Good day, everyone, and thank you for joining us on such short notice. I'm Aishwarya Sitharam, Head 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, our Chief Financial Officer. As you're aware, earlier today, we've made a disclosure regarding semaglutide, a key product in our portfolio. We've organized this call to provide clarifications around this disclosure and also to answer any questions that you may have. We will start today's call with Erez providing a brief overview on the matter, and then we will open the floor later for questions. I would like to remind everyone that we are currently in our silent period related to our Q1 FY 2027 financial results, and I would request everyone to restrict the questions to the topic on hand. Before we proceed, I would like to call out some housekeeping points. All participants will be on the listen-only mode during the opening remarks. Should you need any technical assistance during the call, please use the chat function on your Zoom application. The chat will not be monitored for any questions to the management. The session is being recorded, and both the audio as well as the transcript of this call will be made available on our website. Please note that this call is the proprietary material of Dr. Reddy's Laboratories Limited and may not be rebroadcasted or quoted in any media or public forum without prior written consent from the company. With that, let me hand the call over to Erez. Over to you. Thank you. Thank you so much, Aishwarya. Good day, everyone. I really appreciate that you came both in short notice. As well, for some of you, it's very early in the morning, so I really appreciate that. Given the importance of this product and our commitment to both transparency, governance, as well as the relationship with you, the relevant stakeholders, we just recently met many of you. It was important for us to communicate the development as related to semaglutide as early as possible. It's something that we got to know about yesterday, and we managed to do it fast and crisp in order to make sure that we are both in compliance as well as maintaining a good relationship and, I believe, the right transparency. To support the growing demand for semaglutide injection globally, we scale up the synthetic API manufacturing process at our API facility with the intent of increasing the API output. While the API itself met the specification, one of the impurities were found to be out of specification upon testing. It means that it was degrading while we made the formulation upon testing of the finished drug product. As a result, we are undertaking a thorough investigation to determine the root cause and implement, obviously, the necessary process improvement. After that, we will complete the validation of the revised manufacturing process of the parameters before we can resume commercial supplies. I am a bit out of the script. Which means that at the time that we made the validation of the scale up, we saw while we tested the API, that it is out of specs and therefore it requires to repeat the validation. This is of the new material and not related to the old material that we sent. Subject to the successful validation, we will resume commercial supply to our long-term partner, OneSource, and we will be on track to supply, hopefully, six to seven million pens between Q3 and Q4 of FY 2027. I would like also to highlight four important points. One, our manufacturing facility continues to operate in compliance with applicable cGMP and global regulatory requirements. Obviously, we are meeting, and we will continue to meet all those requirements. There is no impact on the product existing, nor global regulatory filings, whether approved or currently under review. There are no changes to that. Based on the assessment conducted to date, we believe that there is no patient safety impact associated with the product already supplied to the market. People that took the product or customers who have the product are safe. The issue is nothing to do with whatever we sent on the market. It was in a scale-up batch. There is no impact on the supply of semaglutide oral, the tablets, which utilize different API source. It is not relevant to it. While this may result in temporary delay to the commercial supply, we believe that we take the right course of actions to ensure consistent product quality as we scale. We remain committed to resolving the issue with urgency and supporting our partners and patients through a reliable long-term supply of this important metabolic therapy. With that, I'm happy to take any questions. Thanks, Erez. The first question is from the line of Damayanti Kerai from HSBC. Damayanti, please go ahead. Hi. Thank you for the opportunity. Erez, just want to understand, in your initial assessment, how long it will take for resolving this issue. You mentioned you are still confident about supplying 6 million-7 million pens between 3Q and 4Q. Timeline for resolution, if it gets extended, how should we see the supply situation? If you can clarify on that, please. Sure. We will make now the necessary adjustments and tweak the process of the API. Then we need to take three validation batches. Again, we need to send them to OneSource for the drug products, and then we need to test. All these activities, right now with our current timelines, should take us somewhere around September. If this will happen, I will tell you after that the risk of that, but if this will happen, it means that commercial API scale can come to OneSource during October and then make the product, which means that the actual supply to the market can resume, let's say, late October, early November, something like that. Is there a risk that we can fail again? Always. There is a confidence, but naturally, there is a risk that a further delay. Right now, the 6 million-7 million is based on the assessment that we can supply from November onwards, and this is from the 6 million-7 million pens. OneSource we have, and we are entering into long-term arrangement with them that we discuss unrelated to the current issue. With them, we agree on the new slotting, which will result to 6 million-7 million pens from November to March. Sure. My last question is, when you observed this out of specification issue, was it contained within few batches? Do you have to do some product recall, or it has impacted just few batches, then other batches are ongoing normally? Sorry- Just want to understand. Yeah, just want to understand when you say commercial supply will be delayed, it will be complete halt or it will be partial for the impacted batch? Sure. The plan was to send the API out of that facility with the process. If the process not validated, we cannot send quantities to OneSource, and therefore, that's what create a halt of supply. There will be a halt of supply between now and September, and that's why I said basically this is the delay of few months. There is no recall concern. Whatever was sent was not sent from that scale-up, anything that was sent to the market is safe, is released, and there is no concern about recalls or patient safety as related to this validation. These were three validation batches, you have to repeat validation, otherwise you cannot send from the new scale. Sure. Thank you. I'll get back in the queue. Thanks, Damayanti. Participants are requested to restrict the number of questions to two so that everyone gets an opportunity to interact with management. The next question is from the line of Neha Manpuria from Bank of America. Neha, please go ahead. Thanks, Aishwarya. Hi, Erez. A quick question from my side. When you say we need to complete validation before we can start scaling up again, this would not require any further submission to either the Canadian authorities or any authorities where we get approval for in the interim. Would that be a right assessment? Yes, that's correct. The validation is the scale-up. Okay. The idea is to validate the product in the new scale to allow us to go and to make the product in higher volume also at OneSource. That require more API. It was more of the scale-up of API, but there is no change to specification or to the submission. Doesn't require any prior approval from any agency. Understood. My second question is, given that we have an alternate supply for OSD, do you think there is a possibility how soon can we add this alternate supply for the injectables, if required, as a backup plan? We do have a backup. It's not the same supplier, but this will require Prior Approval Supplement. It means that we are about one week away, give or take, because you normally need to submit it as a Prior Approval Supplement, and therefore, it will not help us in the next couple of months. Next couple of months, we unfortunately have what we have. Okay. Sorry, one last question. Just to be clear, the inventory that is there in the market, we do not need to recall any of that, what is already supplied to OneSource and the inventory that is already there in the market? First of all, correct. I just want to make sure because you may get that information. There was a recall of one batch in India. It's nothing to do with the issue we are discussing. Okay, but there is one recall in India that we initiated. Okay. It may come because of timing, but it's nothing to do with the scale-up. The scale-up batches never went to the market, therefore, there is no recall or anything like that that associated with that. Understood. Thank you. Only, Neha, just what the inventory we have at OneSource is our inventory only. It is not commercially sold. Okay. That will also need to be recalled? No, that is our inventory, part of our inventory. I'm just saying. Okay. All right. Got it. Okay. So- Thank you. Not recall, but we may need to provide for it. That's what he means. Yeah. Okay. Got it. Thanks, Neha. The next question is from the line of Dr. Bino Pathiparampil from Elara Capital. Bino, please go ahead. Hi. Good afternoon. First question, would we have to write down any inventory lying in with OneSource? We may need to write down the batches that were associated with that. Yeah, probably, yes. Got it. Any indication about the value of that? The value will come, just to make everybody's honest, we are in the silent period, as you know. Excuse me. Out of the ordinary, but I want to also be sincere. Likely, and obviously these details you'll see in two weeks time. Got it. I know it's silent period, so not about this quarter, but going forward, how does that impact your targeted 20%+ EBITDA margin target? We are on the same page. Nothing has changed beside this event. All the stuff that we have discussed during our NDR as well as with you guys remain the same. Obviously, we will miss to sell certain quantities in this period of time, so obviously this will be a downside of what we have discussed in May and June when we met you guys. Got it. Thank you very much. Thanks, Bino. The next question is from the line of Surya Patra from Phillip Capital. Surya, please go ahead. Surya, you can unmute yourself. Yeah. I'm audible, right? Thank you for the opportunity. I just wanted to check whether this has impacted, in any manner, our supply to the Canadian market. Because of this, rather, whether so far we have seen any kind of impact? The lot that we have supplied already to the Canadian market, whether that will be having any implication because of the impurity issue that we have detected now. The answer is no. Whatever we sent to the Canadian market will not get impacted. It was done with a different scale. This was, as I mentioned before, a validation of a new scale-up that we made. No impact of whatever we sent to Canada until now. Okay. The impact on the Canadian market will be because we will not be able to supply in the next couple of months. There will be future impact on that. Sure. Okay. Yeah. That is it, sir. Thank you. Thanks a lot. Thanks, Surya. The next question is from the line of Tushar Manudhane from Motilal Oswal. Tushar, please go ahead. Thanks for the opportunity. Just one question to ask, this impurity is because of any coming from the raw material side or because of the reaction, or is it to do with equipment-related issue? If you could highlight. It's impurity that comes from the API, that degraded in the formulation. You detect it when you do the testing to release the batch in formulation. It was detected, and it was out of spec. No, I understand, sir. Within the API, again, is it to do with the raw material that was received for manufacturing API, or is it to do with the process or the reaction of manufacturing the API? It is to do with the process and the reaction of the API. Effectively, does it require the equipment change to address this issue? I understand it's too early in terms of root cause analysis, but prima facie, whatever you could share. To the best of my understanding, no, it will not require that. It's required to tweak the parameters to control that impurity. Got it, sir. Just lastly, while the scale-up batches have an issue, probably the relatively lower scale batches that at least off it might continue or that also will have to stop to understand the root cause of this impurity? Naturally, right now we are investigating because also the small scale was moved into that process. Right now it will be halt until we validate and feel comfortable that it works. That's why we had to do that. There is some small scales that are underway. This will continue to be produced, but it's not much quantities. Once you've solved the problem, the validation batches manufacturing will take a month or two. Is that a safe understanding? Again, sorry? Once the root cause analysis is done, probably, if you could just break the timeline from here till, let's say, November in terms of the root cause analysis and subsequently taking up the validation batches in terms of manufacturing. Yes. I mentioned to Damayanti when she answered, I'm assuming that it will take us from days to a week or two to find exactly what we need to correct, and then we need to start to make those batches and to release them. Upon successful production of those batches, we need to send them to OneSource, and then we need to make the batches and test them. Some of the test takes up to three weeks because of sterility. All of that process will take us as early as end of September. If everything will be successful, and of course, it can also be different, but assuming success, we can assume commercial supply at October to OneSource and then move from them. The 6 million-7 million pens that I mentioned is assuming supply of commercial quantities to the market from November onwards. Could be an upside of a week or two. This is the give or take the timelines that we are discussing. Got it. Thanks. Thanks, Tushar. The next question is from the line of Kartik Mehta from ICICI Securities. Kartik, please go ahead. Yeah. Hi. Thank you, Aishwarya. Hello. Am I audible here? Hello? We can hear. Yes. What is the milestone that we should track in terms of you being able to reach this by September? When you say it is an unknown impurity, are we using external consultants here in terms of this, and isn't there a regulatory sort of an approval or communication also which will be required while you have done it actually voluntarily, which is what is the right way to do? I'm just trying to understand. When you say it will happen by September end, and this issue was known to us, let's say yesterday or so, what is it that you guys have drawn, and how should we track this? Thank you. First, Kartik, there is no need to inform any agency. There is no change of specs or change of regulatory filing. This is one of your questions. When you get result of out of spec, you have to stop and to see what needs to be changed, because obviously you cannot continue, especially on validation. You need to take the process, tweak it again, and validate it again. Once it's validated, only then you can use the scale up, and that's what we plan to do. What went wrong in this batch, I don't know. We got the results, so that's what we'll investigate. It's a process issue, like I mentioned before, and we'll have to tweak it and scale it again. The timelines I already mentioned. I'm 35 years in this industry. It's happened before, unfortunately. Right now, the way I see it is that we have our R&D people that can take care of that. They are using also external people that can help them. By and large, it's something that it's in our capability to deal with, to fix it, and to scale it. It was very important for us because we communicated in lengths and in details. Yeah. -with the shareholders and with the markets, or that it was in magnitude to make sure that you are aware that we have now a supply issue for the next three months. Is there time alternatively to do this with another supplier? Do you feel confident that I'm sure you guys would have thought over it. Is that more time and to reach that commercial scale with an alternate supplier would not be the correct option, and hence to try this? Also that, do we need external consultants to resolve this because this is an unknown impurity, if that is what I heard correctly. Thank you. First, we are qualifying another supplier, but the timelines, as I mentioned to Neha, I believe it was her question, it will take time. It's about a year away. We are going to do it unrelated. This part that we want to resolve in, like, three months, it will have to be with the current process and the current API source. Our team also using external, but we don't need external for that. There are some help and knowledge that we receive. We always use external help when needed, but there is no need of external help or anything like that. It's a product that was developed by us, and people should resolve it, and are using also help if needed. To your question, we are using parallel. We are also qualifying another supplier as a backup, but it will come later as a pre-approval supplement. There is no product recall here for this batch because this batch never went into the market. Is that understanding correct? That understanding is correct. I mention it again, no recall. It's a batch. We tested it. We found it, one of the impurity out of specs, and this batch never shipped to a market and never shipped to any customer, therefore, no recall is needed. Thank you and all the best. Thank you. Thank you. Thanks, Kartik. The next question is from the line of Dr. Kunal Dhamesha from Macquarie. Kunal, please go ahead. Hi. Thank you for the opportunity. Just one question on the impurity being part of API. My understanding, and I may be wrong here, API as a cost of overall manufacturing of this pen is very low. Why not keep on manufacturing the API in batches and whichever batch succeeds, keep supplying that? There might be some incremental cost of API, maybe one or more batches we'll have to kind of discard, we can continue with the production. Right? Why this decision of stopping the API manufacturing altogether when API cost is a very minuscule part of overall manufacturing cost? There is nothing to do with the cost here. It's about GMP. If you are failing a validation, you cannot continue. You have to control the process as per GMP and commitment to GMP and quality. Because the product showed degradation in the scale-up batch, a scale batch for validation, you have to repeat validation. We cannot supply to the market a product that is not validated. It's GMP, it's safety of people. Cost is not relevant here. Okay. Second aspect on this, let's say the entire batch, which basically showed the issue, and the earlier batches would not have shown such issue, right? How much time does it take to manufacture one batch for us? It's not just to make, it's also the testing, and then we need to give it to the filling of the cartridge, and then we need to do the sterility test. All of that together will take something like two months. Okay. That's how I kind of gave you the timelines of end of September. There is always a way to squeeze here and there, but I wanted to be on a safe side and to give you a reliable assessment of the situation. That's where it came from. Sure. Thank you, and all the best. Thank you. Thanks, Kunal. The next question is from the line of Kartick Bane from Bajaj Life. Kartick, please go ahead. Thank you very much for the opportunity. Can you all hear me? Yes. Yeah. Thank you. My question is to do with more respect to the kind of impurity that we are talking about. Is it related to the addition, deletion, or substitution of any amino acids which are in the peptide, is it to do with some change in the excipients, because of which the physical characteristics of the final formulation is getting affected? Is it the degradation and because of which there is a concentration less into the vial that needs to go into the vial? What kind of technical issue is here, if you can enlighten me on that? It's the first one. Okay. It's a degradation of that impurity that was detected in the final product. My second. What caused the degradation, I don't know. Okay. Has any of the other companies like Eli Lilly and Novo Nordisk or other peptide companies have faced a similar issue that has come into the public domain? Not that I'm aware of. I'm not aware. Maybe, but I'm not aware. Okay. Thank you. Thanks, Kartick. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Shyam, please go ahead. Good evening. Thank you for taking my question. Just the first one on the guidance for 6 million- 7 million pens in Q3, Q4. At as an interim, just want to understand from a demand perspective, we are not sure yet. Just want to understand how is demand panning out, what has given us the comfort that we'll still be able to do that with a quarter delay, let's assume, of your guidance, which was the earlier guidance, right? Just from a demand, anything has changed or what gives us that comfort? Nothing has changed. Unfortunately, if we had 15 million pens, we could supply that also. There is no shortage of demand. I don't see shortage of demand also going forward. I'm pretty confident about the demand going forward. From a timeline perspective, competitive intensity can increase, right? We could have Sandoz and others come through, Aspen, many other companies. You still think demand is outstripping supply? Yes. Some of their names are being supplied by us, as you know. Got it. Just the last question, for us to move away from OneSource to our own fill finish, does this change the plans? Is there any timeline on when that switch can also happen? We are committed to be with OneSource actually for long term. We will have also our backup facilities, but we are committed to a relationship with OneSource, and they are committed to our relationship. I believe that we are going to be important partner for them for many years, and so are they for us. There is no plan to leave them in that respect, but we are building our facility, and we also use that for our product. I thought we had a large capacity, like 25 million, 30 million perhaps. That's not for ourselves. Why will we still need OneSource, say, 12, 18 months later? I'm just curious. Sorry. I'm reiterating just to make sure. First of all, you're right, we will have a large capacity. It will be used for semaglutide as well as for other products, and we have a good use of that line as well. I just want to make sure people will not misunderstanding. We are planning, and we plan to enter into a long-term relationship with OneSource on semaglutide injection. Got it. Thank you. All the best. We also have some media colleagues on the line. Erez, I hope it's okay for us to take some questions from the media as well. Go ahead. All right. We have the next question from the line of Rishika Sadam from Reuters. Rishika, please go ahead. Hi, am I audible? Yes. Yes. My question is, does this mean that Dr. Reddy's is still on target to achieve its annual target that it has set earlier of 12 million pens in the first year of launch? You talked about 6 million-7 million pens between Q3 and Q4. How does it sit with the annual target that the company has set earlier? I have a follow-up question. Naturally, because we are going to lose these months, that's why I mentioned instead of what we could sell in this period of time, we will sell 6 million-7 million pens in addition to what we sold already until now. The range is between 6 million-7 million pens for fiscal 2027. Right. Will that be short of what you predicted earlier? I'm just trying to get the numbers in line here. Sorry for the confusion. Yes, because before that, we assumed that we will sell during July, August, and September, and October. Now unlikely that we'll do that's why we initiated that clarification to the market and update to the market. Right. Just a clarification on the issue and impurity you talked about. I just wanted to get this right. This was part of the scale-up process, and it was identified in a new batch of API, that's correct? That would be sent. That's correct. Yeah, that's correct. It's a scale-up. There is no concern of anything that was sent to the market until now. Right. Thank you. I'll join back if I have a question. The next question is from the line of Satviki Sanjay from Bloomberg. Satviki, please go ahead. Hi, Erez. Hi, am I audible? Yes, please. Hi. Just checking how this changes your partnership to supply APIs and semaglutide, say, with companies in India as well as some of the companies in Canada that we talked about, Sandoz, Torrent. If you can share that. Yeah. Obviously we updated all of them today, the same as we are updating you. Some of them have alternative, some of them don't. We obviously wish and agree with them that they need to do whatever is good for them. We are committed to resolve it and to resume partnership. If they will choose to do to a different partnership or to do also, we'll obviously respect it. We communicate to all of them, and they all understand the situation, and we'll take it from there. Obviously, in the next coming months, we will not be able to supply as was communicated to them before that. Understood. Thank you so much. We factored in about 30 minutes for this call. We've gone over, but we'll probably take one last question before we close from the line of Abdul kader Puranwala from ICICI again. Abdul, please go ahead. I hope I'm audible. Just on taking the previous participant question ahead in terms of our supplies to a partner. Will the duration in which we are not able to supply, does that attract any failure to supply kind of a fee? Likewise for OneSource where we earlier talked about taking out close to 12 million pens for them. Is there any payment we will have to make for the entire supplies as against what we are budgeting now for the second half? There are no penalties as such. Potentially, and it was not under discussions, I just want to give you my assessment. Naturally, some of the arrangement that we made with some of the customers that involve down payment and stuff like that, we may need to renegotiate that. There is no penalty as such, and I'm not anticipating those. Not just that, I hope and hopeful that it's a product for many, many years, and we'll continue the relationship with them for many, many years. There are no penalties as such. Okay. Just last one, this is again a follow-up for what you have spoken previously. In terms of your plans to captively manufacture the product in-house, is there any delay you now sensed? When you talk about OneSource being a long-term partner, is there any delay you are now factoring in your capital manufacturing for this product as compared to what you were thinking, say, a month or a quarter ago? No. All the plans stay valid. We just have to move. Naturally, also our facility needs to be supplemented with our API. This API will come only after validation. The plans will just have to shift for the time of duration that will resolve this issue. We will stay with OneSource, and we'll have also our facility, just will take a few more months later than we originally communicated and anticipated. All right. Thank you. All right. That was the last question. Thank you so much for joining us today. Once again, a very short notice. We value your time and participation on the call. If you have any further questions, please feel free to reach out to me or to the corporate communication team if you're representing media. With that, we end today's call. Thank you, everyone. Have a good day. Thank you