Dr. Reddy(US:RDY)2024-07-27 18:00Financial Data and Key Metrics Changes - Consolidated revenue for Q1 FY '25 was INR 7,673 crores (US$ 921 million), representing a 14% year-on-year growth and an 8% sequential growth [5][10] - Gross margin for Global Generics was 64.7%, while PSAI gross margin was 23.1% [6] - EBITDA for the quarter was INR 2,160 crores (US$ 259 million), showing a 15% quarter-on-quarter growth and a 1% year-on-year growth [7] - Profit after tax for the quarter was INR 1,392 crores (US$ 167 million), with a PAT percentage of 15.1% of sales [8] - SG&A expenses increased by 28% year-on-year and 11% quarter-on-quarter, totaling INR 2,269 crores (US$ 272 million) [6][27] Business Line Data and Key Metrics Changes - North America Generics business recorded revenues of US$ 463 million, with a year-on-year growth of 19% and sequential growth of 18% [12] - India business revenue was INR 1,325 crores, reflecting a 15% year-on-year growth and an 18% sequential growth [13] - Emerging market generic business recorded revenues of INR 1,188 crores, with a year-on-year growth of 3% and a sequential decline of 2% [34] Market Data and Key Metrics Changes - The emerging market grew at 9.8% in constant currency, with 17 new product launches during the quarter [12][14] - The European generic business recorded revenues of US$ 59 million, with a year-on-year growth of 4% and a sequential growth of 1% [33] Company Strategy and Development Direction - The company is focusing on growth through strategic collaborations, including licensing agreements and acquisitions, to enhance its product pipeline [30][31] - The acquisition of Nicotinell and the joint venture with Nestle are key steps towards building a robust consumer healthcare business [10][11] - The company aims to invest in generics, biosimilars, APIs, consumer healthcare, access to novel molecules, and digital therapeutics [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustainable growth through disciplined financial management and operational efficiency [14][30] - The company anticipates continued growth in North America and plans to maintain a strong focus on the Indian market [73][95] Other Important Information - The company has a net cash surplus of INR 6,731 crores (US$ 808 million) as of June 30, 2024 [29] - The R&D spend for the quarter was INR 619 crores (US$ 74 million), an increase of 24% year-on-year [27][34] - The company was recognized for its sustainability efforts, being featured in the 2024 list of Global 500 Most Sustainable Companies [32] Q&A Session Summary Question: What is driving the sequential moderation in cash flow generation? - Management indicated that fluctuations in factoring and increased freight costs contributed to the lower cash flow generation [53][109] Question: Is there any one-off included in this quarter's SG&A expense? - Management confirmed that the increase in SG&A expenses is primarily due to investments in new business initiatives and not due to one-off items [55][109] Question: How should we think about the potential size of the OTC business in fiscal '27-'28? - Management stated that the OTC and consumer care segment is a focus area, currently valued at approximately US$ 320 million, with growth expected from the Nestle JV and other initiatives [57] Question: Can you provide an update on the Nestle JV? - The JV is expected to commence operations on August 1, 2024, with initial activities focused on customizing Nestle's products for the Indian market [102][123] Question: What is the expected timeline for the filing of denosumab and abatacept? - Denosumab is expected to be filed next year, while abatacept is anticipated to be filed by the end of calendar year 2025 [44][81]