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    Dr. Reddy's Laboratories Limited

    DRREDDY
    Healthcare·12 May 2026
    Management Summary

    Dr. Reddy's Laboratories reported a resilient FY26 with highest-ever annual revenues, despite product-specific headwinds and one-time impacts like a ₹453 crore lenalidomide shelf stock adjustment. The underlying base business achieved double-digit growth, and the company made significant progress on key pipeline assets like semaglutide and abatacept, securing regulatory approvals and BLA acceptance. While Q4 margins were impacted by product mix and impairments, management expects improvement to above 50% in FY27, maintaining an adjusted EBITDA margin of approximately 25% for the full year.

    Highlights

    5

    • Full year adjusted EBITDA margin was in the neighbourhood of 25%, consistent with stated aspirations.

    • Underlying base business delivered double-digit growth for Q4 as well as for the full year FY26.

    • Secured regulatory approval of semaglutide injection for Type 2 Diabetes in Canada and launched 'Obeda®' in India.

    • USFDA accepted BLA for the Intravenous (IV) presentation of abatacept biosimilar candidate for review.

    • Awarded the Gold Medal by EcoVadis for FY26, achieving its highest-ever score of 80.

    Concerns

    4

    • A shelf stock adjustment of ₹453 crores related to lenalidomide reduced Q4 revenues.

    • Impairment charges of ₹259 crores in Q4 due to discontinuation of CAR-T assets and partnered product Eftilagimod alfa.

    • Q4 gross margin at 48%, lower by 760 basis points year-over-year due to lower lenalidomide sales and price erosion.

    • North America Generics revenues (excluding SSA) declined 40% YoY in Q4 and 21% YoY for FY26, primarily due to lenalidomide.

    What Changed2

    vs Q1 FY27

    Guidance items1 → 21 (+20)Risks discussed4 → 5 (+1)
    Key financials

    Metrics

    8

    Periods

    2

    Q4

    4
    • Adjusted Revenues
      ₹7,969 Cr
      YoY-6%QoQ-9%
    • Gross Margin
      48%
    • Underlying EBITDA
      ₹1,554 Cr
      YoY-37%QoQ-28.0%
    • Diluted EPS
      ₹2.64

    FY26

    4
    • Adjusted Revenues
      ₹34,046 Cr
      YoY+4.6%
    • Gross Margin
      53.5%
    • Adjusted EBITDA
      ₹8,419 Cr
    • Diluted EPS
      ₹51.42

    Segment breakdown

    North America Generics
    199 Mn Revenue (Q4, reported)251 Mn Revenue (Q4, excl. SSA)1.3 billion Revenue (FY26, reported)1.36 billion Revenue (FY26, excl. SSA)
    Emerging Markets
    ₹1,806 Cr Revenue (Q4)₹6,761 Cr Revenue (FY26)
    Russia Business (Emerging Markets)
    8% Revenue Growth (Q4, constant currency)-23% Revenue Growth (Q4, constant currency)
    India Business
    ₹1,566 Cr Revenue (Q4)₹6,219 Cr Revenue (FY26)
    European Business
    136 Mn Revenue (Q4)542 Mn Revenue (FY26)
    PSAI Business
    101 Mn Revenue (Q4)
    List

    Capital allocation

    6
    high confidence
    CategoryHeadline
    Capex

    ₹438 crores this quarter · ₹2,000 crores (FY27) planned

    Debt

    Net ₹-3,271 crores

    Dividend

    ₹8/share (final)

    M&A

    Progynova® and Cyclo-Progynova®

    acquisition · closed

    M&A

    Nicotine Replacement Therapy (NRT) consumer healthcare business

    acquisition · integrated

    Guidance & targets

    21
    CategoryTargetPriority
    Profitability
    Adjusted EBITDA Margin
    ~25%
    		High
    Profitability
    EBITDA Margin (with semaglutide)
    Close to 25%, maybe a bit less
    		Medium
    Profitability
    EBITDA Margin (base business without semaglutide)
    Around 20%
    		High
    Margin
    Gross Margin
    Above 50%
    		High
    Margin
    Gross Margin
    50% or above
    		High
    R&D Spend
    R&D Spend as % of Revenue
    7-8%
    		High
    SG&A Spend
    SG&A Spend (nominal terms)
    Around same levels as FY26
    		High
    ETR
    Effective Tax Rate
    24-25%
    		High
    Sales Volume
    Semaglutide units
    6-7 million units
    		Medium
    Sales Volume
    Semaglutide units
    12 million units
    		Medium
    Sales Volume
    Semaglutide pens per quarter (B2B/direct)
    3-4 million pens
    		Medium
    Growth
    North America Generics growth (ex-lenalidomide)
    Double digits
    		High
    Growth
    US Generics growth (ex-lenalidomide)
    Double digits
    		High
    Biosimilar Sales
    Annual biosimilar sales
    US$0.5-0.7 billion
    		Medium
    Biosimilar Margins
    Biosimilar portfolio margins
    Above average company margins (25%+)
    		Medium
    Capex
    Annual Capex
    ~₹2,000 crores
    		High
    Product Launch
    Semaglutide (oral)
    Launch
    		High
    Product Launch
    Abatacept IV
    Launch
    		Medium
    Product Launch
    Abatacept SC
    Filing
    		High
    Product Launch
    Semaglutide markets
    >50 markets
    		High
    Product Launch
    Semaglutide markets
    >80 markets
    		High

    What to watch in Q1 FY27

    5

    Semaglutide oral product launch

    Next quarter (Q1 FY27)
    CurrentApproved by CDSCO in India, launch expected soon.
    TargetCommercial launch and initial sales contribution.

    Why it matters

    Oral semaglutide is a key growth driver, and its launch will diversify the product offering and potentially boost India business growth.

    I believe that it will grow. Plus in the next coming days, we will launch also the oral product, so the combination of both should give us a very healthy growth.

    Risks & concerns

    5
    RiskSeverity

    Lenalidomide sales decline and price erosion

    Lower lenalidomide sales and price erosion in unbranded Generics impacted Q4 gross margins by 760 bps YoY. North America Generics revenue declined significantly due to this. — Management acknowledged

    high

    Delays in Semaglutide approvals/launches

    The 12 million unit semaglutide sales target has been pushed back by several months, now expected by early FY28 instead of FY27, due to approval delays in markets like Brazil. — Management acknowledged

    medium

    Competition in Semaglutide market

    Management expects more players to enter the semaglutide market after several months, which could intensify competition and potentially drive prices down (e.g., below US$25). — Analyst acknowledged

    medium

    CAR-T therapy program discontinuation

    ₹135 crores impairment charge due to discontinuation of R&D programs related to CAR-T therapy due to clinical issues, indicating a setback in this innovation area. — Management acknowledged

    medium

    Eftilagimod Alfa trial discontinuation

    ₹93 crores impairment charge due to discontinuation of a trial for in-licensed asset Eftilagimod Alfa following an interim futility analysis. — Management acknowledged

    medium

    Q&A highlights

    7

    “We were also surprised by that. It was not part of any arrangement or anything like that. I cannot speak on the details on the relationship of the customers, but it came from them. I guess, certain planning issues or mistakes at their end, and that's the outcome of it.”

    Highlights a significant one-time revenue reduction (₹453 crores) due to customer-side issues, not company strategy, impacting Q4 performance.

    asked by Neha Manpuria

    2 min read5 chapters

    Detailed Narrative

    01

    Q4 FY26 Performance Overview and Key Impacts

    Dr. Reddy's Laboratories reported Q4 FY26 adjusted revenues of ₹7,969 crores (US$849 million), a 6% year-over-year decline, primarily due to lower lenalidomide sales. The quarter was significantly impacted by a ₹453 crore shelf stock adjustment related to lenalidomide and ₹259 crores in impairment charges for discontinued CAR-T therapy programs and an in-licensed asset. Despite these headwinds, the underlying base business, excluding lenalidomide, demonstrated double-digit growth year-over-year for both the quarter and full year FY26.

    02

    Profitability and Margin Dynamics

    The adjusted gross margin for Q4 FY26 stood at 48%, a decrease of 760 basis points year-over-year, mainly attributed to product mix and price erosion in unbranded generics. Underlying EBITDA for the quarter was ₹1,554 crores (US$166 million), reflecting a 19.5% margin and a 37% year-over-year decline. For the full year FY26, the adjusted EBITDA margin was approximately 25%, consistent with stated aspirations, and management expects gross margins to improve to above 50% in FY27 through cost efficiencies and productivity improvements.

    03

    Strategic Pipeline Progress: Semaglutide and Abatacept

    The company achieved significant milestones in its key pipeline assets. Dr. Reddy's secured regulatory approval for semaglutide injection in Canada and launched its oral version, 'Obeda®', in India, with plans to launch in over 50 markets this calendar year. For abatacept, the Biologics License Application (BLA) for the intravenous presentation was accepted for review by the USFDA, with a launch targeted for early calendar 2027. The subcutaneous version of abatacept is also on track for filing in the US this year, further expanding the biosimilar portfolio.

    04

    Segmental Performance and Growth Drivers

    While North America Generics revenues (excluding the shelf stock adjustment) declined 40% year-over-year in Q4 to US$251 million, primarily due to lenalidomide, management expects double-digit growth in this segment ex-lenalidomide for FY27, driven by biosimilars, consumer health, and 505(b)(2)s. Emerging Markets reported robust 29% year-over-year growth to ₹1,806 crores in Q4, and the India business grew 20% year-over-year to ₹1,566 crores, outperforming the Indian Pharmaceutical Market with a 15.2% MQT growth.

    05

    Capital Allocation and R&D Focus

    Capital expenditure cash outflow for FY26 was ₹2,302 crores (US$245 million), with a planned capex of approximately ₹2,000 crores for FY27, focusing on biosimilars and product-specific investments. R&D spend for FY26, excluding one-time📎 provisions, was ₹2,385 crores (7% of adjusted revenues), a 13% decrease year-over-year, reflecting the completion of significant abatacept development. The company maintains a net cash surplus of ₹3,271 crores (US$349 million) and recommended a dividend of ₹8 per equity share for FY26.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.