Dr.Reddy's Laboratories Ltd at JPMorgan Healthcare Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : So the first question that I have is Dr. Reddy's today probably has a very well-balanced business with a growing emerging market presence, improving position in India post the Wockhardt acquisition and a strong U.S. pipeline. From here on, what do you think will be the growth engines for Dr. Reddy's so sort of to achieve the aspirational return target that you have talked about in your calls?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Fair enough. If I were to start off with your India business, there has been significant improvement in the core business in FY '19 and '20. We have now, like I said, augmented with the Wockhardt portfolio acquisition. How do we move from growing in line with the industry to beating industry growth despite the fact that we have a portfolio that is sort of skewed towards the acute segment? Will this be through entering trade generics, institutional OTC? How do you pivot that growth for the India business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 13, 2021 / 4:00PM, REDY.NS - Dr.Reddy's Laboratories Ltd at JPMorgan Healthcare Conference (Virtual)

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : So I have 2 questions from what you mentioned. Moving to top 5. The big gap, I think, from where we are versus getting to top 5 would be probably the chronic segment, which we do have presence, but probably we can strengthen further. How do you plan to address this gap? That is my first question. And then probably I can ask the second one.

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Fair enough. My second question on what you mentioned was the accretion from Wockhardt deal. Could the portfolio -- the margins of the Wockhardt portfolio meaningfully improve from, let's say, getting to where we are at a corporate level? I know there is scope for improvement even in the India business. But because Wockhardt has acute exposure, is there significant scope for expansion in Wockhardt? And what will be these areas?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Understood. In the last few years, the, emerging market business and India have been a key driver of the operating leverage and the margin expansion. If I were to look at the margins from here, can the India business improvement drive that margin expansion? Or do you think this would now depend probably get -- will be on the back of the U.S. pipeline? Just trying to understand if we have probably reached the peak when it comes to India margin and the focus there is to improve both.

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Fair enough. But particularly for India, do you think the invest -- would this growth require disproportionate investment either by the way of MR or increasing rural penetration? Or like you mentioned, investment in digital? Or do you think despite of all of these investments, there is scope for expansion?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Understood. If I may shift gears a little bit to the emerging market. One area that you've spoken about in the emerging market is leveraging your injectable pipeline for building the institutional business. Could you give us some color on the progress that we are seeing there? And by when will this start scaling up meaningfully?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : And if I were to look at the emerging markets, we have a very strong presence in Russia, CIS. Can we create a similar market, a similar-size market, in EM? So do you think EM would be because it's institutional, these could be all $10 million, $15 million type of market because it's institutional? We don't really set up branded businesses.

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : And just extending on that. China, a lot of your peers have talked about it. We are seeing -- Reddy's was 1 of the first players to increase investment in this business, the already existing investment scale it up, so to say. How far along are we in our China investment materializing? And has the investment opportunity in your view, changed because of either the CP program, the discounting levels that you've seen or the fact that you're seeing more players enter that market or trying to establish their presence in that market?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : And given that we started investment there about, I think, in FY '19, towards the end of FY '19, should we start seeing meaningful contribution from China in the next fiscal? Or would you say it's probably another 2 years away? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 13, 2021 / 4:00PM, REDY.NS - Dr.Reddy's Laboratories Ltd at JPMorgan Healthcare Conference (Virtual)

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Understood. No, that's a fair point. Moving to the U.S. business. Some of the launches that we have seen in the last few years reflect the fact that Dr. Reddy's R&D capabilities have been superior. Has the approach to R&D changed and as we become more broad based in the U.S. generic business versus the past? And do you think that impacts the quality of the pipeline that we would be launching, let's say, 2 years from now?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : I'm tempted to ask about delay for general Vascepa. We have seen 1 of your peers launch, but the generic share has been fairly limited. It seems like there seems to be a supply constraint. Could you give us any color on our preparation for launch and when we could see that?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : And is supply constraint an issue for you?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Understood. Erez, one other question that I wanted to ask you is on biosimilars. The EM strategy for biosimilars is fairly clear when it comes to Reddy's. But on the regulated market front, we have talked about sort of derisking or partnering the approach to reduce the risk. Could you -- as the regulatory pathway becomes more clear, market -- we have seen market formation in quite a few biosimilars. Would you like to change the approach that Reddy's has taken for biosimilar development -- for biosimilars for regulated market?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Yes. So in the first wave, it would be fair to assume that Reddy's would be partnering out most of the pipeline?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : And other than the few assets that we know the 2 assets, does Reddy have -- is Reddy investing in building a larger pipeline for biosimilars in the regulated market?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Fair enough. Now the, let's say, the topic of the hour. Could you provide some color on Sputnik V? How are the trials progressing? Could you give any details on the time line and the capacity? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 13, 2021 / 4:00PM, REDY.NS - Dr.Reddy's Laboratories Ltd at JPMorgan Healthcare Conference (Virtual)

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Understood. So you said it's 125 million units of treatment?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Yes. Okay. Fair enough. And this -- the production is third party, right? It's not our own capacity that...

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Okay. Okay. Fair enough. Now just shifting gears a little bit to capital allocation. In the last few years, you've become more broad-based, EM, India versus a U.S. dominated investment in the past. How do you look at capital allocation priorities in the next 5 years? What would be your top 5 areas for capital allocation?

Question: Neha Manpuria - JPMorgan Chase & Co, Research Division - Analyst : Thank you so much, sir. Appreciate your insights on the various topic. Thank you for taking time to join us in the session.