delivered double-digit growth aided by new product launches during the quarter. During the quarter, we launched 6 new products in the region, including complex generics, such as [indiscernible]. And we remain on track to bring more such products to the market as we progress through the year. Our branded franchise, including India, Emerging Markets and Consumer Health business in equity replacement therapy or NRT together accounted for 42% of our overall revenues and remain an important source of stable margins for the company. Our emerging markets business recorded revenue of INR 1,833 crores, accounting for 22% of our overall revenues and reflecting a robust growth of 31% year-on-year and 2% quarter-on-quarter. Growth was driven by new product launches across market and favorable currency movement. During the quarter, we introduced 43 new products across countries. Our India base revenues were INR 1,780 accounting for 21% of our overall revenues and delivering robust double-digit year-on-year growth of 17% and 10% sequentially. This performance was primarily driven by the innovation franchise, new launches, including acquired brands, price increase and volume growth. [indiscernible] June 2026 data highlights our continued outperformance of the Indian pharmaceutical markets and moving quarterly total growth of 14.6% versus 13.5% for the IPM in the moving annual total MAT growth of 13.5% versus 11.1% for the market. Our IPM rank stood at 9 for the quarter and 10 for the year. We launched 7 new brands during the quarter, further enhancing our domestic presence. Our European business, which includes NRT posted revenue of EUR 131 million for the quarter, accounting for 18% of our overall revenues. Revenues were broadly in line with the corresponding period last year and decline represents sequentially on account of a price evolution as well as the impact of operating model. Changes post NRT integration explained by NBN, offsetting the contribution from new product launches in Generics. During the quarter, we launched 24 new generics products across market, further expanding our European product portfolio. Our PSAI business reported revenues of $91 million, accounting for 11% of the overall revenues. Revenues declined 5% year-over-year and 10% sequentially, primarily on account of lower API volume uptake during the quarter, we filed 38 drug master 5 globally. We remain focused on strengthening our core business while building the next wave of growth across peptide by similar consumer health and innovation. We'll continue to advance key products such as semaglutide and abatacept, improved operational efficiency and pursue value-accretive business develop opportunities to drive long-term value creation. With that, I invite your questions as we move into the Q&A session.

Thank you very much, Erez. [Operator Instructions] The first question is from the line of Neha Manpuria from Bank of America.

Just my first question is on the EBITDA margin guidance that we had mentioned that we should be able to get to 20% EBITDA even without sema. Now given how the quarter shaped up, even if I were to adjust for sema, Middle East, I think you mentioned 5. How should we think about the margin improvement from here even assuming that there's still uncertainty about when and how much sema comes back?

Neha, just a technicality is the first part of the question, if you can repeat, we heard you from the middle.

Okay. My question was that we had given a guidance of 20% margins, excluding sema. So just wanted to get a sense of how we improve the current high teens margin that you have indicated adjusted for sema and the Middle East impact, given that you're still uncertain about where in sema comes back and how much it comes [indiscernible]?

Neha, just to make sure that if we are taking out from the 12.5% and we take out the impact of what we provide, plus and here that what we did not sell just to make sure that -- and in addition to PLI and the rest of the stuff, what I say the high teens, it's actually around 18%, okay? So this quarter, the equivalent of the 19% last quarter, it's 18% for this quarter. We are still, I maintain what we discussed a few weeks ago that we are in the neighborhood of the 20% and likely to stay, and that's what we have saying we will do in the next quarter, including the quarter next quarter, which will not be with semaglutide. So that's still in the case to be in the neighborhood of the 20%, as we will resume because we -- with the assumption that we will come back with semaglutide in November, of course, under this assumption, the margins will be higher than that. So we are maintaining what we have discussed in June.

Understood. And second question is on the U.S. business. There seems to be a decline quarter-on-quarter despite the fact that we launched in Canada. We had bosutinib. And I'm adjusting the shelf stock adjustment in the base quarter here. What exactly happened in the U.S. because given we had the bosutinib FDF launch, I would have assumed some channel spending as well as the Canada suppliers?

[indiscernible] is actually in the right direction is -- there were some timing of procurement of the product. We -- and the launch of the product was very successful. So overall, I'm still maintaining a double-digit growth for the U.S. market. Q-on-Q, as you saw already in this quarter, we grew double digit, and it will continue throughout the year. So it's a double-digit growth in the United States. It's just timing of product and nothing special.

The next question is from the line of Dr. Kunal Dhamesha from Macquarie.

First question on abatacept update. So 2 aspects here. One on plant in section where we have got 7 observations, and we have submitted the response. But let's say, when we compare the observation with the last inspection, which had like 5 observation, how does those compare? And second aspect from an ongoing dialogue perspective with the U.S. FDA on the product approval, what are the types of query we are receiving? Is it on data on the clinical side, manufacturing related, CMC-related color here would be helpful.

Sure. So the observation, the 7 were very different than those go, and we believe that they're addressable. And we sent all the relevant information to the U.S. FDA on Friday, which was well within the stipulated time. So this is undergo, and now we will seek a feedback, obviously, from the FDA of what we submitted. As related to the BLA, we did not receive any query as we speak. The goal date of the product is still in December, and this is still intact. We did not have any query or any ask as of date.

Sure. And on that, let's say, inspection, what is your understanding? Would it require another inspection or the response you have submitted would suffice?

To my opinion, we should get approval.

Sure. Sure. So that's the first question. Second question is, some of the productivity measures that we have talked about in the past, right, that we will try to improve the efficiencies. But the way I see it, when I look at the SG&A expense without R&D -- after removing R&D, Q-on-Q is still higher, right? So is there any specific cost saving measures are we undertaking. If yes, what's the quantum in terms of saving that we can see and when those measures would be visible in the overall performance?

So Kunal, we decide, we said like our absolute SG&A amount like the FY '26 largely in line with FY '26 actuals. This quarter, because whatever growth you have seen, largely that growth is on account of adverse ForEx rate movement as well as there is a elevated freight cost on account of the Middle East conflict. These 2 is like almost what the increase, what the growth you are seeing on either Q-on-Q or on the year-over-year, almost at 75% to 80% on account of these 2 factors. In other ways, absolute amount is almost is like if you take it out and then there is not a much significant increase.

So just to, Kunal, we are planning to grow double digit. And we are planning to grow the associate cost by low single digits. So the productivity measures will be primarily that the sales that's associated, obviously, with [indiscernible] will grow much faster than the expenses. But as we grow in most of our 52% now of our business is branded markets. So naturally, in such a case, we need SNM to grow the business. And what is important, they will grow the sales much faster than the cost. In this case, we are talking about the gap of 10% to 12% because this between the sales growth and the cost growth. And that's where the productivity we are going to see.

And when should we start this difference in the growth. I assume it would be gradual, right, eventually? Or it's just linked to the revenue, and not any specific cost measure?

No, no, it is. First of all, you already see that -- and I know it's hard because of all those onetime activities and -- or activities. But you already see it. And as time will go by, it's obviously we'll see it more. But the way to see it is that eventually that the margins -- that the growth in emerging markets, most of the S&M is in emerging markets. And the growth in the emerging market is right now also 15%. And in [indiscernible] it's more than 20%, while the cost is in a very low single-digit growth. If we take out the onetime activities.

Sure. And last one, if I may just squeeze in. One is we have around INR 3,000 crores of cash on the balance sheet, right? And so what kind of opportunities are we looking at from the business development activity? And secondly, on today's announcement from an U.S. President on tariffs on generics as to how we think about the overall development. I know the details are missing, but what would be your initial impression of that? And how would you tackle that?

Sure. So just the first one was [indiscernible]. So first of all, we are engaged in is development. I also mentioned it in my script. There are actually quite a few deals that we are engaging in all sectors and in generics and innovation, in biosimilars. And hopefully, we can announce those deals as we sign it. So the cash and the balance sheet will be used for inorganic. On the tariff, we've been there last year. There is -- obviously, it's a tweet. And between tweet to the reality, a lot of things likely to happen. As we speak, I don't see any reason to be concerned even as -- even in according to the tweet, we are supposed to have 2 years of without tariff. It's not practical to move any facility in 2 years. You know it well. Everybody knows it well. So I'm assuming that it's an opening for a discussion and dialogue about the IPI here in India, as well as association in the United States already engaged on that. So we will see as it evolved. Personally, I don't, at this stage, give too much way to that.

So if I may add, almost 25% to 30% of our revenues are actually being manufactured by CMOs in the U.S. So we already have that as a starting point.

But I will not give too much weight at this stage for that. Let's see how it will evolve. We've been there last year and between what we started and how it ends, it was very, very different.

The next question is from the line of Tausif Shaikh from BNP Paribas [indiscernible].

First few questions on semaglutide pens and API. Can you tell us how many pens as doctor be able to sell during the quarter and a broad-based breakup region wise would be helpful?

Yes. So we sold 180,000 pens before we stopped. We were supposed to sell more, by the way. But, obviously, that's also part of the reason why there is a relatively high level of provision of -- that we have to do on material and ventures that will not use. Obviously, most of it will be for the market of Canada. We have also for India as well. We are still maintaining what I said 90 days ago that with the assumption that we will finish, and this is still the time line that in the -- around the third week of September, we are supposed to finish all the testing of the API, and then supply to our partners once source. We have the slotting an agreement with them. And if everything will go well, we should be able to give to the market 6 million to 7 million pens between November and March. There's still the same place that we are.

Yes. That's helpful. Second question on the semi API. Just wanted to confirm that Dr. Reddy's is also supplying this KPI to many global pharma manufacturer player were also your competitors in Canada and other markets. Just wanted to understand your strategy over here? I mean how much percent of capacity Dr. Reddy's plans to keep for captive consumption for the future?

No. We have plenty of capacity. The issue -- the theoretical capacity [indiscernible] because we need to scale up in a satisfactory manner, but we have plenty of capacity for both party as well as ourselves. We are talking about the [indiscernible], but let's say, even with the -- with the non scale up, it can be about north of 300 as capacity. At this stage, not relevant. It's more about the quality of the API not the capacity.

The last question, abatacept, what would be your time went for the launch if the product has to be approved from the CMO side. Can we expect some delay from the earlier guidance which we have planned in calendar year 2027?

Abatacept is not out of CMO, but is made by our own facility in Bachupally, and that's the facility that were -- that underwent the FDA inspections. The timing is a launch of [ Fornafova ]. We are -- right now, the golden date is December. So obviously, we hope for that, but we need to see whether we will get additional query and if that will stay intact.

But I guess, I think we have filed the product from 2 of [indiscernible], right. The other one is from CMO side. We have done the dual -- dual filings for the product right?

Abatacept was filed only from Bachupally site.

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

My question is again on semaglutide. So as you continue to work towards resuming supplies after addressing the OSS issues, we understand in some of your targeted market, new players are getting approvals, et cetera. So we understand your B2B supplier to a few of them. But nonetheless, by the time you get back in these markets, how do you assess the competition scenario and your ability to gain market share there?

So we believe right now the demand for the 6 million to 7 million pens will be there for us. And it's even back with orders. So we believe that we'll be able to sell all the 6 to 7. Obviously, it's a bummer. We were not denied. We see the consequence, it's -- we lost 4 months of sales for that. So obviously, from the 10 to 11, into the 6, 7, this is the impact on us. But we feel that we will state that the demand for the product is still very high. And the people that will enter the market in these 4 months to the best of our knowledge, there are not that many at least in the markets that we are planning to get approvals. So it's a bummer, but we believe that the product will stay solely for us.

Okay. And also wanted to understand this API issue, will it impact the review of application for semaglutide in some of the market apart from, obviously, Canada is something where you have approved product, but say, in Brazil or in other markets, will the applications will be halted until the time you resolve the API issue?

No, because the specs stay the same. So we are not changing the specs of the quality. It was just our ability to meet the specs in the scale a bench on the API, which we need to resolve. But the file is good and the quality of the drug product is good. So I don't anticipate any delays or a change to our applications anywhere, including Brazil.

Okay. So in how many countries you have filed semaglutide application so far?

How many we filed already?

[indiscernible].

For sure. So the program of the 80 countries remain the same. If I remember correctly, but please forgive me if I'm not fully accurate, it's around 30 countries already, if I remember correctly.

Sure. And my last question is, how should we look at R&D and tax rate from here on. So we understand this quarter had some benefit on the taxes. But on a normalized basis, how should we look for the full year?

So our -- I mean, the tax rate around between, I think, 24% to 25% on the [indiscernible] and R&D., what we have stated earlier, it is in the range of 7% to 8%.

Okay. And any major R&D programs after Abatacept where you plan to spend majority?

So we have a long pipeline for the future both on the peptide as well as additional biosimilars. This is likely that will be close to the 7% that being said. But we -- most of the R&D spend is right now going to products post 2034, between 2034 to 2040 type of -- that's where the R&D goes, besides, of course, some allocation that comes for licensing fee as well as remediation of product, but mostly it's for later product.

The next question is from the line of Saion Mukherjee from Nomura.

Since you last addressed on the sema situation, is there any progress in terms of root cause analysis? And how you see possibility of a resolution? How do you sort of assess the risk of that program at this stage?

So we identified the root cause. We started also the activities in the sites. There is a program management that takes us again to around September 22, September 23. The success rate is high. I don't know to say exactly percentage. If I need to say a number, it's somewhere between 80% to 90%, but there is a chance that it will fail. I just want to make sure it's not 100%. But we feel relatively confident. Let's cross our fingers on that.

I see. Okay. And just one last one on CapEx. What's the guidance for this year on CapEx and for next year, please?

So we see, I think, this year close to -- at this point of time, I think, around INR 1,800 crores on a full year basis.

And will this come down next year, you think?

Hopefully, that's what is our expectations, but around that range because I don't know there is a continuously for the specific product investments in the biosimilars and the peptide and then regular CapEx is signed. Already, if you see that earlier, we were in the INR 2,100 crores to INR 2,700 crores range. And then from there, we have just this year's [indiscernible] believe, I think that, that stays at that level.

Okay. Sir, if I can just ask one question because you mentioned about Middle East conflict and freight cost, et cetera. What's the level of impact either as a percentage of sales or an absolute amount, if you can quantify?

It would be both solvents and the freight on the EBITDA is close to around 1%.

Okay. And is there any improvement now because the conflicts seem to have escalated once again? So how you see for the rest of the year?

So we believe, I think even as long as it continues and because earlier, we thought [indiscernible] stop, then it is up all the solid prices, and we have seen the decline. And now because of, once again, the war is going on. We believe this will stay at least after December this level of increase.

The next question is from the line of Rahul Jeewani from IIFL.

Sir, I had -- I wanted some clarity in terms of our base business growth. Now if I look at our North America revenue base in FY '22 was close to $1 billion. And if I take this quarter's number, then we are annualizing at around $950 million. Now over these past 4 years, we have launched around 90 to 100 products in U.S. We did a main acquisition as well, which contributed $100 million in terms of incremental revenue. So despite these launches and main acquisition, where have we struggled in terms of driving growth on the base U.S. business. So if you can please comment on that.

No, sure. Obviously, we faced on the base of the FY '22 or any other year that you're referring a significant price erosion that was through this period of time. In some of the years, it was even in double digit. Some of them, it was in single digit. This is and you know that very well, very normal for the United States. And against that, we bought a new product, some brought a small value and some less. Overall, I'm reiterating what I'm saying all along that the U.S. market, the generic piece of it is the best single-digit growth without the upside. And on time to time, there is an upside that comes and with upside through the years, whether it's by [indiscernible] before there was other products. So that piece of the market is a single digit, even low single-digit type of a market in which new product complex for price erosion. That piece, the reason that we are still there beside that is that this group of product is what's feeding the growth in American market as well as in Europe. So the leverage growth and what you see now in Europe as well as in the emerging market, it's primarily the U.S. portfolio that is growing them. So we moved from investing in the U.S. to take a product and launch it globally. And so overall, the ROI of the product that we launched in the years that you mentioned actually give us a very, very good ROI. Just it's not come in United States, we see it in the other markets. In addition to that, we are obviously diversifying as a sale to other business bonded, as we stated. But to your analysis, you are correct in this period of time, if you take out product like [indiscernible] your analysis is correct.

Sure, sir. And do you think that we have lagged the peers in terms of R&D productivity for the U.S. generic business. Given that many of our Indian peers have been able to launch products in, let's say, respiratory segment or injectables, which has allowed them to scale up their U.S. portfolio, while we obviously seem to have had pretty muted performance on the U.S. business over the past 4- to 5-year period? So is there any issues in terms of the productivity for our I&D business. And do we have any measures in terms of evaluating this R&D productivity, particularly for the U.S. generic business?

So to your question, yes, we [ failed ] in the certain complex generics. We have instated some of them in the past like I have also called [indiscernible] like some of the peptides that we were late. So the answer is yes. We did have these issues. I believe that we collected it. Obviously, as we know very well, the R&D expenses of today's product that we will launch on average, 10 to 12 years from now. So obviously, the products that we launched in this period of time were products that were developed before that, and we absolutely add productivity issues. And I believe that we took the right measures to correct it. And again, I agree with your observation. I believe that we took care of it.

Sure, sir. And last question from my end. On abatacept, I was also under the impression that we would file abatacept from the partner facility as well. But right now, you are saying that abatacept is only filed from Bachupally. So do you see any risk to a abatacept now in terms of, let's say, contributing to us in FY '28. And are we evaluating an alternate site filing for abatacept?

So abatacept was never meant to be filed from a CMO. It was developed and meant to be filed out of Bachupally from our CCM 5, which is our drug substance in our FFM, which is the filing finish, both of them in Bachupally. So that was always the plan. There was some discussion in the past whether because of tariff we should get a kind of -- in the case of tariff, should we get a CMO in the United States. We indeed engage with this issue. But a tariff [indiscernible] became not relevant plus any CMO that we'll do now will have to be post-approval supplement because, first, they will have to approve the product. And then based on that, they can -- you can add the information about the CMO. So any activity like that will be a post-approval supplement and will require also relatively high cost because, as you know, CMO of biologics product is not cheap. At the moment, the launch will be out of Bachupally. About the risk, there are 2 types of risk. One is in the case that we will have additional query on the G&P. And I believe that is addressable, like I mentioned, but it is possible to get. And second, query is about -- the queries that we may get on the BLA. If we will get this naturally can delay the launch of abatacept. As we speak today, the goal date for abatacept is in mid-December 2026.

The next question is from the line of Vivek Agrawal from Citi.

Just want to understand the India business, they have done a good growth in the quarter. So I just wanted to understand what the organic growth if we remove a couple of small [indiscernible] that we have made in this [indiscernible]?

In India, if we remove the recent acquisition, it's 15%?

15.5%.

15. 5%, fully organic.

Understood. And does that include semaglutide supply as well?

Not much, Vivek.

I understood. Just one more question on bosutinib. So does this -- does that include a full quarter impact of launch? Or it's just a very small launch in this product?

It's a 1 month [indiscernible] .

It's 2 weeks of supply, and we have exclusivity on the 400 mg.

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

Just a couple of quick questions. One, in Canada, I believe we had an arrangement to provide semaglutide to Sandoz as well. Is -- does that deal still hold? And are they going to wait for our supplies to be back?

Yes, it's still hold, and we -- and we believe that if supply will come back in November, we'll be able to meet the commitment to Sandoz.

Got it. And second on [indiscernible], I believe it's a partner product you're selling it in the market. What would be the broad profit share arrangement. Is it equal? Or do you make only a distribution margin?