Dr. Reddy’s eyes new growth levers as gRevlimid wanes, Semaglutide approval holds key

With its biggest revenue driver gRevlimid nearing the end of its high margin run, Dr. Reddy’s Laboratories is banking on new launches, pipeline expansion, and cost optimisation to sustain growth across global markets. The company expects upcoming products such as Semaglutide and Abatacept, along with the recently acquired Stugeron® portfolio, to support its next phase of expansion, even as analysts caution about near-term margin pressure.

gRevlimid, the generic version of Bristol Myers Squibb’s blockbuster cancer drug Revlimid (lenalidomide), has been one of Dr. Reddy’s largest contributors in the US market since its launch. The drug, used in the treatment of multiple myeloma, has generated strong profits for Indian generics players since 2022, but its exclusivity window is closing, leading to price erosion and revenue moderation. With this tailwind fading, the company’s next growth drivers are expected to come from complex generics and differentiated products such as GLP-1 therapies.

M.V. Ramana, CEO – Branded Markets (India and Emerging Markets), said the company’s focus areas include strengthening its core portfolio, scaling new therapies, and maintaining profitability despite pricing pressure in the US. “We are focusing on sustaining double-digit growth through a combination of new launches, operational efficiency, and disciplined capital allocation,” he told Business Today.

The company reported consolidated revenues of ₹8,805 crore in Q2FY26, up 9.8 per cent year-on-year, while profit after tax rose 14 per cent to ₹1,437 crore. EBITDA stood at ₹2,351 crore, translating into a margin of 26.7 per cent. Gross margins, however, moderated to 54.7 per cent due to lower gRevlimid sales and price erosion in the US base portfolio.

According to Equirus Research, Dr. Reddy’s US revenue declined by US$25 million sequentially to US$373 million in the quarter, mainly due to a drop in gRevlimid contribution and price erosion in key products. The brokerage noted that while gRevlimid will continue contributing through Q3, earnings could dip sharply from Q4 onwards.

“Beyond gRevlimid, the pipeline looks thin. Near-term opportunities such as Semaglutide and Abatacept remain contingent on timely regulatory approvals,” the firm said, retaining a ‘Short’ rating on the stock with a December 2026 target price of ₹1,024.

The research note also flagged that while Dr. Reddy’s has built in Semaglutide and Abatacept revenues in its projections, any delay in regulatory approval could impact earnings. Equirus expects the company’s EBITDA margins to decline to 19 per cent by FY27, citing likely price erosion in Semaglutide and limited upside from complex generics.

Ramana, however, maintained that the company remains confident about its GLP-1 portfolio. “We expect Semaglutide to be the first among our GLP-1 products to reach markets once patent expiries occur. The need for such therapies in India is significant, and accessibility through affordable pricing will help expand the category,” he said.

The company’s Q2 report highlighted the SEC’s recommendation for Semaglutide approval under CDSCO, and a positive opinion from the European Medicines Agency for its denosumab biosimilar candidate. During the quarter, Dr. Reddy’s also launched two novel gastrointestinal drugs in India — Tegoprazan (PCAB®) and Linaclotide (Colozo®) — and completed the $50 million acquisition of Stugeron® and related local brands from Janssen Pharmaceutica for 18 markets, including India and Vietnam.

Equirus noted that Dr. Reddy’s remains confident about deploying its 12 million pen capacity for Semaglutide globally but has sounded cautious about timelines, particularly in Canada. It added that intense competition in markets such as India and Brazil could limit price realisation.

The company’s domestic business, however, continues to show resilience. India revenues grew 13 per cent year-on-year to ₹1,578 crore in Q2, supported by new brand launches and pricing growth, despite the impact of the recent GST revision. Dr. Reddy’s moved up one rank to ninth in the Indian Pharmaceutical Market during the quarter, with leadership positions in stomatologicals and vaccines.

Ramana said the company will continue to explore in-licensing, M&A, and consumer health opportunities to complement organic growth. “We are open to strategic partnerships that help expand our portfolio and access,” he said.

Analysts expect Dr. Reddy’s to increase focus on cost management as the gRevlimid windfall fades. The brokerage estimates ₹1,200 crore in potential cost savings, though it warned that sharp R&D cuts could impact the long-term pipeline.

Despite near-term headwinds, Dr. Reddy’s continues to invest in new launches and regulatory filings across markets. The company filed five new ANDAs and launched seven new products in the US during the quarter. Europe, boosted by the NRT acquisition, grew 138 per cent year-on-year to ₹1,376 crore, while emerging markets expanded 14 per cent to ₹1,655 crore.

Ramana said the company’s approach is to keep expanding while maintaining financial discipline. “Our aspiration is to achieve sustained growth with margins around 25 per cent or better. We are balancing investment in innovation with cost control,” he said.