Ladies and gentlemen, good day and welcome to Dr. Reddy's Q3 FY2022 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Agarwal, Head of Investor Relations. Thank you and over to you.

Thank you. A 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 December 31st, 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 analytics of this call will be based on the IFRS consolidated financial statements. To discuss the business performance and outlook, we have the leadership team of Dr. Reddy comprising Mr. Erez Israeli, our CEO, Mr. Parag Agarwal our CFO, and the Investor Relations team. Please note that today's call is copyrighted material of Dr. Reddy's and cannot be rebroadcasted or attributed in press or media outlet, without the Company's express 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 all of you are keeping well. We had yet another quarter of good performance in terms of year-on-year growth in revenues and profits, maintaining a healthy EBITDA margin, and generating good cash flows. Let me take you to the key manager highlights for the quarter in a bit more detail. For this section, all the amounts are translated to U.S. dollars at a convenient exchange rate of 74.39, which is the rate as of December 31, 2021. Consolidated revenue for the quarter stood at 5320, which is $715 million, and grew by 8% on a year-on-year basis while declining by 8% on a sequential quarter basis. Year-on-year growth has been supported by growth across most of our businesses and was driven by good base business performance and recent launches. Sequentially, our revenues were impacted by a higher base of Q2, which had a higher contribution from limited products, and also due to the absence of out-licensing income in our proprietary business. Consolidated gross profit margin for this quarter has been at 53.8%, which was flat over the previous year, while the margin increased by 40 basis points on a quarter-on-quarter basis. The gross margin for the global direct business was 57.8% and 22.5% respectively for the quarter. The spending for the quarter is growth that is $207 million, an increase of 7% year-on-year, and a decrease of 3% quarter-on-quarter. However, the year-on-year increase is in line with our business growth, and on account of continued investments in sales and marketing activities for products in India and emerging markets. As a percentage of sales, our SG&A has been at 29%, which is lower by 20 basis points year-on-year. The R&D expense for the quarter is Rs 415 crores, that is U.S. $56 million, and is at 7.8% of sales. R&D spend increased by 1% year-on-year and declined by 7% quarter-on-quarter. The present development activities continued normally during the quarter, and we continue to build a healthy pipeline of new products across our markets. The EBITDA for the quarter is Rs 3,266 crores, that is USD $170 million, and the EBITDA margin is 23.8%. The EBITDA margin for the nine months in this fiscal is at 24% and is closely tracking our exploration target of 25%. Consequently, our profit before tax stood at Rs 971 crores, that is $131 million, which is a growth of 242% year-on-year and a decrease of 23% quarter-on-quarter. Adjusted for the impairment charges, our profits grew by 10.7% over the previous year. The effective tax rate for the quarter has been at 27.2%. We expect our normal effective tax rate to be in the range of 25% to 26%. Profit on net for the quarter stood at Rs 770 crores, that is $95 million. Reported EPS for the quarter is Rs 2.48. Operating working capital decreased by Rs 512 crores, which is USD $69 million, against the amount on September 30, 2021. The decrease was primarily driven by a decrease in receivables of Rs 616 crores aided by higher collections. Our capital investments during the quarter stood at Rs 293 crores, which is $56 million. The free cash flow generated during this quarter was a net inflow of Rs 1,234 crores, which is $171 million. Consequently, we now have a net cash balance of Rs 998 crores, that is $134 million as of December 31st, 2021. Foreign currency cash flow hedges in the form of derivatives for the U.S. dollar are approximately USD $360 million, largely hedged around the range of Rs 75.4 to Rs 78.9 to the dollar. With this, I now request Erez to take us through the key business highlights.

Thank you, Parag. Good morning and good evening to everyone. I hope you and your family are safe and healthy. I'm pleased to report that we had strong financial performance this quarter without any impact from one-off events or COVID trends. We have achieved year-on-year growth across our key businesses, with both EBITDA and profit margins approaching our targets of 25%. We continue to invest in our future growth, and we achieved this despite industry challenges like increased price erosion in the U.S. Generics market, rising commodity prices, and higher freight costs. This consistent performance underscores the resilience of our diversified business model. We also generated significant cash flow this quarter, leading to a cash surplus that will facilitate future investments. Now, let me highlight the key business updates for the quarter. Our North America generic business recorded sales of $248 million, achieving 6% EBITDA growth, while facing a 2% decline from the previous quarter. We gained market share on several key products, including a recent launch, but sales were affected by price erosion and seasonal demand fluctuations for some new products launched in the U.S. Our Europe business saw sales of 47 million Euros, remaining largely flat year-over-year and sequentially. In Europe, we launched four new products in Germany and one each in France and Ireland, and we expect several successful launches in Q4 to drive growth. In emerging markets, we reported sales of 1,154 crores rupees, reflecting a strong year-on-year growth of 20%, though there was an 11% decline sequentially. The Russia business grew by 2% year-on-year but experienced an 80% decline quarter-over-quarter in constant currency. The previous strong performance in Q2 was boosted by seasonal demand and successful biosimilar launches. Sales in the rest of the world were aided by one-off sales of COVID-related products. We launched 60 new products across various emerging markets during the quarter. Our India business recorded sales of 1,027 crores rupees, with 7% growth year-on-year and a 10% sequential decline. Adjusting for COVID-related sales from the previous year and last quarter, the results align well with our expectations. We launched four new products in India this quarter. According to our December 2021 report, we have outperformed the market, growing at 23.1% net compared to the market's 18.1%. We achieved sales of $97 million in our PCI business, with a year-on-year growth of 2% but a 40% decline sequentially; we expect performance to improve in the upcoming quarters. During the quarter, we filed 32 drug master files globally, including one in the U.S., along with 22 formulation products and one ANDA filing. As of December 31, 2021, we had 1,991 filings pending with the USFDA, including 88 under review and 350 on hold. We signed a deal for the commercialization of our biosimilars in the U.S. and continue our global development of five to seven other biosimilars at various stages of development. Earlier this month, we launched molnupiravir in India, adding to our portfolio for the ongoing COVID pandemic, while also exploring export opportunities gained through licensing rights from Merck. Regarding Sputnik V, we have prepared our capacities in India and are actively working with the government to reduce Sputnik as a vaccine and booster. We submitted a proposal to the DCGI for clinical trials of Sputnik as a booster for other vaccines. Sputnik remains a viable option for us in India and other markets. Consistently with our healthy balance sheet, mergers and acquisitions are key components of our growth strategy, and we are pursuing several deals in our focus areas. We are making progress in strengthening key processes in our core businesses and our digitalization efforts. Moving forward, we are focused on enhancing innovation and ESG initiatives. We are determined to deliver both short-term and long-term growth across our businesses, and we are optimistic about the future. I'm also pleased to share our recent recognitions. In November 2021, we ranked ninth among pharma companies globally in the Dow Jones Sustainability Index 2021. During the quarter, we received recognition from UNWAP for gender inclusivity in the workplace. Our HPA P1 manufacturing plant was awarded the National Energy Conservation Award by the Bureau of Energy Efficiency, Government of India. We were also recognized as the most innovative company of 2021 at the CE2 Industrial Motivation -- Innovation Awards 2021 and recently won an APEX Award for Sustainable Corporate of the Year at the 2021 Sustainability Company Awards. These achievements will continue to be our focus, and we will enhance our actions in these areas. With that, I would like to open the floor for questions and answers.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. The first question is from the line of Kunal Dhamesha from Emkay Global. Please go ahead.

Good evening and thank you for the opportunity. So the first question is regarding the U.S. market. You have maintained that price erosion has been quite significant, but if you do a back calculation, how do you see the prices trending on a sequential basis in this quarter?

So we did see a broader kind of global phenomenon. It’s continuing to be a global-based situation. But in Q4, a relatively larger number of products will face competition and the pricing outlook is likely double-digit. But despite that, we're still growing. We managed to offset this with new products, market share gains, as well as with productivity activities. We're experiencing growth across nearly nine out of ten quarters, and this should continue according to the underlying fundamentals.

Can you give me more color on the contributions across India and emerging markets who would like to see a percentage of revenue for the first nine months?

The contribution was primarily significant in the second quarter, not so much in the third quarter. The third quarter was without major COVID product contributions, and we will see probably more in Q4. Therefore, the main contributions from this portfolio will be in the second, as well as in the fourth quarters, not so much in the third.

Understood. And in the third quarter, would that suggest there was very little contribution from Sputnik?

Yes, in the third quarter, there was a relatively lower demand compared to the previous period due to the absence of serious COVID-related cases. We are anticipating contributions in the second and fourth quarters, but Q3 saw very little.

Thank you for taking the question. You just mentioned double-digit price erosion in the U.S. Could you elaborate on how this is trending in the quarter? Should we anticipate prices returning to more normalized levels?

It should be returning to more normalized levels. I believe that most of the products that faced erosion were already impacted. I don't anticipate a change in the business model, and I think most of the effects are behind us.

Understood. Given the double-digit price divergence in the U.S., how do you account for the improved margins in generics, which improved close to about 100 basis points quarter-on-quarter?

Yes. It's due to several factors, including the launch of new products, cost improvement programs, and gains in market share. We were well-prepared for these phenomena and, as I mentioned in my opening remarks, we are growing despite these challenges. I'm not concerned about margins going forward.

Could you share your observation on the commodity and raw material prices? Have you seen any moderation compared to the second quarter? What is your outlook moving forward?

Yes, we did see moderation in prices in a few areas, including intermediate commodities and energy costs. However, while some prices have not returned to normal levels, I do not anticipate further inflation of that magnitude.

My first question would be regarding the pre-filled syringe that we had planned to launch. What is the current status?

As for the pre-filled syringe, we expect to launch the product in Q3 of FY2022. The current status is that it's on track for a calendar 2022 launch. That's all I can share at this moment.

Thank you for this opportunity. Could you share more on the price erosion situation in the U.S. market? Is the double-digit situation specific to Dr. Reddy's or more broadly observed?

It’s a broad-based situation in the U.S. market, but it also very much depends on how many of your products face competition and when those products are issued. We have seen double-digit price erosion, but our overall portfolio is still performing well in terms of growth and EBITDA.

Can you provide an update on the U.S. market share, particularly for your product that has stabilized around 11% to 12%. Have you hit a ceiling, or is there still potential for growth?

The product is doing well, and we expect to continue improving our performance in the upcoming quarters. There remains a considerable market to gain, although the innovator holds a significant market share at present. Thank you all for joining us today for the earnings call. In case of any further inquiries, please reach out to us.

Thank you very much, sir. Ladies and gentlemen, on behalf of Dr. Reddy's, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.