Kunal Dhamesha

Kunal Dhamesha questioned whether a plant inspection is required for Semaglutide approval in Canada and addressed concerns about its substitutable status due to perceived API differences. He also sought clarification on the new labor code-related provision, its retrospective nature, and future impact on employee expenses.

Answer

CEO Erez Israeli confirmed no plant inspection is required for Semaglutide approval in Canada and expressed confidence in its substitutable status, clarifying that the innovator also uses synthetic API for injectables. CFO M V Narasimham explained the new labor code provision is a retrospective re-computation of employee benefits, with future recurring impact expected to be less than 50 basis points and not significant.

Kunal Dhamesha asked if a plant inspection from Health Canada is required for Semaglutide approval and about the confidence in the generic product's substitutability. He also sought clarification on the new labor code-related provision of INR 117 crore, specifically if it includes retrospective costs and if it will be recurring.

Answer

CEO Erez Israeli confirmed that no plant inspections are expected or needed for Semaglutide approval in Canada, and the product is absolutely expected to be substitutable. CFO M V Narasimham explained that the INR 117 crore provision is a retrospective recomputation based on revised wage definitions under new labor codes, and while future impact will be recurring, it will be less significant (under 50 basis points).

Kunal Dhamesha inquired about the R&D allocation for biosimilars and non-generic businesses, and the potential risks to the Semaglutide market in Canada, including increasing filers, compounding pharmacies, and aggressive innovator pricing.

Answer

CEO Erez Israeli clarified that Daratumumab and Denosumab are licensed products, while Abatacept is internal, and R&D spend is expected to remain around 7% of sales. He reiterated that the Canada Semaglutide market is anticipated to be very competitive with multiple players, but declined to forecast specific price erosion.

Kunal Dhamesha of Macquarie Group asked about the launch strategy for semaglutide in Canada, given the lack of reimbursement for the weight-loss indication (Wegovy), and for a breakdown of the planned capacity by pen type.

Answer

CEO Erez Israeli clarified that the initial launch in Canada will be for the generic version of Ozempic (for diabetes), not Wegovy, and he does not anticipate issues with this approach. He also specified that the guided capacity of 10 million pens is expressed in terms of single-use pen equivalents.

Kunal Dhamesha questioned the significant sequential decline in gross margin, the PBT margin fluctuation in the NRT business, and sought an update on the development and launch timelines for generic semaglutide and the abatacept biosimilar.

Answer

An unnamed executive and CFO Mannam Venkatanarasimham attributed the gross margin drop to one-off costs, including severance from the Freeport plant divestiture and lower out-licensing income, stating it was a temporary impact. The CFO advised modeling the NRT business with an EBITDA margin around 25%, attributing fluctuations to integration costs. CEO Erez Israeli confirmed plans to launch generic semaglutide in calendar '26 where IP allows and expects to file for the abatacept biosimilar by the end of calendar '25.

Kunal Dhamesha of Macquarie Capital inquired about the sequential moderation in cash flow, the step-up in SG&A expenses, and the US product launch momentum. He also asked about the impact of a recent Microsoft outage and sought clarification on the Nestle JV's operational start and the biologics facility expansion.

Answer

CFO Parag Agarwal attributed the lower free cash flow to fluctuations in factoring, which he expects to normalize. He explained the SG&A increase was due to investments, higher freight costs, and other one-offs, but reiterated the full-year guidance of 27.5%-28%. CEO Erez Israeli confirmed the US launch plan is on track, stated there was zero impact from the Microsoft outage, and detailed that the Nestle JV would go live on August 1. He also noted the biologics facility in Bachupally is being expanded from 15 kiloliters to a target of 50 kiloliters over the next two years.

Kunal Dhamesha sought clarification on the U.S. business's quarter-over-quarter decline, asking if the base erosion included generic Revlimid. He also asked about recent trends in U.S. price erosion and the number of planned product launches for the U.S. market in the upcoming year.

Answer

CEO Erez Israeli confirmed the quarterly sales figures include Lenalidomide (generic Revlimid). He attributed the sequential decline to a combination of supply sequencing and price erosion on the base business, not market share loss. While the overall pricing sentiment is unchanged, he acknowledged that some large products faced increased competition. For FY'25, the company plans to launch over 20 products in the U.S.