• Consolidated Revenue: INR8,359 crores (USD977 million), 16% YoY growth, 4% QoQ growth.
• Gross Profit Margin: Approximately 59%, increased by 19 basis points YoY, decreased by 91 basis points QoQ.
• SG&A Spend: INR2,412 crores (USD282 million), 19% YoY increase, 5% QoQ increase.
• R&D Spend: INR666 crores (USD78 million), 20% YoY increase, 8% QoQ decrease.
• EBITDA: INR2,298 crores (USD269 million), 9% YoY increase, flat QoQ.
• EBITDA Margin: 27.5%, decreased by 176 basis points YoY, 95 basis points QoQ.
• Profit After Tax: INR1,413 crores (USD165 million), 2% YoY growth, 13% QoQ growth.
• EPS: INR16.94.
• Operating Working Capital: INR12,782 crores (USD1.49 billion).
• CapEx Cash Outflow: INR709 crores (USD83 million).
• Net Cash Surplus: INR1,603 crores (USD187 million).
• North America Generics Revenue: USD401 million, flat YoY, 10% QoQ decline.
• European Generics Revenue: USD134 million, 142% YoY growth, 14% QoQ growth.
• Emerging Market Revenue: INR1,436 crores, 12% YoY growth, 1% QoQ decline.
• India Business Revenue: INR1,346 crores, 14% YoY growth, 4% QoQ decline.
• PSAI Business Revenue: USD97 million, 3% YoY growth, 3% QoQ decline.

• Warning! GuruFocus has detected 7 Warning Signs with NTRS.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dr Reddy's Laboratories Ltd (NYSE:RDY) reported a double-digit top line growth of 16% year-on-year, driven by strong performance across various segments.
• The company achieved its highest ever quarterly revenues and EBITDA in Q3 FY25, with EBITDA margins at 27.5%.
• Successful integration of the Nicotine Replacement Therapy (NRT) business contributed significantly to revenue growth.
• Dr Reddy's Laboratories Ltd (NYSE:RDY) launched innovative products such as toripalimab and elobixibat, enhancing its portfolio in India.
• The company made progress in its biosimilars journey, securing marketing authorization for rituximab in the UK and filing denosumab in both the US and Europe.

Negative Points

• The gross profit margin decreased sequentially by 91 basis points, impacted by price erosion.
• SG&A expenses increased by 19% year-over-year, driven by higher logistics costs and investments in new business initiatives.
• The US generics business faced challenges with price erosion and competition, leading to a sequential decline in revenue.
• The India business experienced slower growth in the cardiac and gastrointestinal segments, impacting overall performance.
• The company received a Form 483 with seven observations from the US FDA inspection at its Hyderabad facility, indicating potential compliance issues.

Q & A Highlights

Q: How has the India business performed, particularly in the cardiac and gastrointestinal segments? A: Erez Israeli, CEO: The India business grew at 16% year-on-year, with most categories outperforming the market. However, the cardiac and gastrointestinal segments underperformed due to lower volume pickup. The issues are transitory, with solutions in place to improve sales and marketing execution. Gastrointestinal improvements are expected soon, while cardiovascular may take an additional quarter.

Q: Can you provide insights into the biosimilar strategy, particularly for denosumab and abatacept? A: Erez Israeli, CEO: Denosumab has been filed in the US and Europe, and it is expected to facilitate the launch of abatacept. The strategic rationale is to create market capabilities for faster market share gain. Approval timelines are approximately 12 months for the US and 14-15 months for Europe.

Q: What is the status of the Nicotine Replacement Therapy (NRT) business integration and future investments? A: Erez Israeli, CEO: The integration of the NRT business is ongoing, with Haleon providing distribution services until April 2025. Investments will continue during this period to maintain growth momentum. The business is gaining momentum, and there is an agreement with Haleon on marketing expenses to support growth.

Q: What are the expectations for the semaglutide market, particularly in Canada? A: Erez Israeli, CEO: The patent for Ozempic expires in January 2026, and Dr. Reddy's is well-positioned for approval. The Canadian market is important, with a 12-14 month approval timeline. The product requires significant capacity for API and pen manufacturing, and Dr. Reddy's has been preparing for this for years.

Q: How is the US business performing, especially concerning Revlimid and other base products? A: Erez Israeli, CEO: The US business saw a decline in some products due to increased competition, but there was no major market share loss. The decline was offset by market share gains in other areas. The focus remains on maintaining market share and managing price erosion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.