Dr Reddy's Laboratories Ltd

NSE:DRREDDY

Earnings Call Transcript 2023-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Q2 FY '23 Earnings Conference Call of Dr. Reddy's Laboratories Limited. [Operator Instructions] 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.

[Amit Agarwal, executive]

Thank you. A very good morning, and good evening to all of you, and thank you for joining us today for the operative earnings conference call for the quarter ended September 30, 2022.

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 discussion and analysis 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 operators comprising Mr. Erez Israeli, our CEO; Mr. Parag Agarwal, our CFO; and the Investor Relations team. Please note that today's call is a copyrighted material of Doritos and cannot be reaudited or attributed in press or media outlet without the company's excess 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.

[Parag Agarwal, executive]

Thank you, Amit. This quarter, we had strong financial performance with the highest ever sales, PBT and EBITDA in the quarter. The performance has been supported by the launch of Malone capsules in the U.S. and rebound of Russia performance over last quarter.

Let me take you through the details for the quarter. For this section, all the amounts are translated into U.S. dollar at a continued translation rate of 8.37, which is the rate as of September 30, 2022. Consolidated revenue for the quarter stood at INR 3,306 crores, that is USD 775 million and grew by 9% year-on-year basis and by 21% on a sequential quarter basis. In the same quarter of last year, we had high Covid product sales, adjusted for which we have grown in high sales in this quarter.

Consolidated gross profit margin for this quarter stood at 69.1%, an increase of 55 basis points over previous year and 90 basis points sequentially. The gross margins were mainly aided by favorable product mix and production-linked incentive recognition. However, it was partially offset by provision made on Covid products inventory as the sales on these products have reduced significantly.

Gross margin for the dual generics and PCI businesses were at 65.4% and 3.6%, respectively, for the quarter. SG&A gross margins were primarily impacted due to inventory provision on Covid products and adverse leverage on manufacturing overhead on a lower sales pace. We expect it to improve in the coming quarters. The SG&A expense for the quarter is INR 1,656 crores, that is USD 204 million, an increase of 4% year-on-year and 7% quarter-on-quarter, which is in line with business growth.

As a percentage sales, our SG&A has been at 26.3%, which is lower by 140 basis points year-on-year and 340 basis points sequentially. The R&D spend for the quarter is INR 47 crores at USD 50 million and is at 7.7% of sales. We have been making good progress on our R&D pipeline in line with our business strategy. Also, while we continue to drive productivity, we have been investing it back to strengthen our development pipeline, building marketing capability and digitalization.

The net finance expense for the quarter is INR 16 crores, that is USD 2 million. We have been able to manage well the risk arising from the Forex fluctuations in the current volatile environment. The EBITDA for the quarter is INR 1,932 crores, that is USD 37 million, and the EBITDA margin was strong at 20.6%. Our profit before tax stood at INR 1,611 crores that is USD 198 million, which is a growth of 27% year-on-year and a growth of 10% quarter-on-quarter.

Effective tax rate for the quarter has been at 30.9% due to the tax effect arising from durational mix. We expect our normal EPR today in the range of 25% to 26%. Profit after tax for the quarter stood at INR 1,113 crores, that is USD 137 million, reported EPS for the quarter to between $66.89. Operating working capital increased by INR 3.3 crores, USD 40 million against that on June 30, 2022. Our working capital base grew by 15 days due to optimization of inventory across our businesses and spectrum of receivables in Russia.

Our capital investment during the quarter could execute INR 251 crores to USD 31 million. The free cash flow during this quarter was INR 58 crores which is $871 million. Consequently, we now have a net cash surplus of INR 1,373 crores that is USD 169 million on September 30, 2022. Foreign currency cash flow hedges in the form of derivatives to the U.S. dollar are approximately a $402 million, largely helped around the range of 78.3% to receive 81.7% to the dollar maturing in the next 12 months, giving $4,320 million at the rate of 0.19 to the reading of $2.4 million at the rate of 6.04 and South equipment banned $67 million at the rate of 4.82 to south equipment and maturing in the next 6 months.

With this, I now request Erez to take you through the key business highlights.

[Erez Israeli, executive]

Thank you, Parag. I am pleased to take you through the current quarter performance, which is marked by record sales, EBITDA and ROCE. In the last few years, we have built a well-diversified business model, which allows us to have multiple growth drivers and reduce the risk of being dependent on the siding market provision. We believe that the current environment of geological and economies, uncertainties inflationary pressure of Forex and Forex volatility, our strategy is allowing us to grow.

While there may be some fluctuation quarter-on-quarter, we focus on building portfolio pipeline across markets, driving productivity, investments for innovation and taking forward our ESG. We believe that our strategy, along with the net cash position will enable us to drive sustainable growth in line with our aspirations.

Let me share you some of the key highlights of the current quarter. We won successful commercialization of element volume limited launch of Lenalidomide capsule in the U.S. market. A rebound that cash sales after this went to return to normalization in last quarter U.S. RDF overages a stream received by our partner in [ ovenability ] commercialization of our products. Our largest manufacturing facility in Hyderabad internally referred at FTI a joined Global Lighthouse network for the coming call. Now let me take you through the key business highlights for the third quarter. Please note that all references to the numbers in this exchange are in respective local currencies.

Our North America Generics business reported sales of $351 million for the quarter, with a strong growth of 38% year-over-year and 53% on a sequential basis. This was largely attributed to the new product launch contribution including the volume initiate launches Lenalidomide capsule in the U.S. market. While we wouldn't be able to mention specific or volume or value arising from the lenalidomide, we expect these products will continue to contribute meaningfully over the next few quarters as well. The price erosion for the base business has been within the [ momenting ] over the last quarters.

In this quarter, we launched 7 products and expect the momentum to continue during the balance of the. Our Europe business recorded sales of EUR 52 million this quarter with a case growth of 10% and a sequential quarter growth -- during the quarter, we launched 10 new products for 5 countries within Europe. We expect to continue with the growth momentum in the rest of FY '22. Our medical market business recorded sales of INR 1,225 with a year-on-year decline of 6% over a sequential growth recorded growth of 36%. The year-to-end decline was due to a higher base effect as we have covered product sales in Q2 of FY '22, adjusted for this position, we have grown.

Within the emerging market segment, the Russia business declined by 2% on a entry basis and grew by 34% on a quarter-to-quarter basis in constant currency. The sales for Russia has reverted to normal levels after the channel inventory stocking normalized in the last quarter. During the quarter, we launched 39 new products across various countries of the emerging markets. We expect this business to continue the growth momentum during year. Our India business recorded INR 1,150 crores with a year-over growth of 1% and a sequential decline of 14%. Adjusted for the corporate product sales in Q2 FY '22 and the bond divestment income is one of 2 we are growing mid-teens year-over-year and mid-single digits sequentially.

During the quarter, we launched 2 new products in a market. As per achieve report of June 2022, our MAT rank in the value terms in a number gains. We will continue to reshape our portfolio in media business with focus of growing big acquisitions partnerships for focus on area while divesting noncore brands. Our PCI business recorded sales of EUR 81 million with over year decline of 29% and sequential decline of 12%. Adjusted for the cold product sales in Q2 of FY '22, the business has declined in single digits over the last year. The decline has been due to well going differ by customers for some of the key products. We expect sales improvement over the next couple of quarters with increasing volume pickup on launch of new products.

We have been progressing well in our journey of building a portfolio of complex and differentiated products, biosimilar and NC pipeline. We have also made a group holding progress to identify a list of innovation moves for our branded markets. We continue to actively look for investment opportunities those businesses in line with our strategy. We believe that even in the current uncertain environment, there multiple continues to grow our business, and we are committed to pursue this in line with our strategy.

With this, I would like to open the floor for questions and answers.

[Operator]

[Operator Instructions] We have a first question from the line of Tarang Agrawal from Old Bridge Capital.

[Tarang Agrawal, analyst]

I have 3 questions from my side. The first question is on Lenalidomide. Just wanted to get a sense that where the volumes bunched in the current quarter as per the agreement with the innovator? Or should we expect the volumes commented by Dr. ads in the current quarter to probably continue as we proceed. So that's #1, #2, if I look at the cash flow statement for the business, there's roughly about INR 600 crores that's been spent on intangibles. So I wanted to understand what is the nature of this? Is it a purchase of ANDAs or something else? And the third question is on the PSAI business. I believe the gross margins for this business have been declining continuously over the last 1 year, and they came to a low of about 3.5% this quarter. So if you could just explain what's happening there? Is this supposed to move up going forward? Or how should we look at it? And what is driving this decline, not specifically for this quarter, but over the last 3, 4 quarters?

[Erez Israeli, executive]

I will take the first and the third, and Parag will take the second question. On the cost, it's absolutely within the scope of the recent we had with the innovator. [indiscernible]. So on the first question on the one the quantities within the scope of the agreement that we have with the innovator, and we will continue to sell the product also in the next coming quarters. On the third question, indeed, the volumes of the API, the government, the APIs, especially on some of the oil pods went down, and this is the main result of also the gross margin, that this is a very much a fixed cost type of an industry. So what we see that slightly be will go up. And actually, with that also demand will go up. Now over time, strategically, we see growth lever in the PCI in general in all 4 levels. So one is that in primarily driven by certain launches of [ Croda ] in which we report commercial quantities for launches that will app next year and day after for those capital, including in that.

The second is that our CMO business loan business, ACS, which is also folded under this segment is going to grow, and we do see a better traction in that direction. And number three, our activities that what we call the indirect business-to-business sales, especially in the Middle East, sola Japan. We also see like the not least, we do have certain net lending deals with the organization, like the gate organization that are supporting the mid-and low fees in terms of economic countries, and we have some interesting projects ahead. So overall, we can guide that we believe that these segments will grow also in the future. That may be the second question.

[Parag Agarwal, executive]

Yes. Karan, the second question, I will take the -- in the cash flow, the intangible amount that you see is towards the acquisition that we have announced publicly also in the last couple of quarters. This includes Sigma from Navitas also the econ portfolio under development and load under small acquisition to pay back. So it's basically towards the acquisition.

[Operator]

We have our next question from the line of Prakash Agarwal from Axis Capital.

[Prakash Agarwal, analyst]

So pardon if I'm asking this again, but 2 questions. One is, how should we think about the base business performance given there is some competition in your key products? Would it be largely flattish or it would have come down? And secondly, on the volume restricted launch that you have done, most or all of it is already booked for [indiscernible]. I'll repeat my question.

[Erez Israeli, executive]

Yes, Prakash we have heard the question.

[Prakash Agarwal, analyst]

So one is the performance on the base business in the U.S. side, how it would have been done? Is it flattish or it would have declined? And second is on the volume restricted launch that you have done for generic Revlimid, so most of it is booked or there is more to be growth in the financial year '23?

[Erez Israeli, executive]

So on the second one, we are going to book stands for this product in Q2 and Q4 and in the years to come. And so it's not that it's a onetime. We are planning to continue to sell this product to the meaningful game also in the next coming quarters. As for the first question, I would -- the best way to describe it is we are very consistent, meaning that even if you -- on the long-term basis, and that's something we are very trying to be very considerable our communication, our U.S. market, our U.S. activities will grow is growing in the single digits on a multi-year basis. While from time to time, we have ups and deep down in accordance to the competition. This quarter, indeed, we have competitions for farm products, like Acosta and docomo back. And against that, we launched products on ventilators. Overall, the U.S. market will continue to grow in the same manner that we discussed in the past. And we will have on 10% product which will contribute more meaningfully to certain to understand. So the answer to that is we are consistent with what we discussed in the previous again this way.

[Prakash Agarwal, analyst]

Okay. And just to think that I understood the second part of the question correctly, you said there is more to come in Q3 and Q4 with respect to Revolut.

[Erez Israeli, executive]

Yes.

[Operator]

We have a next question from the line of Kunal Dhamesha from Macquarie Capital.

[Kunal Dhamesha, analyst]

First one on the gross margin. So we have kind of improved gross margin by 550 bps. Can you just quantify various moving pieces here? I think your product mix, PLI accrual, FX impact and then offsetting is the toy product provision and the price erosion.

[Parag Agarwal, executive]

Yes, Kunal. So our gross margin for the quarter, we have reported at 59% and as I stated, it is strong because of favorable product mix. including the impact of new product launches. So that's clearly something that's pushing it upwards. We have also recognized the benefit of PLI and a few other normal export incentives like BBB, et cetera, during the quarter. We've also taken a provision of around INR 100 crores for Covid product inventory as the sales have come down quite a bit as you would know. So overall -- and there is, of course, a little bit of cost inflation that sitting in these numbers.

There is some softening we are seeing installment which should have some case impact in the second half, but costs still remain at an annulated level. So overall, I would say that, yes, being what the gross margin is there about, I would just point out that we need to take out the impact of new product mantis during the quarter. Our gross margin is within the normal range that we have been consistently talking about, this is somewhere between 5 months.

[Kunal Dhamesha, analyst]

And would we be able to share some insight in terms of why our NDS filing run rate remains low. I think in FY '20, we filed around 18 NDs FY'21 was slightly better than '20 and then FY '22 was mainly -- if I look at this year's run rate first half is around 4 NDS filing while our R&D continues to remain a [indiscernible]. So any insight into why our near and ratio?

[Erez Israeli, executive]

Yes. It's more of a timing we do deliver the submission. Normally, most of the commissions are done in the second half of the year. So we are one to pick up of those numbers. As for the overall numbers, we are focusing our R&D as fast as practical and incited on the biosimilars on products that has bigger potential. So it's -- so we are trying to target not sell for producer, but rather will be lower number of the debt around 2025 products, but those products with the potential to be post market, mainly for growth, et cetera. So what we see here is also a combination of timing as well as focus of the R&D across markets, not just for gross market. The products that we have developed in the U.S. market, we are also launching in other markets, especially injectables. So the actual the value that can derive from the R&D should be higher in the future while those relevant products will be launched in the near future, being globally more complex, more injectable [ Mobile Legends ].

[Operator]

We have our next question from the line of Damayanti Kerai from HSBC.

[Damayanti Kerai, analyst]

My question is on India, please. So even after existing for Covid base and the sale of some noncore brands for the quarter, sequential growth rate is around mid-single digits, which is lower than market growth of double digits. So how should we see growth moving ahead? And what will be the key drivers? So a few years back, you mentioned about growing your India sales are almost 50% on the base existing at that time. So are you broadly on track to achieve that? Yes.

[Erez Israeli, executive]

We are on press -- we are very confident that we are on that. What you see now is comprehension of as we are on low focus. So as part of our strategy and as discussed in previous meetings, we agencies that we want to focus on. And for those focus to talk to put and sources behind meaningful brands that can grow in sustained for many years as well as investing in what we call the rain, which India is going to be a big outlet for that. As part of this, we are divesting board as well as focusing on Brad. For example, the brand that we acquired recently as well as area, which is an area of bits, the vascular and no chromatin nature. We do have some brands with module and we are fixing those. And I'm very confirmed that this will happen as well. So bottom line, I'm very confident that we are going to see very solid and we are reporting data goals to be compact in India, and we are ending posted.

[Damayanti Kerai, analyst]

Sure. My second question is on injectables. So this has been one of your focus segment. So can you talk a bit about the competition outlook for this segment, given we have seen like competition driving in this segment. So how do you see competition scenario building up in injectables over next few years?

[Erez Israeli, executive]

After the patent please, we invite people to invest behind products that the patent exploration in this time. And naturally, as part of the way portfolio was built [ by them ]. They are more and more investable that will be coming this partition, actually, many companies have injectable pipeline and act to increase in the future. So we do see the injectable business is very competitive. We see 2 advantages and differences in the injectable business ended those taste [ over certain ] channel is different. It's selling to hospital. It's selling globally between use 15 and around the world, and we want you to do a biostudy compliment. So the gross margins are higher in the sum of this product, the technological there is also higher. So given all of this, we believe that we will see more growth to better margin on a global comment. At the same time, every product will take competition and the petition on time, it will be as any other segments or general segment, which is likely to be also for industry.

[Damayanti Kerai, analyst]

Sure. And my last question is a clarification on PLI scheme benefit. Is it one-off you are likely to book it every year or like in next quarters also.

[Parag Agarwal, executive]

Yes. This is clearly not a runoff. This is seen that, as you know, it's a multiyear scheme. And even within this year, it is not a one-off. Of course, the quantum fluctuate from one quarter to another, depending on the sales to the product that qualified for the [indiscernible].

[Operator]

We have a next question from the line of Surya Patra from PhillipCapital.

[Surya Patra, analyst]

Yes. My first question is on the cash flow that we are likely to be generating from Red limit. So in fact, Dr. has been a kind of a consistent generator of free cash flow, over INR 1,000 crores kind of annually. And is revaluate way that contribution that we are witnessing it is obviously over INR 1,000 crore kind of offer annum contribution that we are definitely likely to see. So given that your qualitative growth outlook, if you can give some means utilizing this cash flow situation. So obviously, your growth can be qualitative and consistent over next few years. So can you give some clarity about what would be your key priorities here going ahead looking at that kind of strong cash flow generation situation?

[Erez Israeli, executive]

Indeed, I agree with you, we are building a boats flow position, and we exactly to basmati. So the capital is naturally a oasis to use it for CapEx to use it for buying and building the list technologies and to use it for our working capital. We will naturally have excess effect. The second is to these developments. We are actively looking for wins across all of the geographies to keep our strategy, both Horizon 1 as well as Horizon 2. We feel also that the geopolitical situation as well as the economy situation a certain opportunity for us. In the case, we do see opportunities that may be in the past in higher valuations. And so likely that we are going to be very busy with this development in the next coming quarters. And if since we left, we will consider, of course, out of this is maybe for the shareholders. We do not take we did not take a decision about this kind of stuff like fiber diet, but what we can assure that we will have for the moment and the money will be used there. And that's all the pies.

[Surya Patra, analyst]

So in fact, whether given the R&D, although there is a kind of significant growth that we are witnessing from Revlimid. But accordingly, the R&D spend has also gone up, that was earlier indicated that way. So you think with the kind of a ramp-up in the business, the R&D spend and the investment on the specialty project, all that is likely to go up quite meaningfully.

[Erez Israeli, executive]

That's why you recall in the past, we did that we are comfortable with 25% EBITDA, which in wanting some quarters we do lower some process will do less this quarter. And maybe also in other quarters, we do more. So absolutely, this is the idea that this will help us to pay for the R&D for the rising to OpEx activities knowing our apartments were knowing the cash position, that's why we feel very comfortable to commit in June that we can finance rig while including the R&D associated with including the suites one, while speaking the overall guidance of the EBITDA 25% on an occur basis. And I'm just saying, we believe that we are in a very comfortable position to do both organic consumer gaming, not just because of this product also from launch of other products and other activities that we will do in the next some years. Sure.

[Surya Patra, analyst]

My second question is on the pricing for the biosimilar. How should we see this as an opportunity for us because our partner put Kai has already got the USDA approval for that. So how influenced this product opportunity would be for us. My only key query here is that what is the kind of association that we are having here because it has been filed in the name. -- the manufacturing base is also used from a treater base only. So then what is the kind of relicense that we are having for this opportunity?

[Erez Israeli, executive]

Yes, this is a residual agreement that we had in the past, activities with Milkman net, that was acquired by Patenaude product was developed by us initially second before, and so we are entitled to royalties, meaningful royalties start of the launch. Like you said rightly, so we are not posting the actual production, but we will share the success once we will for the quarter.

[Surya Patra, analyst]

Okay. Sure. And sir, just one clarification. You mentioned about the INR 100 crore provision. Is it relating to the PSI and this INR 193 crores of government grant that is what is the PLI amount, these 2 clarifications.

[Parag Agarwal, executive]

Yes. So the amount of government brands includes CLI and the other export incentives that we received. So it's a total amount. Sorry, what was the first question? On the INR 100 crores provision, is it relating to the PSR?

[Surya Patra, analyst]

Yes. It is across all businesses. It is for India as well as CSI and also in emerging markets. So it's the aggregate provision across all geographies. But is it possible to share for PSA?

[Erez Israeli, executive]

We don't share a big specific numbers. Because this is a quarter-specific one. Let's say that without the coverage, the gross margin of the PI will absolutely grow -- high single digit. I would put it as high single yes. So without this for port provision the gross margin for PSA has been high filed.

[Operator]

We have a next question from the line of [ Rebecca Song ] from Bloomberg. We move to the next question from the line of Bino Pathiparampil from InCred Capital.

[Bino Pathiparampil, analyst]

Just a couple of questions. Just a follow-up on this INR 193 crore government grant. What people could belong to? Is it just this quarter? Or is it related to products sold over the last few quarters?

[Parag Agarwal, executive]

So it is part of the production linked incentive scheme that the government of India has closed. There are certain products that qualify under the speed -- and this incentive pertains to the sales that have been made in the first half of the year. They've seen started from this fiscal year. Understood.

[Bino Pathiparampil, analyst]

Second, your tax rate is a bit higher for the quarter. So has it got something to do with the higher unit profits in the building at -- if it's going to be a higher tax rate whenever there is higher contribution from Vennie profits?

[Parag Agarwal, executive]

As I said, because of the jurisdictional mix, as you know, we are a global company operating multiple countries. And the sales of various products are booked in various geographies, depending on where the IP resides and where the value is created. So it's entirely driven by the initiation mix, and it includes some impact of new server mates, including Lenalidomide.

[Bino Pathiparampil, analyst]

Got it. And finally, you had guided to delay for this year in this current year. Are you on track for that? You voice is not clear. I'm can you re the question? Sorry, the BLA for 7 year new product, you had guided for 2022. Is that on track?

[Parag Agarwal, executive]

Yes, it has been filed by your partner. That's already filed.

[Operator]

We have a next question from the line of Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, analyst]

Can you just share what was the core EBITDA margins to exclude those one-offs, I mean, versus the 25% ballpark target that you had?

[Parag Agarwal, executive]

Sameer, first of all, I would not classify this as core. I think the entire business -- the results we have reported are cool because any new product launch is part of the core, right? I think there are a few moving parts, which I talked about, but let me just list them down again. We clearly have an upside because of new product launches, of which the generic version of Revlimid is obviously a significant component. It has been a successful high-value launch. There is a cover inventory provision that we have made. We have recognized the government grant of INR 193 crores as we have disclosed.

Overall, there is some impact of cost inflation, but I think we have had good cost control. So overall, I would say that our EBITDA margin of 30% is core. Having said that, I must clarify that what we have been stating very consistently is that we are targeting our aspiration is to deliver 25% EBITDA margin on a sustainable basis in the near to medium term, and we remain on track for that target. There will be quarters when you will see higher EBITDA. There will be quarters where we will see lower EBITDA, but we are on track to delivering our aspiration.

[Sameer Baisiwala, analyst]

Yes. Thanks for -- it's just when I did those adjustments based on whatever information that you guys have shared, it looked like it was more like 20%, 21%. So I get your point, it's -- you want to include everything in the business. But if you were to just see what it was prelaunch and now, it seems to be a little on the lower side and hence the question. So that's fine...

[Erez Israeli, executive]

I believe some the numbers are higher...

[Parag Agarwal, executive]

And also on the working capital side, rather seems to be INR 700 crores negative working capital, if I look at receivables and payables. So can you just talk about that? So INR 400 crores and INR 300 crores, I think, are the 2 movements. To that movement would be because of the receivables because of the higher sales. If you see in this quarter, our sales have crossed INR 6,000 crores, and there is a certain set period. So that's the impact that we reflect. And largely coming from the U.S. And that is already higher... That's right. And payables, INR 300 crores, it has gone down a... So there are certain payments that we have made to our partners. It's not really something which is bringing the table down format and is just a timing issue.

[Sameer Baisiwala, analyst]

Okay. Yes. And just with your permission, my last question. If you look out the next 4 to 6 quarters, anything that you want to highlight in terms of high value of complex launches for the U.S. market?

[Erez Israeli, executive]

I believe that we will continue to push for performance.

[Sameer Baisiwala, analyst]

Okay. And then you say that, you mean with the parent market, you think there'll be more new launches that onto add on top of this?

[Erez Israeli, executive]

Yes, absolutely. We will not more product in the U.S. in the second half as well as in the FY '20.

[Operator]

We have our next question from the line of Prakash Agarwal from Axis Capital.

[Prakash Agarwal, analyst]

Just a follow-up to my first question I asked. So you mentioned there is more to come in Q3 and Q4. question also was in terms of quantum, have you booked a large amount or expecting qualitatively, if you can comment that it would be similar or less sir?

[Erez Israeli, executive]

We cannot guide the numbers, but it's going to be many sooner.

[Prakash Agarwal, analyst]

Okay. That is helpful. And to understand this further, I understand NATCO is going to come back in March with double-digit volume share. So this calendar year or this was fiscal year, that is the volume restricted for everybody? Or at least you can comment for yourself?

[Erez Israeli, executive]

We cannot comment on our sales. our agreement is naturally until 2026. So there is a share that we're on, we do not want to share if this is a spare settlement with the meter. But like I said before, we believe that the quantities and the value can be minus the coming quarters, we could…

[Prakash Agarwal, analyst]

Fair enough. So just completing the loop here, what I understand is you started in September, you have volume restriction until March. And then there is another increment that happens post March? Is that right understanding? Or is it for September?

[Erez Israeli, executive]

I can mention I cannot specify any details about assessing them in September and exposure in November, December and in market.

[Operator]

We have our next question from the line of Bino Pathiparampil from InCred Capital.

[Bino Pathiparampil, analyst]

Just a couple of follow-on questions regarding product in the U.S. again. You have filings for Lexiscan, I believe there is some litigations going on. Could you give us a later status update? Or do you expect to launch it anytime soon, say, maybe in the next 6, 12, 18 months? No, I did not pick up the question when you reset -- generic version of Lexiscan -- you have a filing in the U.S. for that, which is regadenoson, -- do you have an update? Do you expect to launch it in the near future?

[Erez Israeli, executive]

Yes, we now I think because we have a settlement on that. So as for the future terms, we will have launched in the future. Obviously, the [ etalement ] comes are confidential to not look for launch timings fertile.

[Bino Pathiparampil, analyst]

Understood. Second, there was a guidance regarding Rituxan filing in 2023 in the U.S. Is the arrangement with Fresenius the same in case of pecan the famous Neulasta? Or do you have a role in there?

[Erez Israeli, executive]

The difference is that this as we will make the product, and they will market our products that will be maintained all the answers will be made by then. This is the main difference.

[Bino Pathiparampil, analyst]

Okay. And are you on track to file that in 2023?

[Erez Israeli, executive]

Yes, on that, yes.

[Operator]

[Operator Instructions] We have our next question from the line of Kunal Dhamesha from Macquarie.

[Kunal Dhamesha, analyst]

So would you be able to quantify your investment in terms of R&D as well as CapEx for the first half of this year between Horizon 1 and Horizon 2 drivers for our business...

[Erez Israeli, executive]

So Horizon 2, as I had clarified, I think when we had the Investor Day communication, we expect to invest about 50 to 100 basis points of sales in Horizon 2 through our P&L, and we are within that range. At this stage, we are not investing significantly in CapEx horizon.

[Kunal Dhamesha, analyst]

And then what would be our CapEx for this quarter of INR 250 crores will be for.

[Erez Israeli, executive]

The CapEx in this quarter, let me step back. The CapEx for the full year is likely to be around INR 1,500 crores in that range. And a lot of this CapEx is towards building capacity for our biosimilars business and for our inductive...

[Kunal Dhamesha, analyst]

Okay. And typically, a similar plant, what would be the capital cost, if you can share or the injectable plan?

[Erez Israeli, executive]

I think there is -- it depends on the product, the complexity and the current utilization of our current plant, sometimes it's a top of CapEx, sometimes it's higher. So I don't think it's possible to give a under answer to that. Anal and when we say CapEx, obviously, it is not all flowing into building new plants. So there will be several additions to the losing plant, there will be maintenance that there’s CapEx on digitalization projects on R&D facility. So it is all took together. So -- and towards the plan, Parag already clarified, those are the 2 mines.

[Operator]

We have our next question from the line of Surya Patra from PhillipCapital.

[Surya Patra, analyst]

Yes. Just 2 questions. So on the REVLIMID again, please. So do you think there is another wave of generic launches before 26th January, I mean January 2025.

[Erez Israeli, executive]

Well, a walkout more before you get the quarter. I do not know exactly when and what is the initial settlement, but slightly before 26 will be additional companies to put...

[Surya Patra, analyst]

Okay. My second question is on the, let's say, the -- basically, India business, 2 aspects that I would like to cover. One is the OTC. And second is the -- your initiative on the digital kind of efforts. So particularly on the OTC side, you have been one of the tester in the OTC space of U.S. and Russia since long. And now you have been trying to build a kind of a similar kind of presence in the domestic market, in line with your enhanced focus on the domestic business. So what is your thought process there? And what you are trying to achieve there in the domestic OCC space? And in terms of profitability, how is it different from the existing ethical business in the domestic market. That is one aspect. Second aspect is that the spend that we have been making on the digital initiative front, in the domestic side since last few quarters. So how is that -- what is the progress there? And what is the benefit that we are recurring from that?

[Erez Israeli, executive]

Thank you sir, to us especially in India in both OTC as well as tactical. And those going to the, let's call it, the traditional channel as well as commerce. What we are trying to achieve as we believe that we have an identified either by ourselves or with Gartner product that a great data behind it. All the products in the launches as well as in [ Pattwell debt by MT Data ]. And we believe that this our branded or radios as well as the relationship that we profession as can have used meaningful value to those points over time. This product also less move consumer residential agreement with recommendation of operational. And therefore, their business model is more sticky than the or generics is in media -- and lastly, also the profitability once the branded actinin higher once the end is established. We also say that because of our position in India because of our replication being recruitable vertical company, many partners would like to work with that. And we believe that we can drive value by bringing innovation to India, it is done in other countries and the redevelopment energy in the direction.

So to summarize that, we have building our meaningful portfolio, we meaningful R&D handling, both in serial and as well as to partners that we continue to support this minimum year. As for the digital, we will continue to build the business. We are moving from most cities with our partners. And we will move from we work in the actual vale channels in apartment, we being to insurance, working companies, about employees as well as direct. And it is -- what we do now is primarily scaling up both the digital capabilities, the elite associate with it, the physicians that are supported. So we are no cities with more patients. And it is taking a -- we do see a great understood for all patient services in India.

[Surya Patra, analyst]

Okay. So is it going to have a kind of a meaningful implication on the MR productivity also -- if not...

[Erez Israeli, executive]

It's not going to the amount what you're asking and assuming the digital, right?

[Surya Patra, analyst]

Yes, yes. Yes. Yes.

[Erez Israeli, executive]

So the amounts are not relevant here. These are codes that we are using in tropins -- basically giving the endpoint solutions about the math's a service a service. It's not selling product. The amount productivity needs to grow up because of the focus that I mentioned before by focusing on all meaningful products, this will be bigger no focus with more data behind it, while selling the rent the relevant to the fines going is lower. And this is absolutely will increase but definitely teapot.

[Operator]

We have our next question from the line of [ Rebecca Song ] from Bloomberg. Since there is no response, we'll take the last question from the line of [ Anubhav from Macro ].

[Unknown Analyst]

I have a couple of questions on injectables. With the first part, just want to understand, are we seeing any industry-wide challenges in the space in terms of -- as far as the supply chain channel content because some of the peers have been highlighted for the last few quarters in terms of getting component or raw materials. So what -- are we also -- kind of a thing or and that is the case being past that headwind.

[Erez Israeli, executive]

That literally giving you so many products in so many countries. There are sinister there, but nothing significantly reportable nothing teamed to do the business. We -- and we do not anticipate negotiation as well. As a company, we are kind of let's say, the risk advance in a way that we do not note single product inactivity or signed supplier of single countries that we are dependent on. So yes, there are challenges given there, but nothing significant.

[Unknown Analyst]

Secondly, on the long-term strategy for the injectables. I understand we are making heavy investment in this space. I wanted to understand testing that do we have a goal that whatever the injectables we want to get into, we should be manufactured in-house -- is it also a possibility that you have the products we can prefer to have of the contract manufacturers. Because in the past also I remember, they have been a couple of products where we did so. Do you see [ Manatithat ]? Or how do you see the strategy as far as injectors manufacturing is concerned?

[Erez Israeli, executive]

Before offering the objection is low down, we always serve as much as [ Pascomer ]. And for that, we qualified the recent rate capacity. We have not seen relatively good facility in Automate, 9 and 11, and latest -- that gives us a lot of capacity going forward. As we don't have access to all the technologies, if I look to injectors on those topologies, we will supplement them by inorganic moves. Especially those type of products do not make sense, for example, to make an Indian selling in the United States. So for the gas, we have a different solution. So if you wish largely, it's going to be organic with some of them.

[Operator]

I would now like to hand the conference over to Mr. Amit Agarwal for closing comments.

[Amit Agarwal, executive]

Thank you all for joining us for today's earnings call include any further query, please reach out to the Investor Relations team. Thank you.

[Operator]

Thank you. On behalf of Dr. Reddy's Laboratories Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.