Dr. Reddy’s Laboratories Ltd.

Q4 FY17 Earnings Conference Call

Page 1 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Saunak Savla:

A Very Good Morning and Good Evening to all of you and thank you for joining us today for the Dr. Reddy’s
Earnings conference call for the Fourth Quarter and Full year ended 31 March 2017. Earlier during the day, we
have released our results 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.

Just a reminder, the discussion and analysis in this call will be based on the IFRS consolidated financial statements.

To discuss the Business Performance and Outlook, we have the leadership team of Dr. Reddy’s comprising Mr.
Saumen Chakraborty – our CFO; Mr. Abhijit Mukherjee – our COO; and Mr. Anil Namboodiripad, Head of
Proprietary Products Business and the Investor Relations Team.

Please note that today's call is a copyrighted material of Dr. Reddy’s and cannot be rebroadcasted or attributed in
press or media outlets without the company’s expressed written consent.

Before we proceed with the call, I would like to remind everyone that the Safe Harbor language contained in
today's Press Release also pertains to the conference call and the webcast. After the end of the call, in case if any
additional clarifications are required, please feel free to get in touch with the Investor Relations team.

Page 2 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Saumen Chakraborty:

Thank you, Saunak. Greetings to everyone. Let me begin with the financial highlights. For the section, all the
amounts are translated into US dollar at the convenience translation rate of Rs.64.85 which is the rate as of 31,
March 2017.

Consolidated revenues for the year are at Rs.14,081 crores or $2.17 billion and declined 9% year-on-year.
Consolidated revenues for the quarter are Rs.3,554 crores or $548 million and declined 5% year-on-year and 4%
sequentially. This is broadly in line with what we had alluded in our last earnings conference call. This decline is
primarily on account of continuing pricing pressure, no new significant product launch in the quarter together with
supply constraint impacting our North America Generic business. On the other side, the Branded Generics market
performed better, especially the Russian operations which had the benefit of strong Ruble and stable economic
outlook. Revenues from our Global Generic segment were $449 million and PSAI segment were $83 million.

Consolidated gross profit margin for the quarter is 51.2%, gross margin for Global Generic and PSAI were at
58.4% and 10% respectively. Relative to the previous quarter, this is a sharp decline. There are a few important
triggers during the quarter bringing down the gross margin by approximately 400 basis points. These are a)
impairment charge recorded at our anti-biotic manufacturing facility at Bristol; b) incremental provision of
inventory built-up in anticipation of new product launch that failed to materialize, for example, Palonosetron
505(b)(2); c) Failure to Supply penalties incurred due to supply disruption for example, Isotretinoin; d)
unprecedented level of price erosion; and e) higher levels of repairs and maintenance charges incurred in order to
renew some of the manufacturing facilities.

Moving on, SG&A spend, including amortization, for the quarter is $169 million, a decrease of 6% year-on-year.
After normalization of the Venezuela base effect, it is approximately at the same level that of Q4 of FY’16.
Overall, we continue to explore avenues to optimize SG&A spend.

R&D expense for the quarter were at $71 million, representing 12.9% to Revenues and is in line with management
estimate. It is 13.9% for the full year.

EBITDA for the quarter stands at $97 million which is around 18% of the Revenues. Lower revenues and gross
margins primarily impacted EBITDA margin. During the quarter, we generated around $150 million worth of
cash flows from operations. Our net debt-equity ratio is 0.25 as on 31st March 2017.

The effective tax rate is around 18% for the year and 2% for the quarter. The lower tax rate for the quarter is
primarily due to resolution of certain tax matter pertaining to prior year. However, we anticipate the effective tax
rate for FY’18 to be in the range of 23-25%.

Key Balance Sheet highlights are as follows:

Page 3 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Our operating working capital decreased by $72 million during the quarter. We would continually focus on
optimizing the working capital cycle. Capital expenditure for the quarter was at $36 million and for the full year
it was $179 million.

Foreign currency cash flow hedges for the next 12 months in the form of derivatives for US dollars are
approximately $235 million, largely hedged around the range of Rs.66.78 to Rs.69.23 to the dollar. In addition,
we have balance sheet hedges of around $273.5 million. We also have foreign currency cash flow hedges of
RUB150 million at the rate of Rs.1.137 to the Rouble maturing over next 3-months.

With these, I now request Abhijit to take through the key business highlights:

Page 4 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Abhijit Mukherjee:

Thanks, Saumen. Greetings to everybody and I extend a warm welcome to you on this earnings conference call.
As you recall, in the last earnings conference call we had alluded to a softer fourth quarter, this was largely in line
with our expectations.

Let me take you through some of the Business highlights for each of our key markets. Please note that in this
section, all references to numbers are in respective local currency.

North America Generic revenues for this quarter are $228 million. We closed the year at $956 million. During the
year, we witnessed increased competitive intensity in few of our high value assets. Normalizing for that, the base
business has held up reasonably well in line with our expectations. The approval of high value launches continued
to remain challenge during the fiscal. The timelines for review of complex products and subsequent approvals
from the agency have been getting deferred. We continue to work with the agency and remain optimistic about
eventual approvals. Our new launches for coming fiscal looks healthy and we expect 10+ launches in the next 12-
months. The current quarter also witnessed initiation of monetization of the Teva deal through our
commercialization of gVytorin, the first product from the transaction. This is a limited player market and we are
excited about this opportunity. During the quarter we have filed 13 ANDAs taking the total to 26 filings for the
fiscal year. This is indicative of our continued focus on investing for long-term growth and R&D productivity.

Continuing on pure generics, our Europe business is fairly stable now and well poised to deliver a profitable
growth on the back of new product launches and traction in new markets.

Our emerging markets business is on track to a gradual recovery. Russia business closed the year with 8% constant
currency growth and 26% for the quarter. This is broadly in line with the expectations. We continue to focus on
improving productivity and augmenting the pipeline. During the quarter, the much awaited national tender of
Rituximab was announced and we secured share and we have commenced supplies in the current quarter. Ex-
Russia, the performance of the other markets was in line with our expectations. We are on track to expand our
geographic presence through leverage of our institution business portfolio and biosimilars. Commercialization of
biosimilars across Emerging Markets have now started gaining meaningful traction. We remain optimistic of
building this momentum further.

India business revenues are Rs.571 crores and grew by 8% YoY. We closed the year at Rs.2,313 crores and grew
by 9%. Normalized for NLEM impact, the results are in line with the expectations. We continue to focus on
productivity announcements and portfolio augmentation.

PSAI business posted revenues of $80 million. The business is gaining traction in Emerging Markets with healthy
margins. Our efforts are directed towards building a healthy order book. CPS business has done well this quarter.

Page 5 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

On Proprietary Products, we continue to grow the business and we are witnessing improving trends for Zembrace
and Sernivo. As of date, we have two pending NDAs with the agency and one NDA recently approved, that is
Minocycline Hydrochloride extended release tablet.

Further, during the quarter, we have settled the ongoing litigation on Doxycycline (Zenavod) with Galderma.
Consequent to the settlement and out-licensing arrangement, we received an upfront amount and there are annual
royalty performance linked milestones.

That concludes my part. Thank you all. I would now like to now open the floor for Q&A.

Page 6 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Neha Manpuria: First on the gross margins. You mentioned quite a few sort of one-off in the quarter.
Some of this could be recurring, but in terms of impairment of the Bristol facility and
provision for new <inventory>, how much of the impact in the quarter is one-off or is
this likely to be recurring for a few quarters?

Saumen Chakraborty: The impairment of the facility does not recur. So we were earlier carrying a value of
almost $12 million for the Bristol facility. Now after this impairment, value is around
$6 million. So this is, of course, done with all anticipated future earnings. You know
this is only an antibiotics facility. So there have been some specific API supply
problems also were there. So, we are not getting much business out of that facility. So,
as per the impairment trigger, we had to take this impairment. Whenever there are such
triggers one has to see but normally we do not expect that. What I talked about the
material inventory write-off provision that happened, several times it happened. But
this time, the incremental one is much higher because we built up in anticipation of
launch which has not happened. So we had to take the entire write-off during the
quarter.

Neha Manpuria: How much would this be sir roughly?

Saumen Chakraborty: We will get back to you the numbers later.

Neha Manpuria: No worries, sir. On the Isotretinoin supply that got disrupted, by when do we expect
this to normalize … would this take a couple of more quarters?

Abhijit Mukherjee: We have applied for PAS. As and when that gets approved. Wouldn’t put a date exactly
but I think your question was more on FTS incurred. I think that tapers down. That
happens only after discontinuation. So that is also one-off this quarter.

Neha Manpuria: Last question was on the launch. So if I remember correctly, last quarter you had
indicated about 15+ launches in FY’18 and we are now talking about 10+ launches. Is
this because we are expecting some delay due to the inspections that have happened
recently?

Abhijit Mukherjee: This is indicative. At the beginning of the year your guess is as good as mine. In April,
we have been able to do two - gVytorin and Progesterone generic. Okay, let us take it
10-15, somewhere in between. We do not have the right answer. We do not know
what’s this figure.

Prakash Agarwal: Just trying to understand the filing run rate has been pretty significant despite, Duvvada,
Bachupally and all the other facilities having some observations and the earlier one still
stuck up. So from which facility are these filings happening?

Page 7 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Abhijit Mukherjee: Mixed all over. So this is some from partners, some internal distributed amongst
various locations. We have two oral solid location, topical location, then we have
injectable location and several partners as well.

Prakash Agarwal: So most facilities are under some US FDA, still having some FDA issues. So we
continue to file. What I am trying to understand is we do not expect any escalation into
Duvvada, Bachupally and all.

Abhijit Mukherjee: First of all, the API facilities, mostly, have gone through good audits, all three of them.
Duvvada has observations but we have responded well and let us see how proceeds.
But that does not prevent us from filing. It is our judgment, but we continue to file, yes.
We also filed some injectables from partners as well. As far as Bachupally is concerned,
we mentioned that in our view these are procedural and will deal with the necessary
response and whatever interventions.

Prakash Agarwal: Srikakulam, is there any update sir?

Abhijit Mukherjee: Probably, the observations are in public domain. Only two - very relatively easy to
answer observations and we had three from the Miryalaguda; two API sites which were
impacted and the third API site had zero observation. Update from Miryalaguda, we
have just got a CBE30 approval which was earlier stuck. So that is in a way we take it
as a positive. As I mentioned, Srikakulam audit happened after this we respond and
then whenever the file comes up for approval, we will know.

Prakash Agarwal: From our side do we expect resolution within this financial year, sir?

Abhijit Mukherjee: Depends on what you are talking about resolution because in our view we start getting
approval in any form, that is the resolution. So one Miryalaguda as I said, we have got
one earlier CBE30, that just got approval, so that audit happened two months back.
That is the only data point we have.

Prakash Agarwal: Lastly, sir, on the amortization, just trying to understand, Vytiron was one of the
products that we have got from Teva/Actavis. So the amortization would start for these
assets that we acquired and the timelines that we are looking for the other two big ones?

Saumen Chakraborty: Yes, amortization will start/happen as and when we commercialize.

Prakash Agarwal: I am just trying to understand that the assets that we purchase for $350 million. How
are we actually amortizing the entire piece since the first product has already started
and then…?

Page 8 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Saumen Chakraborty: There is a purchase price allocation which has been already disclosed. So based on that
the amortization will happen for specific products whenever it is getting
commercialized.

Prakash Agarwal: The larger piece happens only when the large two products get approved and launched?

Saumen Chakraborty: Yes, absolutely right.

Anubhav Agarwal: One question on to Abhijit sir on Vytorin. When do you expect the next round of
competition in this product and currently after the launch roughly what market share
Dr. Reddy’s have got into?

Abhijit Mukherjee: Very fair market share for three players currently. Next round certainly I do not know,
so I cannot comment. The only I think in public domain from Mylan’s concall is they
are impacted because of the Nasik – its in public domain. Beyond that I have no idea.

Anubhav Agarwal: I am aware of Mylan. That is exactly I was asking beyond this. But do you expect this
to be as good a product for fiscal ’18 and as good a product for fiscal ’19 as well based
on your intelligence right now?

Abhijit Mukherjee: How can we predict? You would not be knowing who has filed with FDA and all that.
So far so good, so let us continue to sell.

Anubhav Agarwal: On the PSAI, the margins were very weak this quarter. Because all the gross margins
in fact, Saumen sir talked about, were largely on the Global Generic side, what
happened in the PSAI side?

Saumen Chakraborty: The CTO which is our Chemical TechOps, which supplies both to the external API as
well as to our internal for captive consumption. So, the entire overhead - how does it
get allocated. There would be a considerable movement which happens and that is a
primary reason for the impact on the PSAI gross margin. Number two has been - we
have spent much higher level of repair and maintenance than normally we spend and
that we have done specifically to renew some of the CTO manufacturing facilities
because compared to the finished dosage, the CTOs were our earlier plants. So we spent
quite a bit to on repair and maintenance.

Anubhav Agarwal: Can you also help with employee cost? Your employee cost is down like 18% in the
March quarter versus the December ’16 quarter. That seems such a sharp decline, there
seems to be some one-off there?

Page 9 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Saumen Chakraborty: As a company, we always believe in terms of putting much higher stake for our senior
management, top management in terms of variable pay, LTI and various other things
which we put at stake. So if there would have been higher profits, then there would
have been higher variable pay. To the extent, it is not there, we suffered. So individually
we suffer but company incurs lower employee cost.

Anubhav Agarwal: But this is a phenomenal which happens in this fourth quarter every year or will this…?

Saumen Chakraborty: It all depends on the trigger. Suppose we would have got the Palonosetron 505(b)(2)
the result would have been different for us.

Anubhav Agarwal: But seems a very sharp decline, 18% sequentially?

Saumen Chakraborty: Maybe we can discuss offline later.

Abhijit Mukherjee: Essentially during the year you count and then you take calls towards the end of the
year on the variable pay. Yes, to that extent, it has some bit of fourth quarter impact.

Anubhav Agarwal: Just one more clarity not on this question but on Duvvada and Bachupally facility, in
your corrective action plans, just some clarity if you can provide, what time do you
plan to finish remediations from your side at least on both the plants?

Abhijit Mukherjee: Remediation as such we have mentioned last year we have spent whatever had to be
spent in terms of remediation. Now there are some observations have come in. These
are to a large extent to do with operator, training, certain observations on areas which
need special intervention to a certain extent which will be largely internal. I am not sure
there is cost, but I do not think there was significant cost involved at this stage.
Bachupally as I mentioned, these are more procedural and less so in terms of cost that
we planned it.

Surya Patra: Sir, just a clarification about all these remediation activities or preservation that we are
anticipating for all these three facilities which are currently under issue. So is the
resolution to happen, then it will happen at a time for all the three facilities or it can
happen separately also?

Abhijit Mukherjee: Look, specifically, we cannot comment. We can only give you data point which I just
repeated. We had Miryalaguda, we had Srikakulam and Duvvada. So Miryalaguda, the
first one to get audited and we got CBE30 which is earlier stuck because of GMP and
now just got a few days back the approval for that. So that is the only data point we
have. Beyond that we would not predict.

Page 10 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Surya Patra: Since it is covered under one issue, so not necessarily the resolution has to happen at a
time for all?

Abhijit Mukherjee: This is the data point. Interpretation is yours.

Surya Patra: About the US pricing scenario for the base business, how is it and do you really feel
that okay there is a kind of stabilization in the pricing scenario there and what would
be the base business price erosion if you can share for your portfolio?

Abhijit Mukherjee: This year as Saumen mentioned has been somewhat bad. It will get rather exaggerated
and visible when you do not have launches overall in the impact wise but overall this
year has been particularly bad but these things will vary from quarter-to-quarter
company-to-company. Average annualized, we still feel that it will be in the range of
high single digit, very low double digit type of thing but can vary from quarter-to-
quarter. Yes, we have taken most of our erosion this year, not able to see very large one
coming through immediately but you never know.

Surya Patra: My point was that post this election phase in US and post major of the channel
consolidation happening in the recent past, so are we still seeing at this current
movement some issue of pricing correction or increased competition?

Abhijit Mukherjee: This is all about the consolidation of the front end which have happened and the
channels got consolidated, impact are showing. Price increase / price adjustments are
not there at all. So overall I do not think dynamics specifically have changed.

Sameer Baisiwala: Abhijit, is it possible for you to give a broad color for fiscal ’18 on the top line and on
the EBITDA margins?

Abhijit Mukherjee: Overall I told you 10+ launches in US and now it is well known that depends on which
launches and what launches, one which has just gone in has played out well, let us see
how the rest of it plays out. US will continue to be dominant and most unpredictable in
many ways because depending on launches, depending on approvals, depending on
resolution, etc., and all those things. Other markets, I think we expect clearly northward
results, Emerging Markets the currencies have stabilized. We have put in significant
effort in increasing footprint. Biologics more and more traction, so expect very healthy
growth there. India, well-known maybe 10, 12% range type of a thing. Europe is
broadly in control, will grow this year, it has been flattish last year to this year, but this
current year it will grow significantly but again small pie. PSAI - also we expect to do
certainly much better than the last financial year, but lot would still depend on how
North America plays out.

Page 11 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Sameer Baisiwala: On the 10-15 launches that you expect, how many are going to substantive as well as
specifically also on the thoughts on Copaxone and Nuvaring.

Abhijit Mukherjee: I will go to the second one. First one, I would not know, I would not be able to answer
- how many would be sort of meaningful. Copaxone as we mentioned, 20mg DMF
response has been sent quite a few months back, I think December probably. So we
have received the TAD which is give or take six months from now. So we will wait for
hopefully IRs in between and may be CR, I do not know. But as we mentioned, I think
we have done reasonably thorough job. Let us see how that plays out. Nuvaring, I think
on the IP side, it is becoming less and less critical because in any case, it is somewhat
clear and then anyway, the specific IP gets over by April next year. There is a CR
which we are planning to respond in what about few weeks from now and then let us
see how that progresses.

Vishal Manchanda: Sir, in the initial commentary, you had said on licensing of ZENAVOD. I could not
hear that clearly. Is there a settlement that you have entered not, if you could give more
color on that?

Saumen Chakraborty: Yes, settlement that we entered. You are talking about the income recovery from this
Galderma deal?

Vishal Manchanda: Yes and when is the launch schedule and …?

Anil Namboodripad: So this was the settlement followed by a licensing and that was done with Galderma.
So the launch is upon Galderma and the intent they have expressed is to launch it at the
earliest possible. We do not have a specific date.

Saumen Chakraborty: We have received some upfront cash payment but in terms of the revenue recognition,
we followed strictly the accounting standard and accordingly part has been taken to Q4
income.

Vishal Manchanda: Could you like also talk about value of the Rituximab tender you would have received
for Russian market?

Abhijit Mukherjee: The market has eroded a lot, it has been somewhat aggressive with now Innovator, a
Russian player and us. So lets not talk of this tender, but overall I think for the year,
high double-digit million dollars (15-20mn range), let us say. I am assuming that we
have share there as well so with that.

Vishal Manchanda: If you could guide on how many emerging market approvals should we look at this
year for your biosimilar portfolio?

Page 12 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Abhijit Mukherjee: Specifically, we would not comment on this but one more reasonably a large country,
yes, two more smaller ones. This thing depend on how the regulatory pathway proceeds
but these are certainly not as big as Russia, but there will be organic growth also in this
product.

Nitin Agarwal: On the emerging markets, you mentioned about some significant effort being put in for
improving footprint. Can you throw some light on that -- are you referring to the efforts
in existing markets or are you talking about opening up some new markets on the
emerging markets side?

Saumen Chakraborty: Both are done. There are certain markets where we are present. So that is done
internally or certain markets where we are not present through our alliance partner. So
similar opportunity that way is explored through both means.

Nitin Agarwal: So the emerging markets story is now largely being driven through the biosimilar route
in terms of any expanding in emerging markets presence,that is the thought process?

Abhijit Mukherjee: That is one major growth driver. The second is we are building an institution business
in various countries. We have opened up in Brazil and Columbia, and Columbia we
have already launched few products last year. This year, we will see more and more
launches and traction and growth on that. Brazil, what is interesting for us, we are
getting institution business with the first launches just starting as we speak, and in the
year, probably 3 to 5 launches this year. Those would be the major ones and then few
North American markets, few Asian markets through partnership, etc., So overall, we
are trying to build an institution business with global footprint, largely led by Oncology
products.

Nitin Agarwal: These would be pretty much the products that you are already commercialized in the
US or Europe I guess?

Abhijit Mukherjee: Largely leveraged, yes, and that process will continue as we keep filing, we will
continue to leverage and see how we can. The only thing is there are several markets
we are building the footprint and it is important that we build the footprint so that we
are able to get through the institution ourselves.

Nitin Agarwal: Of the 10 to 15 products that you talked about launching in the current year in the US,
are any of them sort of contingent on the resolutions on the Inhouse facilities?

Abhijit Mukherjee: We would be providing all the details and subsequent questions somewhere what. So I
think let us just leave as that, let us take 10 plus. I was forced to commit 10-15. So
wherever you want to sort of take this thing. So let us just leave it at that.

Page 13 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Aishwarya Agarwal: Can you please help us with this 483 where we have repeat observations written, so just
want to understand how serious this repeat observations are, what do you expect from
it… you will be able to overcome with whatever procedures you are supposed to do or
will it get escalated?

Abhijit Mukherjee: I think the observations are in public domain right now and if I take your call by
consulting people, but we will give you some broad view that currently the
interpretation by the agency on repeat is not specific, but let us say, something is called
out and it falls in a category, and later in that category, you have observation which
may be a different observation, but it is still said it is considered as a repeat observation.
This is again with changing trend of the audits. I think we are seeing this happening
repeatedly. For Duvvada which is probably as I mentioned where we had sent pretty
large comprehensive response, the first repeat observation is on the investigation
quality. That particular observation is probably half of the whole observations we have
in terms of number of this thing. There are various incidents - we continue to investigate
and continue to make reports. So naturally there is scope for improvement and we are
putting all efforts, but there is indeed, as a broad category, it can come up even in future
and similar areas, not to say that we are putting in all efforts, we are trying to make it
as broad umbrella effort to remediate in our facilities, but as a whole category
sometimes this may come out.

Aishwarya Agarwal: Sir, my next question is have you filed Copaxone Formulations?

Abhijit Mukherjee: I just mentioned that as committed, it was filed and we have got a TAD and the TAD
is give or take six months from now.

Manoj Garg: Abhijit, you have alluded a couple of times in this call regarding your EM strategy both
on the Biosimilar side as well as on the Injectable business. Just want to have maybe a
broader sense that 3-5-years down the line, how big this opportunity could be for us
from both the segments in the emerging markets?

Abhijit Mukherjee: Fairly significant. I would not put a figure to it but it is one of the core strategic thrust
areas. We will put in efforts, money, resources behind this and we are doing it building
this systematically 3 to 5-years. The question is good and valid question. I think fairly
significant. Beyond that I would not go any further.

Manoj Garg: If we can get some sense in terms of like the overall size of the opportunity for
rituximab, within those emerging markets, where either you have filed or you are
awaiting for the approval, how significant that could be if you want to put some
numbers out there?

Page 14 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Saumen Chakraborty: I will request not to pressurize to give any kind of financial guidance which is against
our policy. Rather to give the color and efforts which we are putting in to build in future
business growth.

Manoj Garg: This question is for Anil. Like if you look at for our proprietary business, I think last
year we had an EBITDA loss of around $80-90 million. So given the kind of ramp up
which we are seeing plus more approvals which we are anticipating over the next few
years, how do you see the P&L of your Prop business moving over maybe two-three
years down the line?

Anil Namboodiripad: Right now, we have a fairly rich pipeline of assets in late stage clinical development,
many of them are high value assets. With the launch of these assets and the number of
NDAs that we expect to file over the next few years, we anticipate to start seeing
positive revenues within the next 3 to 4 years.

Manoj Garg: In terms of getting the breakeven for this business like from $80-85 million kind of
EBITDA loss, when do you see the breakeven?

Saumen Chakraborty: We wanted to mean positive cash flow, revenue is even positive today.

Anil Namboodiripad: It is a positive cash flow. So that is what I meant. That we will start seeing positive cash
flows over the next 3 to 4 years.

Manoj Garg: Just on India, Abhijit, you spoke about 9-10% kind of growth for the domestic market.
Does it mean that probably we will be largely in line with the market growth, I think in
the past you have alluded that we have done lot of course correction in the domestic
market and going forward we expect probably to accelerate our domestic growth higher
than the industry growth, so is it because of GST at conservative or overall like you
feel that maybe some 2-3-years kind of things, the growth will be it that range of 9-
10%?

Abhijit Mukherjee: You are right, actually, there is so much one is hearing, reading, seeing and
uncertainties are all around GST and various other things. So, I am just putting out a
figure because I would not go beyond that at the moment, but yes, there could be a little
bit higher if everything goes well.

Abhishek Sharma: Did I hear correctly you said you have received CRL on Nuvaring?

Abhijit Mukherjee: We received and we are responding to the complete response letter within a couple of
weeks, yes.

Page 15 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Abhishek Sharma: What is the nature of observation, sir, does it relate to manufacturing or….?

Abhijit Mukherjee: Like normal CRL, this is drug device combination, so there are questions on all sections
and we have to do a lot of work and we are responding. Let us see if there could be a
few more questions, but let us see how that goes.

Abhishek Sharma: Sir, the other question is on Aloxi. Is there any further visibility on when you would be
able to launch it now?

Abhijit Mukherjee: You probably have seen some interesting development on the litigation side driven by
another company and we will be watching this closely. This is not the 505(b)(2) but
on the 505(j) side. So let us see, how that unfolds. As far as (b)(2) is concerned, we
have appealed but it all depends on as I said on the other side on how that unfolds over
next give or take say 60-80 days.

Abhishek Sharma: Your approach would remain 505(b)(2), right?

Saumen Chakraborty: We have both the options.

Karthik Mehta: Just on your inspection which happened in Duvvada, could you quantify all the
products which are manufactured from there, have been effectively transferred to some
other side in the event that we receive an import alert there, talking of the existing
commercialized products?

Abhijit Mukherjee: I think we mentioned, the two major injectables have core site in a partner site as well
but that probably answers and there is one more Oral Solid where we do not have a
partner site. I really sincerely hope that it does not go the direction you mentioned.

Karthik Mehta: Again, just to maybe stick on the reinspection, in your consultation with your advisors,
do you feel that as per the global CAPA, all three plants would receive any EIR at the
same time, I know you just mentioned about CBE30, but then in your view, can the
other two plants remain under warning letter and any one of the other under…?

Abhijit Mukherjee: You have seen the observation, it is in public domain, you will have to make your
interpretation on this, and the data point which we give is from one plant we have
received CBE30. Based on that, you have your interpretation, and you are probably I
am sure have seen the observation from the three plants, right.

Karthik Mehta: Yes sir, the reason I ask is because I am not able to make observation because all the
three plants were given one warning letter which is why it is addressed to you?

Page 16 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Abhijit Mukherjee: That is why, I cannot answer the question in specific, but I can only give you a data
point, the data point is, from one site, we have got CBE 30 approval which was the first
one of it and let us see how the rest of it unfolds.

Karthik Mehta: Is there a change in expectations due to the recent competition in the US intensifying
(ClaurusOne)?

Abhijit Mukherjee: Yes, the most recent consolidation you are talking about, right. So I think this is not
new anymore for anyone. So I think we will deal with the way we dealt with the
previous one. So, as I said, I think whatever erosion market has seen in that range would
continue. We will have to deal with such consolidations the way we have dealt in the
past.

Saion Mukherjee: Sir, one question on the Proprietary Products side. If you can Sernivo and Zembrace,
how are they doing, you had guided for $30, 50 million earlier as peak potential. When
do you see that coming through for these products? If you can update us on the filings
on the prop side that you have done this year, how many are pending approval and what
kind of launch calendar that you are looking for FY’18 and ’19?

Anil Namboodiripad: So let me start with how the business is doing. Both Zembrace and Sernivo have
significantly picked up since the last time we spoke which was the last quarter. With
Zembrace prescriptions in Q4 increase by roughly around 33% over Q3, we see more
than 500 prescriptions per week by the end of FY’17 and that is what we were targeting
and we are on target, serving as a launch pad for FY’18. Number of prescribers has
grown nearly 50%, which is all good indicators of how the product is being taken by
the market. Similarly, on Sernivo, we have more than 850 prescriptions per week which
is quite healthy. That is how we ended FY’17 and 40% volume increase over Q3s
highest week. So these are some indicators for you to explain that these two products
are now positioned for further growth through FY’18. The base business has also been
doing steadily. So your question was around the peak sales and when we will get there.
So as I had mentioned to you, in FY’17, there were some delay in terms of getting
managed care of insurance coverage. As of now, we have 75% coverage with insurance
plan, there is still room to grow, but we believe that will happen. Peak sales, we expect
in the next three years or so for both products. The other part of your question was
around key launches. So we have two pending NDAs for FY’18 -- one of them is
Xeglyze which is contingent upon clearance of one of our facilities and the other is a
topical product for Dermatology, and that is expected to be approved - the PDUFA date
later in the year, and then there are several other NDAs that we expect in FY’19. So we
are not commenting on it at this time.

Page 17 of 18
 Dr. Reddy’s Laboratories Limited
May 12, 2017

Saion Mukherjee: So, can you throw some light on the Xenoport asset, how that is progressing and any
timeline that you have visibility on in terms of filing?

Saumen Chakraborty: This will be further off in terms of the timeline on the immediate distinct, this has to go
through its development. So maybe we can take it at a later stage.

Rahul Sharma: Just wanted the clarity on what could be the sustainable gross margins going ahead for
the company?

Saumen Chakraborty: Again, you are taking financial guidance. So last time also I said normally the way we
manage our business is supposed to have north of 50% as a gross margin but for the
last couple of years, 55% is what was there, maybe in few quarters, we got even higher.
But this quarter has been specifically lower, the reasons I have explained. So it could
be within this range, take a few hundred basis points, plus or minus but 55% could be
a normal effect, you cannot be so accurate, we refrain from giving any financial
guidance, there is a lot of uncertainty, you cannot be absolutely certain about the pricing
conditions, the contracts that you will quote and the flow, so all these things affect in
terms of your margins but yes, normal expectations if you wanted some kind of a
financial modeling, I am saying here and there a few hundred basis points but 55 could
be normal expectations.

Rahul Sharma: If you would add up all those one-offs which were there, then what would be our gross
margin for the quarter?

Saumen Chakraborty: I said, this has declined by 400 basis points. So if you add 51.2 plus 400 basis points it
would have been around 55-point something.

Rahul Sharma: Another thing was how has been the price erosion in the existing portfolio on YoY
basis and QoQ in US markets?

Saumen Chakraborty: Abhijit already told you that this year particularly in FY’17, it has been severe, but it
will vary also from company-to-company depending on portfolio launches and
everything. But we have seen FY’17 over FY’16 is a bit unprecedented because we
have never seen earlier on gross level going beyond the high single-digit for this year,
it has been in the double-digit, and this quarter specifically has been higher. But going
forward, the expectation is that it may not be that level of erosion getting.

Page 18 of 18