Ladies and gentlemen, good day and welcome to Dr. Reddy's Laboratories Limited Q1 FY 2022 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star then zero on your touch-tone phone. 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. Thank you. 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 June 30, 2021. Earlier during the day, we have released our results, and the same are also posted on our website. This call is being recorded, and 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 senior team of Dr. Reddy's comprising Mr. Erez Israeli, our Chief Executive Officer, Mr. Parag Agarwal, our Chief Financial Officer, and the investor relations team. 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 expressed written consent. Before I proceed with the call, I would 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. Parag Agarwal. Over to you, sir. Thank you, Amit, and greetings to everyone. I hope you and your family are keeping safe and well. I'm pleased to take you through our results for the quarter one of 2022. It is yet another quarter of double-digit growth in sales. However, profits were impacted due to higher price erosion in U.S. and increase in investment towards brand promotion, R&D, and digitalization. We believe these investments are critical for the sustainable long-term growth of the company. Let me take you through the key financial highlights for the quarter in a bit more detail. For this section, all the amounts are translated into U.S. dollar at a convenient translation rate of [74.7-77.9], which is the rate as of 30th June 2021. Consolidated revenue for the quarter stood at INR 4,919 crores, that is $662 million, and grew by 11% on year-on-year basis and by 4% on a sequential quarter basis. The growth is mainly driven by new product launches, including COVID products, high export business volume, full quarter impact of portfolio acquired from Wockhardt in Q1 FY 2021, and was partly offset with price erosion in some of our products, mainly in U.S. and Europe. Consolidated gross profit margin for this quarter has been 52.2%, a reduction of 380 basis points year-on-year and 150 basis points quarter-on-quarter. Q1 FY 2021 gross margins were high due to higher export benefit and favorable product mix. The gross margins in current quarter were impacted due to higher price erosion primarily in U.S. and increase in inventory provision for products. Gross Gross margin for the global generic and PSAI were at 67.7% and 21.6% respectively for the quarter. The SG&A spend for the quarter is INR 1,505 crores, that is $202 million, an increase of 18% year-on-year and of 5% quarter-on-quarter. The increase on account of investments in brands in India and emerging markets, investment in digitalization, and annual increments. The year-on-year increase is also due to full quarter impact of the incremental expenses after the integration of Wockhardt acquired for full year. The R&D spend for the quarter is INR 463 crores, that is $61 million, and is at 9.2% of sales. R&D spend increased by 13% year-on-year and 11% quarter-on-quarter and is in line with the increase in development pipeline in our biosimilars and generics business, including development of COVID-related products. The EBITDA for the quarter is INR 1,019 crores, that is $137 million, and the EBITDA margin is 20.7%. The EBITDA margin was impacted due to lower gross margin and higher investments in sales and marketing and R&D. We are confident that EBITDA margin would improve in the coming quarters. Consequently, our profit before tax stood at INR 743 crores, that is $100 million, which is a decline of 16% year-on-year and an increase of 21% quarter-on-quarter. In June 2021, we received the final arbitration award pertaining to Doxil product in favor of Astellas for $46.25 million. This led to an incremental charge of $26.25 million for us, which is adjusted in our IFRS financial statements for Q4 and for the full year for FY 2021 filed in Form 20-F as a subsequent adjustment event. Effective Tax Rate for the quarter has been at 23.1%. We expect our normal ETR to be in the range of 25%-26%. Profit after tax for the quarter stood at INR 571 crores, that is $77 million. Reported EPS for the quarter is INR 34.34. Operating working capital increased by INR 1,189 crores, which is $160 million against that on March 31st, 2021, mainly driven by increase in inventory and receivables. Increase in receivables was primarily on account of a planned discontinuance of receivables discounting program in the U.S. Our capital investment during the quarter stood at INR 320 crores, which is $80 million. Our free cash flow generated during this quarter was a net outflow of INR 686 crores, which is $92 million, mainly due to increase in operating working capital. Consequently, we now have a net surplus cash of INR 45 crores, that is $6 million as on June 30, 2021. Foreign currency cash flow hedges in the form of derivatives of the US dollar are approximately $555 million, largely hedged around the range of INR 74.7 - INR 77.9 to the dollar. INR 77.5 million at the rate of INR 0.9921 to the rupee. AUD 10 million at the rate of INR 68.062 Australian dollar, and ZAR 110 million at the rate of INR 4.96 to South African rand maturing in the next 12 months. With this, I now request Erez to take through the key business highlights. Good morning and good evening to everyone. I hope you and your loved ones are keeping safe and healthy in these testing times. While many of our key markets and businesses, including India, were severely hit by the second wave of COVID-19 during this quarter, I am pleased that we have continued to deliver our purpose of improved health cannot wait by ensuring the continuity of our operations and serving our patients with the relentless efforts of our employees and business partners. We continue to make good progress on our strategic ambition by enhancing our development pipelines across core molecules and biosimilars, continuing with our new products, strong momentum, gaining market share in key products, making inroads in Europe, testing markets in Europe, driving productivity and accelerating our innovation agenda. Today, we have successfully managed to extend our business model beyond the key innovation through digital innovation and proof demonstration that is the launch of Svaas, an app-based integrated OPD service delivery platform in India. This will provide system and high-quality healthcare by addressing patients' needs for doctors, pharmacy, laboratories, and insurance all under one roof. This is an unusual quarter for us as we face price erosion pressure in the U.S. as well as decline in API sales, while the growth in both is expected in the next coming quarters, supported by scale-up in the recent launches, continued new product strong momentum, and gain of market share. Let me take you through the key business highlights of our business. Please note that all the references to the numbers in this section are in respective local currencies. Our North America generic business recorded sales of $235 million for the quarter, with a YoY growth of 4% and sequential quarter decline of 1%. We launched four products in the U.S., including acetec 10 mg capsules, ertapenem injection, sapropterin 100 mg per day, and albendazole tablet, and relaunched amoxicillin tablets. We also launched two products in Canada in this period. This quarter witnessed normalizing progress in sales for retail, Gx, and OTC business due to low COVID infection rates in the U.S. This and market share gain in our existing products and from the recent new products, which was offset by relatively high price erosion due to an increasing intensity of competition in certain key products and continued impact of lower number of elective procedures for health system business. Our Europe business recorded sales of EUR 45 million, with a YoY growth of 6%, driven largely by new product launches. The sales were flat on a sequential quarter basis. During this quarter, we launched four new products in Germany and two products in the U.K. We have expanded our presence tofour new countries in Europe, namely Netherlands, Portugal, Slovakia, and Czech Republic, with the launches of acetec for injection in these markets. We believe that Europe will continue to be a good growth driver for us in the next few years with a controlled strategy of portfolio market expansion. Our emerging market business recorded sales of INR 903 growth with a YoY growth of 40% and sequential quarter growth of 3%. Within the EM market, the Russia business grew by 14% on a YoY basis and declined by 13% on a quarter-to-quarter basis in constant currency. Our business in many other focused markets like Brazil and China performed well. During the quarter, we launched 13 new products across our associates. Our India business recorded sales of INR 1,060 growth with a strong YoY growth of 69% and sequential growth of 6.6%. This strong growth was supported by both COVID portfolio as well as good performance of the base business. Year-to-year growth was also positively benefited through low base effect of Q1 last fiscal. During the quarter, we launched six new products in the Indian market, including Sputnik V vaccine, COVID treatment drug of 2-DG, a nutrition product, CurHealth, and Feverico. June 2021, we have growth by 19.4% on MHPS, faster than the market growth of 14.4%. On Sputnik V, the commercial scale-up is ongoing. We are working with RDIF for ramping up supply. We are also working closely with ICMR in India for manufacturing the vaccine. We have been able to create a robust go-to-market infrastructure to supply the product between manufacturer and healthcare system, across 80 cities and towns across India. We are also working on millions of Sputnik Light. As per the recommendation from SEC, we would leverage Russia's phase III trial for approval in India. Our PSAI business recorded sales of $102 million with a YoY decline of 10% and sequential quarter decline of 6%. This was largely due to a higher sales base for this period during the same quarter last year owing to stocking activity by our customers as a response to mitigate the COVID-related potential disruptions. Considering the nature of this business, we expect some fluctuation in quarter- to- quarter sales due to lumping in orders. On the R&D front, we continue to strengthen our pipeline across the positional therapies as similar to pushing through our development pipeline, while we continue to make progress in the phase III clinical trials of ONO-4208. We are also strengthening our small molecule pipeline for all our markets and improving our execution with this proportional focused approach for value and potential assets. During the quarter, we filed 30 drug master files globally, including two files made in India. We have also filed 70 formulation products across global markets, including ANDA, two NDA in the U.S. As of June 30th, 2021, we have 93 drug master file pending for approval with the U.S. FDA, which include 90 ANDA and three RFAs. In our proprietary corporate business, we continue to build the swell with the pivotal registration trial for ONO-712 for PSP indication. During the quarter, we have licensed the development and commercialization rights of DFD-29 program that is minocycline modified release 40 mg. Additionally, efforts are underway to globally monetize key approved and non-marketed assets. While we are cautious of continued uncertainty in business environment, owing to the global pandemic and increasing competitive intensity of the generic, we remain committed to our strategy and believe that our several levers ahead of us deliver healthy profits as it was on a sustainable basis over the coming quarters and in the future. With this, I would like to open the floor for questions and answers. Thank you very much. We will now open the question and answer session. Anyone who wishes to ask a question, may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue settles. The first question is from the line of Forum Parekh from Choice Equity Broking. Please go ahead. Hello. Am I audible? Yes, ma'am, go ahead. Yeah. Just wanted to know on the outlook of the North America business with this intense price erosion, price competition. How do you look at it? I think I wanted to know, going forward, what would be the drivers for a better market? Yes. This quarter was a bit unusual for us as we got the downside of the U.S. as in some products, we faced a price erosion primarily defending our share, while the big launches are coming up annually and later, for example, Otepans, which is a very important launch. This launch came in the last few days of the quarter, naturally, for products like that, we will see realizations of its potential in the quarters to come, as well as other products. I think, first of all, timing-wise, it was a bit unusual for us. We are expecting North America to grow this year, as well as to come to the famous numbers that I'm always saying. We are very still committed to our 25/25 EBITDA roughly, as always, also in the quarters to come. In this respect, it's a bit different. The EBITDA, specifically, this quarter, it was a combination of the U.S. as well as less APIs, because normally when you have less APIs, you have the EBITDA, and this is also fluctuating from a quarter to quarter because of the order book, as well as COVID and other activities like that. I'm not so concerned on that on the long term basis. Okay. Can you just throw some color on the North America side, on the price reduction, how do you see it? Something very similar to what used to be in the years ago when you're launching a product, especially products which we launched recently. Recently means that in the last 12 months, then the competitor is coming, and you need to defend your share, and it leads to a price erosion. It's not unusual situation and naturally, this will continue to be also in the future. I cannot create something that is unusual for us in North America. It's a normal business model in this country. Okay. Thank you. Good luck. You're welcome. Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Thanks for the opportunity. Just from the aspect related to subpoena issued by the U.S., I should like to understand in terms of the number of healthcare professionals involved, as per the complaint by the anonymous person. First of all, it's not a new thing. We reported on it in November of last year. As we are traded in the U.S., we need to submit this information and to the relevant agencies and that's what we did, and this is still the process. It is really under investigation, that is done. Those investigations normally takes some time. I don't can give you an immediate action in this respect. Once the investigation will come, we will share it with the authorities and address the relevant processes. Okay. Secondly, just on this PSAI gross margin, while the sales would have been impacted because of the inventory buildup for the previous quarters, but how to look at the gross margin for this business going forward? The gross margin in API, because of the nature of it, relatively high level of fixed cost. When you have less sales, it is normally you see it within the margin that sets. Once the sales will go up, also the margin will go up. I don't see any specific issue. We did have some price decrease in some molecules. On those molecules, we see less profitability. On the other hand, we are going to launch others. Overall, I believe very much in this business. While it will continue to fluctuate, we will have good quarter and less good quarter elements, depends on the procurement patterns of the customers. Always a good answer. Thank you. Thank you. The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets. Please go ahead. Yeah. Hi. I hope I'm audible. Yes, ma'am. Okay. Thank you for the opportunity. My question is on Russia and CIS business. If I understand correctly, fourth quarter is the lowest regional quarter for us. Despite that, we saw a notable sequential decline in both Russia and CIS. Can you talk little bit more there, like, what are the reasons, due to which we are facing sales decline? Is it something specific to Dr. Reddy's or it's something market-wide phenomena which is impacting sales in Russia and CIS? First of all, we are growing. We are growing in this area, but more specifically, in Russia, there is a timing of the tenders and the bid on biosimilars. Those normally are coming in specific quarters and according to the buying patterns of the government in Russia. That's why, I believe we have most of those sales of those two kind of products. In certain quarters, we will see sequential decline. This is more of a timing issue of the tenders of the products, while actually we are growing on both the retail as well as the government business, meaning the hospitals in Russia. How should we expect growth for this part of the business in a normalized way? Should see growth like we happened last year. In general, the emerging markets will continue to grow in normal patterns which we used to see. Not necessarily every quarter, but last year and also in the future. Okay. That's helpful. My second question is on Sputnik rollout in India. Depending on the clarification which you might have got from the CMOs, by end of FY 2022, how many dosages you are confident about distributing in India? How do you see the rollout of COVID vaccines in next 12 - 15 months? We will have somewhere between September and October. You will see the products coming out in India. Okay. From Sputnik V, as we hope. I guess we will be able to. Right. The infrastructure is in place, particularly with the sufficient quantities for the Indian market, and in every sense. Of course, this also depends on what will happen in the U.S. in terms of vaccinations by others. We should have a sufficient line once this is done. Okay. Thank you for your answers. I appreciate it. Thank you. The next question is from the line of Prakash from Axis Capital. Please go ahead. Hi, good evening, and thanks for the opportunity. Sir, you mentioned about PSAI. The voice was not clear, but trying to understand. We had stabilized this business and seen a 30%+ gross margins for at least last year. Again, we saw this volatility coming for this quarter. How do you see I understand you mentioned about why this quarter was affected, decrease in sales volume and pricing. Do you think it's a one-off, and how do you see the rest of the year and year after, given that there's a heavy investment in the DMF, and you spoke about last quarter on the CDMO that you are starting already? What is the update there, and what is the outlook, sir? The outlook is positive. We believe in this business, it wants to grow. Indeed, in the last quarter fluctuation, there were quarters in which people took more and the quarters that people took less. In the last two quarters, they are taking less. I agree with that. Overall, the product, especially the future of the product, looks very promising. Specifically, I think what happens to us in this quarter is that some key products, we missed certain pattern orders because of seasons and some differences with pricing as well. I see that more of a short-term issue rather than long-term. On the scale-up of the CDMO and stuff, we are very much on track, and I very much believe in this business. I count relatively small. Growing but small in terms of impact on the entire company. Most of the activities of API are rather from, let's say, the generic API activity. The impact is by the pattern of orders and so on. Prakash, is it okay? Hello? Yeah, sorry, I was on mute. I asked that, do you think this is a one-time delay from you back to normalcy from Q4 onwards, or it will take time to come to normalcy? I don't think it's a one-time, per se. At some of these products that the price went down, it will naturally continue. Per se, I think we are going to see a growth in the API for sure for the year, but it may fluctuate also during a quarter and quarter- to- quarter. I cannot say this is a one-time, but the direction is positive. It is comfortable. Okay, great. Second question, sir, on the EBITDA bridge. Last year, we were at healthy EBITDA margin of 24%- 25%, and we started this quarter with soft U.S. business, soft API business, with resultant drop in gross margins and EBITDA margins. How do you think, by when will we be able to come back to your 24%- 25% mark? Will it take a couple of quarters or it will take next year to- No, no, it will come back, and as you know, we cannot give guidance, let's say, or next quarter you are supposed to see something similar to what you have seen from us already. Yeah, I'm not looking for guidance. I just want to know the drivers which will lead to that. One is clearly the Vascepa launch which will help. Yeah. No Yeah. No more than that. The drivers will be first the realizations of the full value of the products that will be launched in the U.S. This is missing in this quarter. The second is that a scale-up of some of our API activities. Third, you are going to see more growth and more impact of some of our, if you wish, more top line in the company after realizations of higher growth in general in EM as well as in India. Last but not least, this was a quarter in which we had some, it was not significant, but some items that were impact, whether it's COVID-related. It was a quarter in which two months out of the three, we were under what they call in India, and it has to deal with the logistics of it, as well as certain COVID-19. All of these are supposed to help, and I am very confident that you'll see the margins that we have discussed. You might see APIs that I'm always presenting in the meeting for long-term, the 25.5% is still valid for the product. Perfect. Great. Thanks. Thank you. The next question is from the line of Sriraam Rathi from ICICI Securities. Please go ahead. Yeah, thank you. Quickly on the issue by the SEC. I'm just wondering what is company stand on that in terms of thinking and potentially even what could be the worst outcome of that in terms of impact it can have in terms of negatively? Can you repeat the question? The line is not clear. Sorry about that. My question is regarding this issue by SEC. What is company stand on that in terms of what are our thoughts, and at the same time, what outcome is something negatively happens in terms of outcome? Normally when you have a complaint in the market, you need to submit this information after the guidance to the agency in the U.S., as we have heard in the U.S., and this is what we did this time as well. The processes that we are going through are self-investigations by a kind of outside counsel firm that is investigating and gives the outcome of this investigation. You are submitting it, and then you are discussing it with the relevant authorities. The potential outcome can be nothing or can be certain things that the company needs to do. At this stage, I think it's too early to assess. I don't envision any immediate action or any immediate activity that we need to do. The process is going to take probably, for the foreseen time, maybe a year, maybe more. I don't know. Okay. Got it. Secondly, one question on the gross margins. I think in the earnings you mentioned that there was an inventory difference also. Is it possible to share how much this impact has been? Inventory hits, Sriraam, I don't think we can share the number. There is some inventory provision that typically happens every quarter. This quarter, we saw a little higher, because of certain quality issues and slow-moving inventory, which is normal in our industry. We do expect it to normalize in the next couple of quarters. Okay. Generally, like we used to be in the range of 68%-65% gross margin. That is where the number to look at for the quarter percentage on a margin. I would not like to give any number. As you know very well, if you look at our data for the last several quarters, our gross margin fluctuates quite a bit. It is clear that in this quarter, our gross margin has been at the lower end of that range. As you know, that's primarily because of the price erosion that we saw in North America, and also because of slightly higher inventory provision. Moving forward, there are a number of levers that will improve the gross margin. Like Erez Israeli said, the full impact of some of the recent launches in North America would push it up. As we grow sales, which we have been growing for a while in the branded market, that will give us better leverage. As the PSAI business improves, that will impact gross margin positively. At the same time, there is a lever that will bring it down slightly, which is the increase in the commodity and solvent prices. Overall, we expect that the levers which are going to put an upside pressure to growth margin are more compared to where we are today. I don't think I can give a range on growth margin. Okay. It's fair to say that we will stay in the neighborhood of where we are. If you recall in the previous meetings, if there will be a great business that will come, for example, I know it's hypothetical, but if a billion-dollar business will come in 49% and a great EBITDA, we will not say no because of the margin. What should guide us is naturally the EBITDA. In terms of expectation, yes, I think it's fair to say that we are working to improve it. Okay, sure. That is enough. Thank you. Thank you. The next question is from the line of Nithya Balasubramanian from Bernstein. Please go ahead. Thank you. A question on the Sputnik V. One of the challenges which you have been facing recently is the scale-up in the Component II. We understand that for fewer doses of the second dose has been important as well. Is this likely to remain a challenge? Or do you have visibility on when this is likely to improve so that you are able to vaccinate more people? Firstly, this is correct. The main challenge is the supply of the second formula, what we call the Component II, and as well as the allocations that come from Russia, as they have their own wave of pandemic, and they have their allocations consideration. In our discussions with them, we are supposed to get it in August. I cannot confirm it because they were delayed in the past, and they might continue in future. I hope that the real solutions will come when there will be a ramp-up out of India, as well as the potential approvals of Sputnik Light. This is the two mitigations that we can have in a case that the challenges of the Formula B will continue. Got it. For Sputnik Light, is there any requirement from the DCGI for you to conduct any sort of study in India? They will accept the trials, the results that will come out of Russia, and maybe once they will review the data, they may ask for more, but at this stage, we are planning to submit the data that will come out of Russia. Got it. One last one. You mentioned that your SG&A spend in India is now higher because you're pushing for marketing activities on digital solutions, et cetera. Is this level now likely to stay? Is this the new normal? In India and emerging markets, yes, it also supported well the sales and the profit. This is a very sexy business, which is growing, and it's paying for its investment, plus it will select return on investment and executive jobs. This is likely to grow. More than that, this is the main mitigation on those businesses that are not giving us that level of comfort, more structural like the U.S. business. This is absolutely within the strategy and will continue. Got it. If I may squeeze one last one in. If you look at Amgen's commentary on the last earnings call, they've been talking about how the company has been able to retain market share because out-of-pocket expenses for the patient is actually lower with the brand compared to the generic. Do you see this as a challenge for Dr. Reddy to gain market share in the market? I cannot comment on this stuff, but I can tell you that so far, we did not see signs for this market. Thank you so much. Thank you. The next question is from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead. Hi. Thank you for taking my question. First question on the U.S. business. If you can provide what proportion of our U.S. business in this quarter was from the new product launches, what would be our, let's say, target going forward on an annual basis, where we are targeting X proportion of the revenues, which should come from the new product launches. That's the first question. First of all, we are not targeting a proportion. We are trying to explore the potential of the pipeline, and some products will be very big, then they will add good proportions because that will be more impacted by new products than others. Actually, some of the products that we are launching are bigger than what we had last year. There will be years that it will be less. We are not targeting specifically a percentage as such. The way we are looking at this business is we look at it sequentially, whether it was the right choice for the shareholders in terms of return on investment, in terms of risk management, et cetera. What we are doing with the U.S. portfolio is, like I mentioned in many discussions before, is primarily to leverage it across markets, to launch it in other countries, Europe, emerging markets, et cetera, and reach the economy of scale. To address directly your answer, this year, the proportion will be higher than other years. It's not necessarily going to be linear after or et cetera. It very much depends on the composition of the new products, the markets that they will be in, and the potential. Sure. Thank you. The second question is, what's the rationale behind the continuation of the receivables financing? Yes, I can explain that. Basically, the rationale is the narrowing of the interest differentials between U.S. and India. As you know, the interest rates used to be much higher in India, and therefore the counting of receivables in the U.S. and being able to take advantage of the arbitrage was a lever that we were using. With the narrowing of the interest rate differential, that arbitrage was no longer making sense, and therefore, we've decided to reverse that. Okay, sure. Thank you. Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead. Yeah. Hi, guys. Good evening. Just one question from my side. I just wanted to understand the SG&A data. Essentially, from March quarter to now, we have seen almost increase of INR 100 crore in SG&A spend. You guys mentioned three reasons. The first was U.S. report. Potentially out of INR 100 crore, INR 25- INR 30 came from first quarter increase. Second was driven by COVID-19 impact, everything from strong spend from SMA, et cetera. I am not able to understand even in our sales pressure, the impact of COVID was very much there. In this quarter, when you talk about higher marketing activities resulting in higher expenses, can you just take me through this balance percentage of the incremental sales impacted so far? Sure. First of all, in this quarter, while we had COVID impact, it was in India, not a lockdown as severe as the last lockdown. We did have, in May and June in particular, a combination of physical calls as well as digital calls. That's one. The second is that we are investing behind a number of new brands. For example, Celevida in nutrition space. We have launched in June, a brand called Pure Health, which builds immunity, and we have got very encouraging response from the consumers initially. We are investing behind our OTC business. We are also expanding into rural areas where we have seen strong growth. There are a number of growth drivers which require investment, and we are not shying away from investing in India and Russia. This is borne out by the growth profile of these businesses. You see, in this quarter, India has grown at a very strong rate. Even if you discount for the low base in India, sequentially, we have recorded 26% growth, and similarly in emerging markets. This investment, we firmly believe, is good cholesterol, and we will continue to invest in good cholesterol. Okay. That's helpful. Second question was on the Russian vaccine. Specifically, supplies will only ramp up for us in December onwards this year. For export markets, have you progressed further with our contract with RDIF? Any progress so far? We got price also for the other markets. At this stage, any quantities that will come, will come to India. Right now, this is our priority. I hope, by the way, that we will get towards the November, but we do not have the confirmation for that as of yet. Everything that is related to export will be after we will satisfy the need of India. Yes, absolutely, the intent is that if this will ramp up, it will be used also for export. At this stage, the agreement and the activities that we have are on India. Okay, thank you. Thank you. The next question is from the line of Neha Manpuria from JPMorgan. Please go ahead. Yeah, thanks for taking my question. My first question is on the India business. As you know, you just talked about investing in nutrition, OTC, climbing into digital areas. If you could just give some color on when we will start seeing the benefit of this. A related question on that, how much do you think you will have to spend to scale up these businesses, particularly something like OTC and nutrition, general businesses? First, India is already financing its growth. We are growing in OTC in India. I know that we are chasing the P&L line, but in terms of OTC, India is financing its growth as well as the emerging markets. The specific investment in the brand, when it's a new brand, you normally see it profitable in the second year. This is the experience in India, and this is going to be also the case in the new launches that we have. The activities that are related to mostly others, as well as therapies, we of course, will see the benefit immediately. As it is, as we are taking foreign products and expanding to other areas. That part of the investment is actually paying off nicely, and the ROCE as well as the EBITDA in India is above our average, even the average we were mentioning in our previous discussions. I would also add that in many of these brands, the investment is in digital marketing, which compared to the earlier mass media model, is much more efficient and effective, and that leads to a much earlier breakeven. Like Amit said, typically it will start paying back from second year, for new brands. In terms of new launches, just wanted to understand how many brands that you have in the pipeline for nutrition and OTC. Like you mentioned, new brands would require new investment. In that context, what is the planned launch pipeline that you have to be specific? The bigger brands are actually brands that we already launched. Okay. There is a opportunity to scale them up and to create economies of scale. Of course, an area like Parag said, like in OTC, like in pharmaceuticals, in which we are launching new brands in order to enhance our presence in that area. Prevention, wellness, OTC is another part of our strategy as well as our traditional GAAs. Now we moved also in every step to the digital therapy. More and more we will expand our footprint in India in that respect. Some of it will be new, and some of it will be level rate of things that we did in the past. Overall, the profit of India will go up materially. It will pay for those investments that we'll take to materialize it. Understood. Focusing on the API supply for our generic that has launched, just wanted to get a sense on when do you think we will get to our fair market share with abacavir? Is API another concern in terms of our ability to ramp up this product based on the supplies from partners? At this stage, I don't see concern with API. Okay. When do we think we can get to our fair market share in the other countries? I don't know what is fair. Fair is a matter of definition. I think that in Q2, we should see different results in the contribution of this product as we launch the product in the last few days of the quarter, and into the Q4 of the current. Understood. Thank you so much. Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead. On the U.S. market, is it possible to quantify the extent of price erosion that you're seeing in the base business? Is it single digits, double digits, sequentially, how that has happened? What's the concentration that we have in the U.S. today in terms of the top two products, three products, if you can throw some light. Also, some color, I think you mentioned about OTC picking up. If you can give some color on volumes. I understand price is lower, how has volume shaped up? Have you been able to defend volumes for all our products, or there has been a loss of market share as well? Yeah. In terms of net market share, first of all, we are growing market share. We are growing in general, and our top three products is about 35%-40%, if I remember correctly, in the U.S. It's a kind of, this is the Pareto. The Pareto in our case is about 35%-40%. In terms of value of price erosion, we are not sharing these kind of numbers in this presentation. For this product, we need to defend. Normally, it's double digits for these two products. The overall impact on the basket, it depends on the value of each product and how big it was. In this quarter, the main thing that happened was, exactly as I said in the beginning, is that we got what you call the skin, but not the Hamid. We got the impact of the price erosion, but we did not get the impact on the market share itself, as most of the lever for us to grow will come primarily from starting Q2. That's why I believe that Q2 will resemble better than our activity in the United States and moving forward as well. Okay. Just, Amit, the number you said, top five is 30%, is that right? Can you just confirm that, please? Yeah. Yeah. Confirm that. Around this number. Yeah. Okay. Secondly, just to ask about the COVID you mentioned. Given that the vaccination phase in India has picked up, and we have a contract for 150 million dosage, and given the pricing environment, do you think from financial perspective, it is a meaningful opportunity? It can be meaningful if all the things will be right. The reason that I'm saying it can, not because I doubt the opportunity is big, it's more the way it will play out in terms of supply out of Russia, ramp-up, vaccination programs in India. There are many. The COVID waves that hopefully for India will not come another wave two again. I wish it for India as a country. There are many factors in that respect. Plus, we need to remember that the antibody, even for the people that do vaccine, eventually are going down, and we do see the impact in countries that got vaccinations six months ago. Now there is a pick-up of cases again, even in a certain area. What we are doing is we are trying to move on multiple dimensions to address scenario. For example, we are working on adults, which is important. We are working on school kids' lives. We are working on other products. In our portfolio, there is not only we have other products. We are working to qualify the Indian operations in case that we can use them in India. We are working on them in the case that we can do. export in the places will be. I don't know exactly how the future will fall, but we are raising for us enough. We are kind of ramping up our infrastructure, registrations of products, et cetera, to allow us to address it when there is a need for it. That's the way we work. It can be an important significant opportunity, but it can be also less than that. This is a kind of unpredictable situation, and especially when it's related to supply and these kinds of things. Okay. Finally, if I can ask on R&D. I know you mentioned about biosimilars. I just wanted to check, is there a very steep increase in R&D spend on biosimilars? How should we think about, are there any products which are going into major clinical trial over the next 12 months? Should we expect this to move higher? If you can guide on R&D spend, how should we think about it, particularly with respect to biosimilars? Your thoughts in general, because there has been limited success in this space. What are your thoughts on increasing spend on this area? We are increasing spend. I cannot call it steep. I can call it an increase of spend. We are starting trials, and it is part of our increase in R&D this year of biosimilars. I think overall, in trials for this year will be four products, including biosimilar. We are financing by increasing of sales of biosimilars, especially in emerging markets, and the main market for it is Russia. The main difference is that this time, the other products will be aimed for first to market, unlike the products that we came behind. There is, I believe, a significant opportunity in that, especially in our markets. I continue to the strategy of leveraging those countries in this area in which as part of our strategy, those products are normally also correct. There will be a draw on this infrastructure standalone as well as the funding partners for markets like the United States, as long as the United States is having foreign business models. I do believe in this opportunity. I absolutely believe investment in this space, continue to be investment in this space, but limited in nature. Okay. Thank you. Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead. Thank you very much, and good evening, everyone. The first question is on the digital health tech effort that you're putting in and the app that you announced having launched today. Just thinking about it, what is Dr. Reddy's competitive advantage in getting into this venture, your right to win versus a few others who have launched their digital tech app like Hospital Chain or online company, ePharmacy, et cetera. Is this a portion of your end game over here? Sure. Thank you for that. I see that as a very important development. First, it's not an app. It is a service. It has to obviously be a service that we are giving to people. People that, in this case, it's a collaboration. We will get under an insured service their needs under one roof, meaning that however we are going to provide them the healthcare that they deserve in much better service and much cheaper than they're used to get by the current alternatives that they have. The beauty of that is the end-to-end platform in which we combine the physician, the insurer, the pharmacies, the delivery, the information, and everything under one roof. I think it's, if you wish, it's outpatient service. I used to get when I lived in America, and it's something that doesn't exist in that form in India, and we are very happy to do that. It's not a normal app. It is absolutely a service, an outpatient service like it is in other countries, but not common in India. Fair enough. Thanks for this. I'm just wondering, what synergy does it have with your traditional business? What's your end game? Will you keep it, develop it, or just your thoughts on this? We absolutely will continue to develop it. We just launched it. The way I see things are involved in India, it will not be about necessarily building on the current business, but companies who will have to go into a different ownership of the stakeholders, and this is what we are aiming to do here also. Our aim is to create an ecosystem, and I think those companies that are the first movers in creating an ecosystem linking all the players in the healthcare will definitely have a competitive advantage. Okay, excellent, sir. The second question is just on ertapenem. I know you have answered. I'm looking at four-week data that is available now on IQVIA, and your market share is under 3% for a drug which you are the second player, and it's 90% still granted. Why is the market share ramp up so slow here, and how should we [view ertapenem]? Normally, when you launch, people are checking the relevant stock, and then they are trying to do it. Our sales is not enough for them to the IQVIA. Sorry, sir. Can you speak a bit louder? What I'm saying, our sales are not working in according to the ramp-up of IQVIA. Oh, I see. Okay, got it. Sir, just for clarification, for Sputnik V, when did you say your supplies would be picking up a lot more from the Indian manufacturer? Was it September, October, or December, between this time frame? September to November, because we have six of them, and each one of them has different dates. Some could be as early as August, but to be positive, we are saying September to November, and we hope to get something from Russia, but it was delayed before, so it may be late again. We are still in the discussions, and it's still very much in the process. Okay. Final one now, specifically. By the time we come to this time period, a lot of India would have got at least one dose, which means they will take the second dose of that vaccine. Will there be enough market left? In that sense, if you back out the entire India, if you back out the anti-vaxxers, et cetera. The moment you get beyond September, October, then there's a commercial rationale of Sputnik. It does in cases that got vaccinated first time, I agree with that. It looks like there are still many places, especially in the smaller cities and areas that did not have the same opportunity. I would say that. Okay. That is why the opportunity is still there. We need to take into account that those antibodies, the longevity is also a question mark. For example, the people that got the vaccine in the months of February, March, will may have to get something again after a certain period of time. When we are ramping up, especially as we discussed in also Sputnik Light, et cetera, we are aiming also for the second wave of vaccinations, whether it was going to be with a six month, nine month, one year, or whatever period of time. That is actually delay, the difference to Russia made, of course, to us as a potential market share in the month of July. I agree with that, but I still believe that it's a very viable opportunity, and it's also very much needed in that respect. Let's say that if we could get the supply today, I would not see any chance to sell it today. Okay. Thank you, and good luck. Thank you so much. Thank you very much. Let's keep that as the last question. I would now like to hand the conference back to Mr. Amit Agarwal for closing comments. Thank you all for joining us today for the earnings call. In case of any further query, please reach out to the investor relations team. Thank you. Thank you, and stay safe. Thank you very much. On behalf of Dr. Reddy's Laboratories, that concludes this conference. Thank you for joining us, ladies and gentlemen. You can now disconnect your lines.