Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call Transcript

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

Question: Kunal Dhamesha - Macquarie Research - Analyst : Thank you for the opportunity. The first question is on the profitability of the acquired business. While we have said that it is accretive to our profitability and provide some colour as to what has been the EBITDA margin and operating margin for this business and how it has made it last three years.

Question: Kunal Dhamesha - Macquarie Research - Analyst : Sure. And then secondly, about when you look at our current OTC business. The first part is what is the size of our current OTC business? And if you can give some colour as to how it is split between US and other than US market? And then how does this acquisition fit into our current piece of OTC business? And do you see any cost synergies coming out of it and the revenue synergies coming out of it?

Question: Kunal Dhamesha - Macquarie Research - Analyst : It is one like what we have been doing with our and then the portfolio will utilize it for the US portfolio, utilizing it for the other markets, similar kind of mean which of the cross-selling opportunities is the way to say?

Question: Kunal Dhamesha - Macquarie Research - Analyst : Sure, I am (technical difficulty)

Question: Kunal Dhamesha - Macquarie Research - Analyst : Yes. And thank you for that too.

Question: Neha Manpuria - BofA Securities - Analyst : Yes, hi. I hope I'm audible. Sir, you know, on the platform that we've acquired, but how do you think that can grow and if I were to take a slightly longer view on the entire OTC business from the current $300 million with the likely portfolio, the menopause acquisition in the US. How big can it be for Dr. Reddy's, let's say, in fiscal 27, 28, how should we think about the size of the potential of this business, including the acquisitions in a few years from now?

Question: Neha Manpuria - BofA Securities - Analyst : So essentially for the existing $300 million base to double and it will take us longer. Is that a fair assumption?

Question: Neha Manpuria - BofA Securities - Analyst : Understood, thank you for that, but just to follow up. If you was able to mentioned adding more products to this platform we have a we already have an allergy medicines OTC product in Europe. Is there complementary aspects to, adding more products that the market access health. Is that why the growth will accelerate over time?

Question: Neha Manpuria - BofA Securities - Analyst : Yeah, does the platform really helps to add products, add more assets to it. Does that accelerate the growth of the OTT platform or does it have operating leverage benefits.

Question: Neha Manpuria - BofA Securities - Analyst : Understood. That's very clear. Thank you so much sir.

Question: Abdul Qadir - ICICI Securities - Analyst : Yes, hi. Thank you for the opportunity. So first question is on I know the asset base. So the revenue part is quite understood. Are you also going to acquire a manufacturing units or, you know, some sort of an asset base along with the this entire business?

Question: Abdul Qadir - ICICI Securities - Analyst : All right understood. Your second question is on what kind of approvals you will require before you close this transaction? I mean, are there any major stringent government regulations with two can be a potential burden with the completion of this acquisition.

Question: Abdul Qadir - ICICI Securities - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 26, 2024 / 1:30PM, REDY.NS - Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call

Question: Damayanti Kerai - HSBC, Research Division - Analyst : Hi. Thank you for the opportunity. My question is regarding the initial cost or investment you which you might require to grow this particular franchise so can you quantify like what kind of spend you are foreseeing for this franchise and the scale of our dues? Do you think the margins can improve significantly from the current level, which you indicated it from 25%.

Question: Damayanti Kerai - HSBC, Research Division - Analyst : Sure.

Question: Damayanti Kerai - HSBC, Research Division - Analyst : Sure. And my second question is they brought on OTC products. So in OTC., what will be the most important factor, which you should focus a differentiated product set that you are? Number two, were they adjacent to what will differentiate your number two position versus the number one position or number three position.

Question: Damayanti Kerai - HSBC, Research Division - Analyst : Sure. That's helpful. Thank you for response.

Question: Surya Narayan Patra - PhillipCapital (India) Pvt. Ltd - Analyst : Yes. Thank you for this opportunity. My first question on about the NRT to see what is the outlook of NRT in the winter on the video as a clarification to our earlier commentary that you mentioned energy is declining in that world market, but it is progressing in the developing markets. Is it right that understanding end of what is the growth outlook, your NAFTA, the therapy and of what is the what is its positioning compared to alternate therapy for drug smoking cessation? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 26, 2024 / 1:30PM, REDY.NS - Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call

Question: Surya Narayan Patra - PhillipCapital (India) Pvt. Ltd - Analyst : Yes, yes.

Question: Surya Narayan Patra - PhillipCapital (India) Pvt. Ltd - Analyst : Yes, yes. So my second point was also that the WHO recommendation to include and is that it's incredibly tough medicine. What does that really mean in the emerging markets, Florida markets other than the US. And have you seen any benefit or have you seen any benefit happening to this energy therapy? Was the recommendation in 2020?

Question: Surya Narayan Patra - PhillipCapital (India) Pvt. Ltd - Analyst : No, no, no, sorry, I'm repeating my question here. How should one read this WHO recommendation that NRP is part of food items and list of medicines? So this is well documented in 2020. Have you seen any benefit accruing to this NRT? And how should the Board progressively this recommendation should benefit us? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 26, 2024 / 1:30PM, REDY.NS - Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call

Question: Surya Narayan Patra - PhillipCapital (India) Pvt. Ltd - Analyst : Okay. And just last question from my side, it's a clarification in fact. And what you mentioned is in the initial commentary that this is a business, it will require investment too. We'll take it forward but even after the investment in terms of the profitability and our margins, this will still have margin beyond 25%. Is that and depending yes, these understanding right?

Question: Surya Narayan Patra - PhillipCapital (India) Pvt. Ltd - Analyst : Sure. Yeah, Thank you sir. Congratulations for the transaction.

Question: Bino Joseph Pathiparampil - Elara Securities (India) Private Limited - Analyst : Hey good evening, I hope you can hear me?

Question: Bino Joseph Pathiparampil - Elara Securities (India) Private Limited - Analyst : How does this product sell it only to direct. It does happen to the customer and are there any regulatory restrictions around that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 26, 2024 / 1:30PM, REDY.NS - Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call

Question: Bino Joseph Pathiparampil - Elara Securities (India) Private Limited - Analyst : Understood. So on so that the acquisition comes with the necessary marketing and sales team because we will need a hybrid team write off for direct marketing as well as searching for prescription marketing to the physicians to order. Does this acquisition come with the team?

Question: Bino Joseph Pathiparampil - Elara Securities (India) Private Limited - Analyst : Understood from second, are the people who get to this product or stop smoking or vaping? How long do they typically use this product to the use it or pretty much lifelong? Or is it like a few weeks and then they stop everything, all types of hotels?

Question: Bino Joseph Pathiparampil - Elara Securities (India) Private Limited - Analyst : Understood. Thank you. And finally, just one thing, if you could share some rough market share of the number one player and yourself in the overall record in replacement market for the rough number indication, just to see how fragmented the market is?

Question: Bino Joseph Pathiparampil - Elara Securities (India) Private Limited - Analyst : Okay. Thank you very much.

Question: Shrikant Akolkar - Nuvama Group - Analyst : Hi, good evening. Thanks for taking my question. I was wondering if it is possible for you to look at the manufacturing back to India and there are some CDMOs offering such services?

Question: Shrikant Akolkar - Nuvama Group - Analyst : Okay. And the product development part is done by [helion] or the CDMO partner?

Question: Shrikant Akolkar - Nuvama Group - Analyst : Understood, a little larger question. So last few months, we have seen several initiatives such as agotic collaboration, [Nestle JV] announced this acquisition. We already have invested in the CDMO business and then they are very potent peptide biosimilar R&D projects. So what are the key priorities going forward with so many moving parts in the 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. JUNE 26, 2024 / 1:30PM, REDY.NS - Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call And if you can also towards the end of this question, if you can answer about the ROC expectation over the next four to five. Thank you.

Question: Shrikant Akolkar - Nuvama Group - Analyst : Yeah. Thank you so much.

Question: Kunal Dhamesha - Macquarie Research - Analyst : Thank you the opportunity again, just one on the broader revenue split for the acquired business between Europe, emerging market and other developed countries. If you can split this GBP217 million in this category?

Question: Kunal Dhamesha - Macquarie Research - Analyst : And this is really helpful. And then two more question on the commodity business. So you said that we have a minimum or a product in the pipeline. Can you share what's the number of pipeline products and a bit more of a novel delivery system for the new containers is the way to think about it or there are, at least, the wholly-owned pipeline, whatever business we are currently paying. The second is how has been the ASP increase in this brand and nicotine replacement therapy category in the last three, four years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 26, 2024 / 1:30PM, REDY.NS - Dr Reddy's Laboratories Ltd to Discuss Acquisition of Nicotinell Call

Question: Kunal Dhamesha - Macquarie Research - Analyst : The average selling price increase in the category in the last three to four years?

Question: Kunal Dhamesha - Macquarie Research - Analyst : Sure. Thank you. And all the best.