Dr. Reddy's Management Discusses Q3 2011 Results - Earnings Call Transcript

| About: Dr. Reddy's (RDY)

Dr. Reddy’s Laboratories Ltd. (NYSE:RDY)

Q3 2011 Earnings Call

January 25, 2011 8:00 AM ET

Executives

Kedar Upadhye – Investor Relations

Satish Reddy – Chief Operating Officer

Umang Vohra – Chief Financial Officer

Analysts

Ranjit Kapadia – HDFC Securities

Hitesh Mahida – Marwadi Shares

Kartik Mehta – Daiwa

Christen Sood – Analyst

Bhagwan Chodhary – India Nivesh Securities

Nimish Mehta – MP Advisors

Bino Pathiparampil – IIFL

Manoj Garg – Edelweiss Capital

Suryadeep Das – Centrum Broking

Prakash Agarwal – RBS

Nitin Agarwal – IDFC Securities

Sameer Baisiwala – Morgan Stanley

Sushant Dalmia – Pioneer Investcorp

Sonal Gupta – UBS Securities

Akshay Shah – Quest Investment

Chirag Talati – Espírito Santo

Ranvir Singh – Brics Securities

Neelkanth Mishra – Credit Suisse

Arvind Bothra – Bank of America

Abhay Shanbhag – Deutsche Bank

Chirag Dagli – ICICI Securities

Alok Dalal – MF Global

Operator

Ladies and gentlemen, good day, and welcome to the Dr. Reddy’s Laboratories Limited Q3 FY ‘11 Earnings Conference Call. As a reminder, for the duration of this conference, all participant lines will be in a listen-only mode and there will be an opportunity for you to ask questions at the end of today’s presentation. (Operator Instructions)

Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Kedar Upadhye from Dr. Reddy’s Laboratories. Thank you and over to you, sir.

Kedar Upadhye

Good morning and good evening to all the participants. And welcome to Dr. Reddy’s earnings conference call for the third quarter ended December 31, 2010. Earlier during the day, we have released the unaudited consolidated financial results under IFRS and the same are also posted on our website. We are conducting a live webcast of this call and a transcript shall be available on our website soon.

The discussion in this call will be based on IFRS consolidated financials. To discuss the business performance and outlook, we have on the call today Satish Reddy, our Chief Operating Officer; and Umang Vohra, our Chief Financial Officer. Our CEO, G. V. Prasad is traveling today to Davos for a prescheduled engagement in the World Economic Forum, after today’s Board Meeting and Press Interaction and hence he has not been able to join today’s call. Please note that today’s call is copyrighted material of Dr. Reddy’s and cannot be rebroadcast or attributed in press or media outlet without the company’s expressed written consent.

Before we proceed with the call, I’d like to remind everyone that the Safe Harbor language contained in today’s press meeting also pertains to this conference call and the webcast.

I would now like to turn the call over to Umang Vohra.

Umang Vohra

Good morning and good evening to everyone. I welcome all of you on this call today. I will discuss key financial highlights of this quarter. All the figures referred to in this section are translated to U.S. dollars at a convenience rate of 44.08 per U.S. dollar. For the purpose of business highlights and Satish’s section, the analysis is based on performance in respective local currencies.

The financial highlights are as follows. Consolidated revenues for the quarter are at $424 million and represent a year-on-year growth of 10% and a sequential growth of 2%. Revenues from our Global Generics business stand at $303 million for the quarter, representing a year-on-year growth of 16%. Revenues from the Pharmaceutical Services and Active Ingredients segment at $111 million for the quarter represent a decline of 5% over last year.

Gross profit margin for the quarter is at 55% versus 51% a year back. This improved margin reflects the contribution from new products launched in the U.S. this year in our Generic segment. Gross margins for the Global Generics and PSAI segments are at 65% and 28% versus 60% and 31% respectively in the previous years.

This quarter expenses include certain items which are non-routine in nature and total up to approximately U.S. $9 million. These are as follows. A, There are expenses pertaining to our OTC business in Russia. You will recall that we had committed to building a strong OTC portfolio in Russia. This quarter has seen a higher spend on the top four OTC products from our franchise in line with the season at Russia.

B, in addition, we refinanced the betapharm loan in this quarter and as a result had to take a non-cash charge pertaining to debt origination costs, which were capitalized on our balance sheet in line with accounting literature at the time of taking the first Beta loan.

Thirdly, our spend on litigation in the U.S. has been high especially on the Fexofenadine related litigations of which we expect outcomes very shortly.

Apart from the above, in the India business we have seen an increase in manpower and associate expense on account of field force expansion done over the last one year.

Total SG&A expenses including amortization charges for the quarter and the expenses that I had mentioned to you earlier is that $142 million representing a year-over-year increase of 17%. The year-on-year SG&A increase for nine months is only 5%, which again reflects the nature of this quarter having certain one-time expenses.

R&D at $29 million for the quarter is at 7% of sales and represents a year-on-year growth of 46%. This increase is on account of a significant scale up in our R&D activities this year and going forward this upward bias may continue to a certain extent and we do expect to keep R&D at about 7% to 7.5% of sale.

EBITDA at $90 million for the quarter is 21% of sales representing a year-on-year growth of 10%. EBITDA for the nine months of this fiscal is $261 million and is also at 21% of sales. We expect the effective full year tax rate to be approximately 11% to 12%.

In this quarter, the higher R&D charge and build up with inventory for new launches in the U.S. had an impact on tax workings, which reduced the effective tax rate for the quarter. In quarter four, we expect the tax rate to catch up due to the anticipated launches and we expect to end the year at 11% to 12% effective tax rate.

Profit after tax is at $61 million and represents 14% of sales and the year-on-year growth of 19% adjusting for the impairment charges in the previous year. Profit for the nine months of this fiscal is at $172 million and is at 14% of sales.

This quarter our operating working capital increased by $24 million during the quarter. Capital expenditure for the quarter is $52 million and $139 million for the nine months of the year. Foreign currency cash flow hedge options for the next 15 months stand at $540 million as of date, hedged largely in the range of $47 to Rs. 48 to a dollar. Our current net debt is at $216 million and net debt to equity ratio is 0.20.

I will now request Satish to please cover the business highlights.

Satish Reddy

Thanks, Umang. Welcome everyone on the call. As mentioned earlier, Prasad is traveling today for Davos, hence he’ll not been able to join our today’s call. Well, before I talk about the performance for the quarter, I also wanted to share the news that just came in. Dr. Reddy, our Chairman has been awarded one of the highest civilian honors in the country, Padma Bhushan.

Our performance in the nine months of the current fiscal, I would say somewhat mixed. We have launched a number of low competition products in the U.S. and delivered strong growth across the key markets of India, Russia and other rest of the world countries in Global Generics.

The [medical] from these launches and growth was partly offset by decline in PSAI and Germany. During this period, we have been investing for future growth through higher R&D, spends for OTC portfolio in Russia and field force expansion in India.

In addition, as announced in November, we have also agreed to acquire GSK’s penicillin facility in the U.S. Our performance for the full year will be shaped to an extent by the developments in Q4 for Fexofenadine Pseudoephedrine higher strength product and Fondaparinux.

The case hearing for Fexo-Pseudo is scheduled to start by the end of this month. We remain confident about our non-infringing position and expect to receive the final judgment before the end of this fiscal.

On Fondaparinux the U.S. FDA audits of our partner’s facilities scheduled as part of the ANDA review process are complete. We continue to work with the agency for the completion of the balance procedural part of the ANDA review process. While the launches of both these products were delayed compared to our earlier expected launch dates. We are confident that we will benefit from the limited competition opportunity.

If you’re able to monetize the Fexo-Pseudo opportunity for a part of Q4 then we will be near the upper range of the ROC guidance for each that we had communicated earlier. In case the outcome of the case is unfavorable or uncertain till the year end, we may end up lower than the ROC guidance range. I will not cover the highlights for each of our focus months.

Starting with North America Generics it recorded revenues of $106 million for the quarter, which represents a year-on-year growth of 66% and a sequential growth of 12%. This has been the fourth consecutive quarter to demonstrate sequential growth of approximately $10 million each quarter. This growth is a result of market share expansion in our base business, as well as new launches and in spite of the delays in the launches of Fondaparinux and Fexo-Pseudo referred earlier.

Let me provide more contexts on our base business in the U.S. In our May 2010 earnings call we mentioned that our strategy will include gaining share in our key vertically integrated products. We are pleased to see increase in share in several products such as Fexofenadine at 21%, Omeprazole prescription products at 16% and Ciprofloxacin at 22% based on IMS shares data ending November 2010.

For these and several other products, our contracted market shares are higher than reported IMS shares. Also the IMS tracking tends to have a bit of a lag factor. We have been also re-enforcing our confidence in Omeprazole Magnesium OTC despite a slow initial ramp up. We are now pleased to observe that in this quarter this product was amongst our top key revenue generators and the product still continues to grow.

We have launched seven new products in this fiscal year to date, three of which were late quarter three launches, including an exclusivity launch of Zafirlukast and second wave launches of Lansoprazole and Valacyclovir. Our initial contracted market share numbers for these products are encouraging and will be reflected in IMS numbers in the coming months.

Q4 we’ll also see a full quarter of sales for all these three products. Our launch of Zafirlukast generated lower than expected sales due to the surprise entry of an authorized generic. However, we continue to hold a high share of the volumes in this niche market and additional competitors also winning the exclusivity period could be emitted.

During the quarter, we filed six ANDAs and we now have 74 ANDAs pending approval at the USFDA of which 32 are Para IVs and 12 are first-to-file. These outcomes in Q3 for U.S. business demonstrate our ability to launch new products successfully and consolidate shares in key molecules.

Moving on to India, revenues for the quarter are at Rs. 301 crores or $67 million, which represents a 14% year-on-year growth. Revenues are lower than Q2 due to expanded -- due to the expected season effect.

The year-on-year growth in the current quarter was led by volume growth and 8% -- volume growth of 8% and contribution from new products launched in the last one year of 6%. During this quarter, we have launched 16 new products in India. Year-to-date the growth for India has been at 19%.

Our biosimilars portfolio continues to grow strongly with a year-over-year growth of 18% till date this year. It has been three years since we launched Reditux and we are glad that it is now our top five brands in India and is still growing steadily.

Our recent biosimilar launch Cresp is also promising especially after the launch in oncology segment in this quarter. In addition, we expect an approval and launch of our fourth biosimilar in the coming months.

Now moving on to Russia, the revenues are at $54 million, recording a year-on-year growth of 11% and sequential growth of 11%. The growth on the high base of the previous year is led by the volume growth across products. Our market rank is 13th as per Pharmexpert’s data for the year-to-date November 2010.

Our secondary sales growth of 21% in value and 33% in volume terms for the year-to-date November 2010 exceeded the market growth of 8% in value and 12% in volume terms during the same period.

Our launches in the last few quarters have being doing well on the back of effective branding and marketing efforts. Going forward, we expect a higher mix of OTC and in-license products in our portfolio.

Europe Generics recorded revenues of 35 euros million that is a decline of 7%. Betapharm recorded revenues of 23 million euros representing year-on-year decline of 24% due to price erosions caused by tenders this year. Our operating profit at betapharm till date is highest relative to previous year, largely on account of actions taken for the SG&A optimization in the previous year.

In December this quarter, the results of the AOK tender in Germany were announced and we could win only three products from this tender. While this is disappointing to us, we had in fact bid at prices, which are in line with the margin and profitability thresholds that we had set for ourselves. We’re also focusing our growth on products beyond the tender now with some launches expected soon.

Moving on to the PSAI business, revenues at $111 million was flat on a year-to-year basis due to the sluggishness in our services segment. The sequential growth of 12% was largely led on the back of new launches and an improved order book status in Active Ingredients business. This quarter we filed nine DMFs that include two U.S. DMFs, cumulatively the total DMFs stand at 436 and it includes 159 U.S. DMFs.

With this, I would like to end my part of the presentation and thank you all for your attention. We can now begin the Q&A session.

Question-and-Answer Session

Operator

Thank you very much sir. (Operator Instructions) The first question is from the line of Ranjit Kapadia of HDFC Securities. Please go ahead.

Ranjit Kapadia – HDFC Securities

My question relates to this settlement with AstraZeneca for those two products Nexium esomeprazole and Accolate. Now, this, is a supply of API included in the Nexium launch because this launches are in 2014 onwards?

Satish Reddy

No, it is not, sorry today for that.

Ranjit Kapadia – HDFC Securities

And then the zafirlukast we have launched in November 10 at risk and now the product is without the risk. So is there any possibility of getting for this period from November to the two months any compensation to be paid?

Satish Reddy

No. There is no compensation to be paid. The product is no longer at risk.

Ranjit Kapadia – HDFC Securities

Okay. Thank you very much and all the best sir.

Satish Reddy

Thank you.

Operator

Thank you, Mr. Kapadia. Our next question is from the line of Hitesh Mahida from Marwadi Shares. Please go ahead.

Hitesh Mahida – Marwadi Shares

Congratulations sir for good trade off numbers, just wanted to know how much your one-time litigation amount have you paid, litigation settlement amount?

Satish Reddy

We have not paid any litigation settlement amount as yet.

Hitesh Mahida – Marwadi Shares

Okay.

Satish Reddy

What I mentioned in the script that we had communicated. The expenditure on our legal litigation has been high in this quarter.

Hitesh Mahida – Marwadi Shares

Okay. And how was the refinance betapharm loans?

Satish Reddy

The betapharm loan has been refinanced. It was about €120 million earlier.

Hitesh Mahida – Marwadi Shares

Okay.

Satish Reddy

We refinanced it to about $110 million right now and it’s been refinanced at rates which are more attractive than what the earlier euro loan was. We are not communicating exactly what component of the total cost that I mentioned to you was on account of the betapharm refinancing, but you could look at the P&L and probably make an impression of it.

Hitesh Mahida – Marwadi Shares

Okay, okay. Thank you. And I wondered, what’s your market share as far as Tacrolimus is concerned?

Umang Vohra

Yeah. It’s about 16%.

Hitesh Mahida – Marwadi Shares

16%. Okay. Thanks. That’s it from my side.

Operator

Thank you, Mr. Mahida. Our next question is from the line of Kartik Mehta of Daiwa. Please go ahead.

Kartik Mehta – Daiwa

If you could explain the low tax rate first and we have had several one-off upsides in this year, so if we look at the pipeline with Fondaparinux would be and D24, which could be there effectively for the next year entirely. Can you guys share if the y-o-y growth for the U.S. business for FY ‘12 will be somewhere between 15% to 20% of commissions, can you share some thoughts on that?

Satish Reddy

We won’t be able to give any specific sales guidance as per U.S. performance next year, right? Having said that, I think this year, what we are trying to say is the growth is also led by limited competition products, so you cannot absolutely count it as one-off upsides, right? So that’s what it is, and Umang can you also explain the tax rate.

Umang Vohra

Yeah. So what’s happened in this quarter is that we’ve had a much higher R&D element to the expenses and we -- as you know we get a way to deduction on R&D, which is allowed by the Indian Government.

Also simultaneously we have further launches that have to take place in the U.S. including the ones that we launched in late quarter three like Lansoprazole et cetera. There have been inventories built up in the U.S. and the result of these inventories being built up in the U.S. there are some tax account -- tax adjustments that needs to be made in order to eliminate the profit that’s lying in these inventories, because these are largely inter-company transactions that makes the difference to the tax rates. Overall, for the full year we are committing to 12% as we said earlier and quarter four will catch up as a result of this.

Kartik Mehta – Daiwa

So this 12% is for FY ‘12 also?

Umang Vohra

No. FY ‘11, FY ‘11 is 12%.

Kartik Mehta – Daiwa

Okay. And on the CapEx, I guess, that is for the planned acquisition, can you share what amount of revenues and when would you record that?

Satish Reddy

The CapEx has already been accounted. The revenues from this, since this CapEx has been incurred for expansion in our existing facilities, as well as the SEZs. Depending on where the CapEx is spent some of the revenues may come in in a shorter period whereas the SEZ revenues typically would take about a year or so.

Kartik Mehta – Daiwa

I was asking in particular about the plant that we acquired in the U.S.

Satish Reddy

Yeah?

Kartik Mehta – Daiwa

So, any timeline when that revenues will be recorded or have you started recording anything or?

Satish Reddy

No. We haven’t started recording anything. This would be recorded in the next fiscal.

Kartik Mehta – Daiwa

In the next fiscal?

Satish Reddy

Yeah.

Kartik Mehta – Daiwa

Thank you.

Operator

Thank you, Mr. Mehta. Our next question is from the line of [Ehshan Sood] of (Inaudible). Please go ahead.

Christen Sood – Analyst

Yeah. Hi. It’s [Christen Sood] from (inaudible). Two questions please, one, can you shed some more light on Germany? Are you expecting a sequential improvement from here? Is the business profitable post these tender losses?

And the second question is on Lipitor, are you expecting to be a participant in the U.S. Lipitor market after the six month exclusivity? Thank you.

Satish Reddy

Yeah. We will be a participant on the Lipitor post exclusivity. That is correct. On Germany, the situation is like this, already we have talked about the overall sales group going down and that’s the result of what’s happening in the market, which is post this process of tender that has happened in the market what we have seen is, there is steep erosion in prices and that’s something that, we have to live with, the market has been totally unsettled because of that. So quarter-on-quarter, obviously you’re seeing that kind of a decline by that compared to the previous year, that’s the reality.

What we’ve done is, over a period of time we have also taken steps to reduce the SG&A as a result of which in terms of profit we’re doing mostly sequentially as far as the quarters are concerned. For example, last year you would have had seen a higher expense on SG&A because of the higher manpower but we don’t have that this year. So, lower sales but it is still a profitable operation.

Going forward, I think based on more tender wins or in spite of a disappointing AOK tender result coupled with the fact that we are trying out a few initiatives to also address the month in the market. So this would start trying to go but you have to give it a few more quarters for that to materialize.

Christen Sood – Analyst

Okay. Thank you.

Operator

Thank you, [Mr. Sood]. Our next question is from the line of Bhagwan Chodhary of India Nivesh Securities. Please go ahead.

Bhagwan Chodhary – India Nivesh Securities

Yeah. Can you update on this Allegra-D24 what the market price you are expecting and one more product that’s Fondaparinux?

Satish Reddy

Allegra-D24 is 200, approximately $200 million innovative product.

Bhagwan Chodhary – India Nivesh Securities

Okay.

Satish Reddy

And at generic prices this could obviously be lower. We are expecting, the court case starts hearing on the 31st of Jan and we expect that hopefully in this quarter it would get resolved. Fondaparinux is approximately a $300 million product, again at innovative prices.

Bhagwan Chodhary – India Nivesh Securities

And what the update of this Fondaparinux by what time you are expecting?

Satish Reddy

Our partner’s facilities have been inspected and we’re awaiting, we’ve been in discussions with the FDA, they’re awaiting an approval on this front.

Bhagwan Chodhary – India Nivesh Securities

Okay. And what about this ANDAs, how many ANDAs you have filed this quarter?

Umang Vohra

We have filed about six ANDAs in this quarter Bhagwan.

Bhagwan Chodhary – India Nivesh Securities

Okay.

Umang Vohra

Can we please restrict the questions to one or maximum two, so that ...

Bhagwan Chodhary – India Nivesh Securities

Yeah. Thanks.

Umang Vohra

Yeah. Thanks.

Operator

Should we move on to the next question sir?

Satish Reddy

Yeah, yeah, yeah.

Operator

Thank you. Our next question is from the line of Nimish Mehta of MP Advisors. Please go ahead.

Nimish Mehta – MP Advisors

Yeah. Hi. Thanks for taking my question.

Satish Reddy

Thanks.

Nimish Mehta – MP Advisors

I have two questions. First of all on Nexium, I understand as per the settlement that Dr. Reddy’s will be launching the product on the same day on which Ranbaxy also is going to launch. So can you just explain as to how can this happen given that Ranbaxy has 180-day exclusivity and Dr. Reddy’s does not enjoy 180 day exclusivity?

Satish Reddy

We are not going to comment on competition and their part of the settlement. All we can say is that we have, if there is a 180-day exclusivity then obviously it does imply that we would have to launch after that.

Nimish Mehta – MP Advisors

Okay. So this is subject to the 180-day exclusivity.

Satish Reddy

That’s right.

Nimish Mehta – MP Advisors

Okay. I understand. And second, I wanted to also know as to when do you expect generic competition in the usual Allegra Fexofenadine because we were expecting from this month, but I understand nothing has come in, right?

Satish Reddy

We do not expect generic competition for Fexofenadine D24, which is Allegra. D24...

Nimish Mehta – MP Advisors

No. I’m talking about usual, it is currently at risk launch and all the...

Satish Reddy

Are you talking about base Fexofenadine?

Nimish Mehta – MP Advisors

Yeah.

Satish Reddy

So base Fexofenadine which is at risk launch already has generic competition.

Nimish Mehta – MP Advisors

Already has generic.

Satish Reddy

Yeah.

Nimish Mehta – MP Advisors

Non at risk competition?

Satish Reddy

Yeah.

Nimish Mehta – MP Advisors

Okay. And finally on Accolate, you mentioned that you’re expecting after 180-day, me to generic stranger, but our understanding was that because it is a non-infringement maybe others will have to wait, so anything that you can comment as to where am I missing?

Satish Reddy

We do not want to comment on that and we’d rather not comment on that.

Nimish Mehta – MP Advisors

Okay. Thank you. I’ll join back in the queue.

Operator

Thank you, Mr. Mehta. Our next question is from the line of Bino Pathiparampil of IIFL. Please go ahead.

Bino Pathiparampil – IIFL

Hey. Thanks for taking my question. Just a question on the Russian and domestic markets despite the higher spends on OTC and marketing Russia growth seems to have tapered off after several quarters of stellar performance. So what has happened historically in this quarter, third quarter has been a very strong quarter as well. So what has happened in this quarter, the same with domestic market despite the sales force being ramped up, we see a slowing growth rate there, so what is your expectation for the full year?

Satish Reddy

Okay. The two issues are slightly disconnected. The OTC spend that we talked about is to expand on our OTC sales in a much more classic way than what we did before. So which means, there will be more marketing spend on advertising and things like that. So that’s the OTC spend in Russia. And the field force expansion in India is also to do with our peripheric and geographic expansion, so that’s something we got disconnected from the skills issue that’s talking about.

As per sales are concerned, Russia it does looks low because of the high base that they had last year, but that’s something that is to be noted. But overall if you see in terms of the market growth trends, our growth as compared to the market, these indicators are looking really good as per the market research data.

As far as India is concerned it’s more to do with the seasonal effect, like I’ve also said, if I see the cumulative growth for the first nine months that’s at 19%, which is definitely above the market growth rate.

Bino Pathiparampil – IIFL

Right. So the domestic market you think you can maintain yearly 20% rate, 19% to 20%?

Satish Reddy

Yeah. We expect about an 18% to 20% on a full year basis, Bino, and that’s been very consistent with the way we’ve communicated in the past two, three quarters.

Bino Pathiparampil – IIFL

Right, right. And in Russia, is there any lag impact of the price control?

Satish Reddy

No. I think also, Bino, it will be good because in Russia what happened in quarter three of last year, on account of what was happening in terms of pricing control et cetera, there was a fair – that was a fairly large quarter for most companies including us. So, we’re seeing this growth that you’re seeing in this quarter over a very large base of the previous year’s quarter.

Bino Pathiparampil – IIFL

Right, right. One final question on then the exceptional SG&A of the quarter, the – do you need to say that the entire $9 million is unlikely to – you should be taken off from a quarterly run rate going forward?

Satish Reddy

That is right. That would be right and we would also say that in every quarter three it’s likely that you’ll probably have a slightly higher expense curve because that’s the season in Russia and that tends to result in the lights – an increase in the SG&A.

Bino Pathiparampil – IIFL

Great. Thank you very much.

Operator

Thank you, sir. Our next question is from the line of Manoj Garg of Edelweiss Capital. Please go ahead.

Manoj Garg – Edelweiss Capital

Yeah. Thanks for taking my question. This question pertaining to the increase competition both in the U.S. market, just wanted to understand the overall market with regard to Tacrolimus and do you know how is the price erosion and kind of market share, though you have mentioned around 16%. So effectively like if you look at on the branded innovative price, what kind of price erosion you have seen so far in that market?

Umang Vohra

Yeah. Manoj for Tacrolimus we have seen Watson coming in for one strength and Mylan getting approval for all those strengths.

Manoj Garg – Edelweiss Capital

Yeah.

Umang Vohra

Particularly what we have experienced for this product is it takes a bit of time for the new entrant to acquire market shares. So, over probably for couple of quarters, we could expect a stable market share. However, on the pricing point of view there is not a significant erosion.

Manoj Garg – Edelweiss Capital

Okay. So when we talk about the 16% market share, that means is that the market share of the new prescription?

Satish Reddy

It’s a total market share, so the generic market share will be roughly 30%.

Manoj Garg – Edelweiss Capital

30% of the overall branded market share.

Satish Reddy

Market share.

Manoj Garg – Edelweiss Capital

Okay, okay. And how, like, with regard to Omeprazole, thought we have been inching up quarter-after-quarter, is it fair to assume that now the quarterly run rate is somewhere in the range of some $10 to $12 million?

Umang Vohra

It’s approximately in that range Manoj. What happens is from external data perspective a large part of our customers data does not get captured within the our database, the Nielsen database.

Manoj Garg – Edelweiss Capital

Okay.

Umang Vohra

So, but the evaluate could be approximately in the range you’ve mentioned.

Manoj Garg – Edelweiss Capital

Okay. And just my last question before I get into the queue. Despite if when I just take $9 million one time kind of expenditure in SG&A, I think if you look at the year on a sequential basis, the SG&A expenditure are higher by 5% to 6%. So is it largely attributed to higher expenditure with regard to OTC in Russian market or is there something more to read there?

Satish Reddy

Can you repeat your question please?

Manoj Garg – Edelweiss Capital

Like if I look at after adjusting $9 million from the SG&A...

Satish Reddy

Yeah?

Manoj Garg – Edelweiss Capital

I think sequentially the SG&A cost has gone up by 5%, 6%.

Satish Reddy

That’s right.

Manoj Garg – Edelweiss Capital

So, is it largely attributed to the higher expenditure or spending on OTC portfolio in Russia or there is something more to read there?

Satish Reddy

If you adjust the $9 million...

Manoj Garg – Edelweiss Capital

Yeah?

Satish Reddy

It is my belief that you’ll come to roughly the same SG&A percentage as you had in the half one of the year.

Manoj Garg – Edelweiss Capital

But like in terms of absolute numbers if you see it has gone up from 530 crores to 565 crores?

Satish Reddy

Yeah. Okay. So, you’re, so if that is on account of high, slightly higher expenditure on India as I mentioned in the script that I read out...

Manoj Garg – Edelweiss Capital

Okay.

Satish Reddy

We’ve seen an increase in manpower and associated spends on account of field force expansion. Also for India, this quarter also has constant spends which are probably slightly higher.

Manoj Garg – Edelweiss Capital

Okay, okay. How many like medical reps you have added during the quarter or maybe last nine months in India?

Satish Reddy

We have added totally 400. I don’t believe we added any reps in the last quarter.

Manoj Garg – Edelweiss Capital

Okay. That’s all from my side. All the best.

Satish Reddy

Thank you.

Operator

Thank you, Mr. Garg. Our next question is from the line of Suryadeep Das of Centrum Broking. Please go ahead.

Suryadeep Das – Centrum Broking

Hi, sir. Thanks for taking my question. I had a question regarding Russian market, regarding the deal you have with Cipla and Vitabiotics. Just wanted to have some colors to whether these deals are already in progress and if, yeah, then what kind of fraction our products should I join this and yeah, I’m seeing right now?

Satish Reddy

Our sales for the Cipla’s products have already started.

Suryadeep Das – Centrum Broking

Okay.

Satish Reddy

Already commenced.

Suryadeep Das – Centrum Broking

Okay.

Satish Reddy

So, this year we won’t have the full benefit of it, but next year we’ll have the benefit of the full year, so that’s...

Suryadeep Das – Centrum Broking

Okay. And about the Vitabiotics products?

Satish Reddy

Also I think it’s, we have started sales, sales have just commenced on that, yeah.

Suryadeep Das – Centrum Broking

Okay. And just one more question just wanted to know if you have any tax guidance for this fiscal?

Umang Vohra

We have, for tax we’re saying it will be about 12%.

Suryadeep Das – Centrum Broking

On an annualized basis?

Satish Reddy

That’s right.

Suryadeep Das – Centrum Broking

Okay. Thanks a lot.

Operator

Thank you, Mr. Das. Our next question is from the line of Prakash Agarwal of RBS. Please go ahead.

Prakash Agarwal – RBS

Yeah. Good evening, sir. Question relates to the gas leaks that happened in December, any updates there?

Satish Reddy

I think it’s – the issue has been somewhat exaggerated in the media, right. So but the issue is clearly that whatever happened that evening, that actually inspectorates, which is actually the authority has given us a notice. We have responded to the notice and we expect further -- to hear further from them. So, there is no further updates to that.

Prakash Agarwal – RBS

But the production facilities are all functional and there is no...

Satish Reddy

It’s all functional, I mean, we’ve only been restricted just on that particular clean room not to produce, which was the only thing affected there. So, beyond that everything is functioning normally, just one clean room, that may be 10, 15 clean rooms in the theater its just one clean room issue.

Prakash Agarwal – RBS

Perfect. And so the second question is on the PSAI segment, we have seen good improvement in the margins, as well as the decline has been much lower than expected. So, I mean, clearly in your press release you’re mentioning, but any particular products or what has actually happened, can you elaborate there please?

Satish Reddy

We don’t give product guidance, but I can tell you that the order book in the API has significantly improved. And this quarter we’ve seen a fair number of products which have been added. The second thing is also in the first nine months, we’ve decongested capacity in each of these plants which was limiting our off take. So, the capacity is in place, the order books improved, some of the new products are tracking well and we’re actually expecting API to do also relatively well in quarter four.

Prakash Agarwal – RBS

Okay. And looking at the fluctuation in margins from 31 to 22 and now back to 28, so what kind of margins do we assume going forward?

Satish Reddy

I would tend to think, we don’t guide for margins, but I think the historical averages of in the range of 28 to 31 would be probably the right averages to look at.

Prakash Agarwal – RBS

And last question on the euro, basically I mean we just had an update from you on the Forex exposure, but that’s largely the U.S. Do we also hedge over euro sales or say sales in Germany or they’re all in dollar terms?

Satish Reddy

The sales in Germany are in euro terms, up till now we have not had to hedge this because on a net cash basis we had very little or very marginal exposures due to the interest and debt principal repayments in euros itself.

Prakash Agarwal – RBS

Right.

Satish Reddy

However, now that we’ve moved this debt to dollars, so the dollar leg is not an issue, but the euro leg now will have, we will be taking a look at it from an hedging perspective for our next year strategy.

Prakash Agarwal – RBS

Okay. You said it’s a dollar denominated debt, so it’s LIBOR plus something, is it?

Satish Reddy

That’s right, it’s a LIBOR plus 60 to 90 basis and we’ve – for us this is a natural hedge with our business.

Prakash Agarwal – RBS

Perfect. Thank you so much.

Satish Reddy

Yeah.

Operator

Thank you, Mr. Agarwal. Our next question is from the line of Nitin Agarwal of IDFC Securities. Please go ahead.

Nitin Agarwal – IDFC Securities

Hi. Thanks for taking my question. I just wanted to check on Prevacid, if you can give us some idea of the competitive situation out there, and how do you see the product really shaping out over the next couple of quarters?

Umang Vohra

See on Lansoprazole there are about four players now in the market, Nitin, four to five players in the market and we could expect a stable market share in the next couple of quarters.

Nitin Agarwal – IDFC Securities

What’s the kind of market share we’ve been able to get in the initial, since, I guess, it’s a very early launch, it’s early days yet for the launch, but what’s the kind of it is...

Umang Vohra

So, we have launched it in the month of October, so it’s early for the IMS to reflect this number, the market share number.

Nitin Agarwal – IDFC Securities

Okay. So, I guess, but in terms of the full impact of the product, is yet to be felt in the numbers even for, Q4 isn’t probably the full impact of the numbers are going to be reflected for Lansoprazole?

Umang Vohra

What Satish referred to is that all these three launches, Lansoprazole, Zafirlukast and Valacyclovir are sort of late quarter launches in this quarter. So the full benefit of the quarterly sales will get reflected in the quarter four.

Nitin Agarwal – IDFC Securities

Okay. And secondly, when you look forward in FY ‘12, we’ve got about these two products on Fonda as well as Allegra D24. We’ve got, before we get some visibility as we go along, I mean when we see the full year around we have the remaining FY ‘12 clearly the next one year forward. Which are your other launches, product launches where you’re really comfortable or clear about the visibility kind of are very much there on those launches on some of these limited competition products?

Satish Reddy

As of now, we’re mentioning fully Allegra D24 and Fondaparinux.

Nitin Agarwal – IDFC Securities

Okay.

Satish Reddy

We do have a few other products in the pipeline but we have not been public about it.

Nitin Agarwal – IDFC Securities

Okay, okay. Perfect. Okay. Thanks very much.

Operator

Thank you, Mr. Agarwal. Our next question is from the line of Sameer Baisiwala of Morgan Stanley. Please go ahead.

Sameer Baisiwala – Morgan Stanley

Hi. Good evening. Just on the U.S. market, I’m just wondering if we see sequentially, our revenues are up $7 million, but what we have is Lansoprazole, which is fairly sizeable market, middle of October launch Omeprazole OTC ramping up plus base business market share gains and little bit of Accolate towards end of the quarter. So, all four of these put together, translates into just $7 million sequential revenue growth. Is there, how do you explain this?

Umang Vohra

Sameer, we’re looking at $11 million, $95 million of last quarter to $106 million in this quarter.

Sameer Baisiwala – Morgan Stanley

The sequential, I’m talking?

Umang Vohra

Yeah. That sequential only I mentioned. We are looking at $95 moving to $106, that’s about $11 million. We’ve also had pricing pressure on Amlodipine Benazepril.

Sameer Baisiwala – Morgan Stanley

I see.

Umang Vohra

So there have been some adjustments even in terms of stock in trade on account of Amlodipine Benazepril, which has reduced the increase that we are seeing.

Sameer Baisiwala – Morgan Stanley

Okay. But I mean, $7 could jolly well be $11, but I would have expected with bunching of so many catalysts, the rise still should have been fairly more meaningful, so is there something that we should expect in the fourth quarter?

Umang Vohra

Yeah. I think the, it’s a valid point Sameer, the issue is that we’ve launched both Lansoprazole as well as Zafirlukast has been even though we’ve launched them in October the off take has really taken off only in December on account of stock in the trade and therefore, I think, you would be able to see a bigger effect of this in quarter four.

Sameer Baisiwala – Morgan Stanley

Okay. And the other question is on Lipitor, you mentioned that you would be launching this post 180-day exclusivity. Is it respective of the outcome of your court case? In the sense would you if the court decision is not delivered would you still be launching it at risk at that point in time?

Satish Reddy

I doubt that there would be – we won’t comment on it, but it would be hard to believe that there would be a launch at risk for such a big product.

Sameer Baisiwala – Morgan Stanley

Okay, okay. And the final question is on R&D spend you are taking it up fairly meaningfully and almost going to 7% to 7.5% of sales including next year. Which component of the business are we really spending, is that (inaudible)?

Umang Vohra

There are two three areas Sameer.

Sameer Baisiwala – Morgan Stanley

Yeah.

Umang Vohra

There are two to three areas. So first obviously is the generic products itself, you also have get up filings and other products that we’re working on. Now the second thing is also on the biologics space, because as we start now working towards regulated markets and more scale up of the number of the products that we’re working on that could also see an increase. That’s the second part of it.

The third is the proprietary products, right. So we also talked about earlier giving indication that at least two INDs is what we will keep filing every year right, from the products in the proprietary product space. So if you could bunch altogether you would actually see this R&D spend which has been somewhat low in the first half reflecting very low, but that’s something that’s getting scaled up as this year concludes. And then as we move on to the next year that’s how – that’s where we think 7% to 8% is what you should expect percentage of sales.

Sameer Baisiwala – Morgan Stanley

Okay. Thank you.

Operator

Thank you, Mr. Baisiwala. Our next question is from the line of Sushant Dalmia of Pioneer Investcorp. Please go ahead.

Sushant Dalmia – Pioneer Investcorp

Thanks. And my question has been answered.

Operator

Thank you, Mr. Dalmia.

Sushant Dalmia – Pioneer Investcorp

Thank you.

Operator

Our next question is from the line of Sonal Gupta of UBS Securities. Please go ahead.

Sonal Gupta – UBS Securities

Hi. Thanks. Partly my questions have been answered. Just on the PSAI can you elaborate, I mean you’ve earlier given guidance for about a single-digit sort of a mix single-digit sort of a growth. But, I mean, fairly things have been much slower, so any thing in terms of visibility for next year how do you see that this business shaping up for next year?

Satish Reddy

I think the main issue is about the services part of the segment. API looks all right, I mean, we have seen the products gain traction and everything looks fine. Only on the services side of the business I think the pickup will take longer than what we anticipated. Because I mean as, you know we serve innovate the customers on the pipeline services, as well as on product services, right.

So pipeline services what quarter you had and by the time you really start building up that side of the business, it could be a slow ramp-up. So I’m not expecting anything positive to report on that at least for the next few quarters. Whereas on the API side I think things are looking good as of now.

Sonal Gupta – UBS Securities

But shouldn’t API be majority of your business, I think probably predominantly it should be API right?

Satish Reddy

It is about two thirds of that business, yeah.

Sonal Gupta – UBS Securities

Okay. And fine and sure. Thanks. Thanks a lot.

Operator

Thank you, Mr. Gupta. Our next question is from the line of Akshay Shah of Quest Investment. Please go ahead.

Akshay Shah – Quest Investment

Yeah. Good evening, sir. I just want to check something, there has been a lot of hue and cry about DPCO flexing its arm in India, especially from the multinational companies. If you look at Germany, you’re talking about it being a tender market. I think U.K. is also willing to become a tender market. Plus there have been reports of asking for discounts on less prices and so on and so forth. Is that another form of DPCO which is emerging in those global markets?

Satish Reddy

You’re talking about Europe specifically?

Akshay Shah – Quest Investment

Yeah. I would thing so, but as basics spread to U.S. now.

Satish Reddy

See obviously in Europe and I think there is the issue of also the healthcare reforms that we’ve carried out in Germany because the spend were extremely high.

Akshay Shah – Quest Investment

Correct.

Satish Reddy

Right? So it is due to something which the government undertook and you are correct it is spreading to other parts of Europe in the sense that Netherlands also has this kind of a tender system and things like that. But usually generic penetration in some European markets, I think it’s steadily increasing over a period of time. Italy, Spain for example will fall into this category.

Now I think the U.S. is a slightly different story from what you see in Europe. So, I don’t anticipate, at least in the immediate future that this kind of a thing can happen.

Akshay Shah – Quest Investment

Okay. Okay. Thank you. That’s all I have. Thank you.

Operator

Thank you, Mr. Shah. Our next question is from the line of Chirag Talati of Espírito Santo. Please go ahead.

Chirag Talati – Espírito Santo

Hi. Thanks. My questions have been answered.

Operator

Thank you. Our next question is from the line of Ranvir Singh of Brics Securities. Please go ahead.

Ranvir Singh – Brics Securities

Yeah. Hi. Thanks for taking my question. Can you just give an update on Balaglitazone and other NCE product pipeline?

Satish Reddy

Yeah. On Balaglitazone, there is no notable progress that we are – that we have to report. The status is the same at the end of last quarter. We are looking for a partner. The study results of the Phase II trial that we’ve done are not, as we had mentioned earlier, not very significant in terms of claiming a differentiation for that product. But we’re still looking for a partner for the territories.

On the rest of the NCE pipeline, we still have as Prasad had mentioned in his earlier transcript in the last quarter, there is a Phase III asset which the recruitment is ongoing for a Phase III trial and there are other differentiated formulations that we’re working on which are in Phase I. Both these products are in the dermatology space and there are several other concepts that are being explored.

Ranvir Singh – Brics Securities

Yeah. And in the talk about fourth biosimilar product, so whether that product will be launched in India or outside India?

Satish Reddy

Launch is slated for India this quarter.

Ranvir Singh – Brics Securities

Okay. Sir, another question to your revenue target, it seems to be, we need a very high growth to reach at this revenue target. So what exactly would lead to see that your stated $3 billion and overall?

Umang Vohra

So, I think there are several factors to that, one is obviously the growth in the emerging markets which is quite significant and all those initiatives whether its, the 4% of OTC in Russia or whether its the high growth that is seen in that market or whether its India, in terms of all the initiative that we have taken, so one is catalog of the growth.

The being one obviously will be the United States, right. So, with the limited competition products and also some of the opportunities that we have in the next say couple of years, we feel very confident, that we could get to the target like we’ve also said in the past.

So, it’s something that we are looking at the target at $3 million, but it could a little bit here and there, but obviously there is tremendous growth opportunity and we feel quite comfortable to the figure right now.

Ranvir Singh – Brics Securities

Okay. Yeah. Thanks a lot. That’s it from my side.

Operator

Thank you, Mr. Singh. Our next question is from the line of Neelkanth Mishra of Credit Suisse. Please go ahead.

Neelkanth Mishra – Credit Suisse

Yeah. Hi. Follow up on that $3 million question. So now that Nexium is likely to be 2014 opportunity and is it -- does it significantly impact your target for FY ‘13?

Satish Reddy

That’s why we’ve not totally taken it on granular detail...

Neelkanth Mishra – Credit Suisse

Okay.

Satish Reddy

Working by product-by-product and I believe that way.

Neelkanth Mishra – Credit Suisse

Okay.

Satish Reddy

We’re just looking at overall growth opportunities in each one of these, the new product launches and cumulatively and also there will be a little bit of a gap, which will obviously fill through certain business development efforts and things like that. So, I can’t specifically say that you know.

Neelkanth Mishra – Credit Suisse

Okay.

Satish Reddy

On that point, yeah.

Neelkanth Mishra – Credit Suisse

Okay. I was just trying to be cute. The second is on Lipitor, actually what happens if, we’ve been very curious to find out what will happen if Ranbaxy’s AIP doesn’t get resolved, because its just been announced that Mylan has also settled on Lipitor with Pfizer. You haven’t settled yet, right?

Satish Reddy

No. We have not settled on Lipitor with anyone.

Neelkanth Mishra – Credit Suisse

And, yeah, but so in case, Ranbaxy’s AIP issue does not get resolved, so what happens to the exclusivity, could you throw some light on that?

Satish Reddy

I mean you can’t, that’s very fluid, your guess will be as good as ours on Lipitor. So, I think, it’s better that we, I think it’s very fluid they way things are, there are too many moving parts to that equation now.

Neelkanth Mishra – Credit Suisse

Okay. Okay. Thank you.

Operator

Thank you, Mr. Mishra. Our next question is from the line of Arvind Bothra of Bank of America. Please go ahead.

Arvind Bothra – Bank of America

Hi. I’m not sure if I missed it earlier, but just wanted to get little bit more color on the GSK alliance, what kind of revenue visibility do we have, when can we expect some color, how that is going to shape up?

Satish Reddy

Not, not much to report, right now, Arvind, because what’s happening is GSK, all we have said is that you know that number of dossiers filed, it’s already about close to more than 100 now. But in terms of anything meaningful to report on sales, you probably have to give it some more time because all we said in emerging markets we are in the branded space. It takes time for the brand to build up. It normally takes about a couple of years before you see the peak sales. So, I guess, you should just hang on to some more time because you really see something meaningful in terms of numbers.

Arvind Bothra – Bank of America

Maybe towards end of fiscal ‘12 is when we can see some separate numbers from that front?

Satish Reddy

Hopefully, that’s why I said, it all depends on the number of launches and the kind of markets in which they get launched. So, I mean, I would still hang on probably, year-and-a-half or so at least.

Arvind Bothra – Bank of America

Okay. Fair enough. Thanks so much.

Operator

Thank you, Mr. Bothra. Our next question is from the line of [Alok Barnwal] of Deutsche Bank. Please go ahead.

Abhay Shanbhag – Deutsche Bank

Yeah. Hi. This is Abhay here. Just taking up on that earlier question, typically we generally see I think the first month of launch of a generic launch three to four months of sales generally dumped on to the distribution chain and sales are recorded. But in your case you say that the pickup is a bit slower. So is there any difference that you have done now as compared to what you use to do in the past?

Satish Reddy

No difference are there, I think what’s happened is that we are also seeing action whether trade is fairly full before once the generic is enters and it’s difficult to capture share on that. There is no change in any practices, I just think this is the market dynamics which is evolving.

Abhay Shanbhag – Deutsche Bank

Okay. So even for future now, typically in the first one or two months we may not see too much of a revenue booking happening from all generic companies. So would that be a change, we should take it forward, going forward for all companies?

Satish Reddy

I think on 12 months basis, it should equate.

Abhay Shanbhag – Deutsche Bank

Okay.

Satish Reddy

So, it depends on when you start it, but over a 12 month period, it should begin to equate out.

Abhay Shanbhag – Deutsche Bank

Okay. But typically we generally see companies getting a bit more aggressive in the first few weeks, which you’re announcing is not the case now?

Satish Reddy

I want to make a distinction here Abhay.

Abhay Shanbhag – Deutsche Bank

Yeah.

Satish Reddy

If you see products for which there’s already generic competition...

Abhay Shanbhag – Deutsche Bank

Okay.

Satish Reddy

… time to gain market share is longer but if you are the first entrant.

Abhay Shanbhag – Deutsche Bank

Yeah.

Satish Reddy

It’s relatively easier to get it. So depending on the product, this dynamic will play out.

Abhay Shanbhag – Deutsche Bank

Okay. The second thing you also have on the OTC cost, you did mention that $9 million is one-time thing. Typically, the belief that we have is that if OTC marketing cost will be more recurring in nature and that can give the Rx where there is a lot of sampling, free samples and all that which is done. So, are there, can you just describe why this maybe a bit more one-time cost because it seems to be a very large amount, a large part of it seems to be on that side?

Umang Vohra

So, Abhay, what’s going to happen is this OTC is not like a new thing that we started right, so it’s not a new launch products or not like a new thing that is there. Lets see in the past the products that we took through this route was lot of activity more at the retail levels, you know so its more like products, I mean you can call it like a junction products right, so moving from prescription into OTC kind of a thing.

What we are talking about now is because we see there is a huge potential for growth in this space we are more going through the classic route. Yeah, obviously advertising and those kinds of things that are being done. So, these are not done throughout the year, right. There will be campaigns carried out at different points of time. Cetrine for example is a seasonal product, right. So at the allergy season you would do this kind of a spend.

So that’s why we are saying that this is not something which is going to recur every year, but this is a initiative that we have taken, you know to ramp up the OTC sales, but you should see more in terms on that light and looking at it as a completely new activity, which requires huge amounts of spends, et cetera.

Abhay Shanbhag – Deutsche Bank

So, what you think is the ramp up will be all free of time, all of the advertisement has been more upfront and which is more would be seasonal in nature, so to that extend it may not recur?

Satish Reddy

That’s right.

Umang Vohra

Yeah.

Satish Reddy

And also in the beginning of the product life cycle for an OTC product advertising tends to be a lot higher and once the brand image is created it tends to dip a bit.

Abhay Shanbhag – Deutsche Bank

Okay. And is this largely on the Russian side or have you started spending something on the Allegra OTC also?

Satish Reddy

No. This is all Russia.

Abhay Shanbhag – Deutsche Bank

Okay. Fine. Thank you. Thank you.

Operator

Thank you, Mr. Barnwal. Our next question is from the line of Chirag Dagli of ICICI Securities. Please go ahead.

Chirag Dagli – ICICI Securities

Yeah.

Satish Reddy

Rochelle?

Operator

Yeah, sir.

Satish Reddy

This would be, we will take one more question after this, so you might want to just announce that to them. And we will take this question and then another question after that.

Operator

Sure, sir. Actually the participants have already heard you in the call.

Satish Reddy

Okay. Thank you.

Operator

You’re welcome. Please go ahead, Mr. Dagli.

Chirag Dagli – ICICI Securities

So, thank you for taking my questions. Just wanted to understand in detail your gross margins, they seem to be fairly robust this quarter, 55 odd percent. Is this the kind of number that you think we should model for the years coming forward given that you will have fairly good U.S. business from the niche products, et cetera?

Satish Reddy

I think, we don’t guide on margins, but in a quarter where you had a significant number of launches, margins tend to be higher. So, if you look at the historical average, it’s generally in the range of 55% to 60%. If you look at an average when we’re launching new products, it generally moves from 60% to 65%. So, depending on the new product launch activity in the quarter, I think the margins fluctuate.

Chirag Dagli – ICICI Securities

Is there an element of foreign exchange on the inventory in this or?

Umang Vohra

No. Because there has not a substantial movement in foreign exchange for the quarter.

Chirag Dagli – ICICI Securities

So, that would have been adverse I would imagine. So, okay, that explains. Thank you so much.

Operator

Thank you, Mr. Dagli. Our last question is from the line of Alok Dalal of MF Global. Please go ahead.

Alok Dalal – MF Global

Yeah. Thanks for taking my questions. Sir, any tax guidance for FY’12?

Umang Vohra

No. We haven’t given a tax guidance as yet for FY’12.

Alok Dalal – MF Global

Okay. And would you be looking at a similar CapEx spend sort of around 400 crores for FY’12 as well?

Umang Vohra

Yeah. We do expect that our CapEx spend for the next year will be similar to the current year.

Alok Dalal – MF Global

Okay. And could you share what is your contribution of OTC business for U.S. sales about?

Umang Vohra

We can send that data to you. We don’t have it readily with us right now.

Alok Dalal – MF Global

Okay. Thank you so much.

Satish Reddy

Thank you.

Operator

Thank you, Mr. Dalal. Ladies and gentlemen due to time constraints that was the last question. I’ll now hand the conference over to the management to add closing comments.

Kedar Upadhye

We thank you all for joining Dr. Reddys management on this earnings call. Request to get in touch with IR desk for any pending queries. Thank you.

Operator

Thank you members of the management team. Ladies and gentlemen, on behalf of Dr. Reddy’s laboratories that concludes this conference call. Thank you for joining us on the Chorus Call Conferencing Services and you may now disconnect your lines. Thank you.

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