Dr. Reddy's Laboratories Limited — Q4 FY26 earnings call

Call held 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

  • 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

  • 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.

Key financials

2 periods

Q4

  • Adjusted Revenues
    ₹7,969 Cr
    YoY -6% QoQ -9%
  • Gross Margin
    48%
  • Underlying EBITDA
    ₹1,554 Cr
    YoY -37% QoQ -28%
  • Diluted EPS
    ₹2.64

FY26

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

What they filed

Q4 FY26: revenue down 11.5%, net profit down 86.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26
Revenue7,696 8,038 8,381 8,528 8,572 +11%8,828 +10%8,753 +4%7,546 −12%
EBITDA2,130 2,076 2,273 1,998 2,174 +2%2,010 −3%1,888 −17%382 −81%
Net profit1,392 1,342 1,404 1,587 1,410 +1%1,337 −0%1,190 −15%221 −86%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • North America Generics
    199 Mn Revenue (Q4, reported)251 Mn Revenue (Q4, excl. SSA)1.3 Bn Revenue (FY26, reported)1.36 Bn 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)

Capital allocation

high confidence
  • Capex ₹438 Cr this quarter · ₹2,000 Cr (FY27) planned
    • Biosimilars
    • Product-specific investments
    • General capex
    So, next year would be around ₹2,000 crores. So, biosimilars, certain product-specific investments, I think, are there, and then general capex.
  • Debt Net cash ₹3,271 Cr
    As of March 31st, 2026, we have a net cash surplus of ₹3,271 crores, which is US$349 million.
  • Dividend ₹8/share (final)
    Based on the company's performance, the Board has recommended payment of a dividend of ₹8 per equity share of face value Re. 1/- each, this is equivalent of 800% of face value, for the year ended March 31, 2026, subject to approval of the shareholders of the company.
  • M&A Progynova® and Cyclo-Progynova® Acquisition · Closed

    Forayed into Hormone Replacement Therapy segment in India.

    Aligned with our strategic focus on bringing innovation to patients in India, we forayed into Hormone Replacement Therapy segment with the acquisition of Progynova® and Cyclo-Progynova® in India.
  • M&A Nicotine Replacement Therapy (NRT) consumer healthcare business Acquisition · Integrated
    In addition, the operational integration of our acquired consumer health business in Nicotine Replacement Therapy is now largely complete.
  • Liquidity Cash ₹3,271 Cr
    As of March 31st, 2026, we have a net cash surplus of ₹3,271 crores, which is US$349 million.

Guidance & targets

Profitability

  • Adjusted EBITDA Margin Profitability · FY26 · High confidence ~25%
    For FY26, the adjusted EBITDA margin was in the neighbourhood of 25%, consistent with our stated aspirations.

    — Erez Israeli

  • EBITDA Margin (with semaglutide) Profitability · Next year and year after · Medium confidence Close to 25%, maybe a bit less
    With semaglutide, it should be close to the 25%, but maybe a bit less, depends on how much semaglutide we will sell.

    — Erez Israeli

  • EBITDA Margin (base business without semaglutide) Profitability · Next year and year after · High confidence Around 20%
    Yeah, so we are planning to maintain the base without semaglutide at around 20%. So this is the plan.

    — Erez Israeli

Margin

  • Gross Margin Margin · FY27 · High confidence Above 50%
    Given our focus on cost efficiencies and productivity improvement, we expect the margins to improve and be above 50% in FY27.

    — M. V. Narasimham

  • Gross Margin Margin · Subsequent quarters (FY27) · High confidence 50% or above
    Considering all these things, I think, certainly our gross margin would be 50% or above.

    — M. V. Narasimham

R&D Spend

  • R&D Spend as % of Revenue R&D Spend · Fiscal ahead (FY27) · High confidence 7-8%
    We expect the spends to be in the range of 7-8% in the fiscal ahead.

    — M. V. Narasimham

SG&A Spend

  • SG&A Spend (nominal terms) SG&A Spend · Year ahead (FY27) · High confidence Around same levels as FY26
    We expect the spends to be around the same levels as FY26 for the year ahead.

    — M. V. Narasimham

ETR

  • Effective Tax Rate ETR · Fiscal FY27 · High confidence 24-25%
    We expect the ETR to be 24 to 25% for fiscal FY27.

    — M. V. Narasimham

Sales Volume

  • Semaglutide units Sales Volume · Calendar '26 · Medium confidence 6-7 million units
    Specifically, for the next, let's say, until the end of calendar '26, I believe that the number is somewhere between 6 to 7 million units.

    — Erez Israeli

  • Semaglutide units Sales Volume · Beginning of FY28 · Medium confidence 12 million units
    I'm still with the same number, but probably it will be 12 months that will probably end somewhere in the beginning of FY28 as well.

    — Erez Israeli

  • Semaglutide pens per quarter (B2B/direct) Sales Volume · Per quarter (implied near term) · Medium confidence 3-4 million pens
    So, between, what we call, the B2B, in which we are selling to the partners, or selling ourselves directly, we probably will be in a pace of 3 or 4 million pens per quarter.

    — Erez Israeli

Growth

  • North America Generics growth (ex-lenalidomide) Growth · This year (FY27) · High confidence Double digits
    Moving forward, this year, again, without lenalidomide, we will see double-digit growth.

    — Erez Israeli

  • US Generics growth (ex-lenalidomide) Growth · FY27 · High confidence Double digits
    We will absolutely grow in North America, ex-lenalidomide in double digits.

    — Erez Israeli

Biosimilar Sales

  • Annual biosimilar sales Biosimilar Sales · By FY29 · Medium confidence US$0.5-0.7 billion
    Hopefully, it will be in the range of US$ half a billion, 600 million, 700 million. It very much depends, of course, of how abatacept will perform.

    — Erez Israeli

Biosimilar Margins

  • Biosimilar portfolio margins Biosimilar Margins · Not specified (conditional on competition) · Medium confidence Above average company margins (25%+)
    In the case that there will be no competition or low competition, absolutely, it will be above the average margin that we have.

    — Erez Israeli

Capex

  • Annual Capex Capex · Next year (FY27) · High confidence ~₹2,000 crores
    So, next year would be around ₹2,000 crores.

    — M. V. Narasimham

Product Launch

  • Semaglutide (oral) Product Launch · Next coming days (Q1 FY27) · High confidence Launch
    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.

    — Erez Israeli

  • Abatacept IV Product Launch · Beginning of calendar '27, hopefully this fiscal (FY27) · Medium confidence Launch
    IV will be likely at the beginning of calendar '27, hopefully this fiscal, that's the plan. But of course, we need to see the approval for that. But right now, that's the plan.

    — Erez Israeli

  • Abatacept SC Product Launch · This year (FY27) · High confidence Filing
    And, we are on track to file the subcutaneous version this year in Europe and US? Yes, we are. In the US, for sure. In the Europe, there might be some delay.

    — Erez Israeli

  • Semaglutide markets Product Launch · This calendar year (2026) · High confidence >50 markets
    So, in terms of number of markets, but many of them, we will do it with a partner that will do it for us. So, between, what we call, the B2B, in which we are selling to the partners, or selling ourselves directly, we probably will be in a pace of 3 or 4 million pens per quarter. So, if you add that, it will come to around 10 or 11, close to the 12 that we discussed last time, give or take, one month. So, we are still in the same neighbourhood, but with the delay of the few months that those approvals took.

    — Erez Israeli

  • Semaglutide markets Product Launch · In 12 months (by Q4 FY27) · High confidence >80 markets

    — Erez Israeli

What to watch in Q1 FY27

Semaglutide oral product launch

Next quarter (Q1 FY27)
Current Approved by CDSCO in India, launch expected soon.
Target Commercial 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

  • Lenalidomide sales decline and price erosion

    high

    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

  • Delays in Semaglutide approvals/launches

    medium

    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

  • Competition in Semaglutide market

    medium

    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

  • CAR-T therapy program discontinuation

    medium

    ₹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

  • Eftilagimod Alfa trial discontinuation

    medium

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

    Management acknowledged

Q&A highlights

6 direct
Large Lenalidomide Shelf Stock Adjustment Direct
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

Semaglutide Sales Target and Timeline Partial
So Brazil will be part of it. I believe it's still that number, but the number moved by several months. I'm still with the same number, but probably it will be 12 months that will probably end somewhere in the beginning of FY28 as well. Specifically, for the next, let's say, until the end of calendar '26, I believe that the number is somewhere between 6 to 7 million units.

Clarifies the 12 million unit semaglutide target is now expected by early FY28, not FY27, due to delays, and provides an interim target for calendar 2026.

Asked by Neha Manpuria

Semaglutide Pricing Strategy Direct
So, our list price will be, give or take, about half of what Novo Nordisk will be. So that can be shared, because it will be listed. Obviously, the rest is arrangement that we have with the customer that I will not be able to disclose, but let's say it will be the normal arrangement that you normally have. We believe that, all the prices will be, let's say, in the neighbourhood of, let's say, US$30 plus. Why I'm saying that number also is because in some markets, we are going to work with the partner, and this reflects the net price that we have for them. Obviously, they will have their margins. And these numbers may go down if the competition intensified, but I don't envision it to, at any case, to be below US$25.

Provides specific pricing expectations for semaglutide (list price half of innovator, net price ~$30+, floor ~$25), crucial for revenue modeling.

Asked by Damayanti Kerai

CAR-T Therapy Program Discontinuation Direct
So, the investment, give or take, is what MVN guided. *135 crores. *135 crores, that's what we took down. We saw that we have issues with the clinical, and we decided to kind of deprioritize it at this stage, and we just impaired it as per appropriate accounting. But this is, give or take, what we invested.

Explains the rationale behind the ₹135 crore impairment charge, citing clinical issues and deprioritization of the CAR-T program.

Asked by Dr. Bino Pathiparampil

Biosimilar Business Break-even Timeline Direct
So, overall, our global biologics sales is not very high. It is about US$100 million in sales. So, at this sales, whatever investments we are doing for the development of abatacept and other products like pembrolizumab, also we are with Alvotech, definitely, it's not at break-even. Once we launch abatacept, certainly, I think post that we can see break-even. ... With abatacept launch in calendar year 2027 (FY28), can see break-even.

Provides current biosimilar sales (US$100 million) and links break-even to the abatacept launch in FY28, offering clarity on the profitability timeline for this strategic area.

Asked by Surya Patra

North America Generics Performance and Future Growth Drivers Direct
Yeah, so firstly, obviously, in this period of time, there was price erosion. And, what it tells is that market share and new products, give or take, covered it. I see it as a kind of very low single-digit growth, not flat. But I'm in agreement with you that market is not growing as the other markets that we have, that are all growing in double digit. Moving forward, this year, again, without lenalidomide, we will see double-digit growth. And going forward, the main growth in the United States will come from biosimilars, consumer health, as well as certain 505(b)(2)s. So, over time, the business will diversify itself, but right now, it's mostly generic products.

Acknowledges price erosion in US generics but highlights future growth drivers (biosimilars, consumer health, 505(b)(2)s) and expects double-digit growth ex-lenalidomide.

Asked by Vivek Agrawal

Abatacept IV Launch Timeline Direct
IV will be likely at the beginning of calendar '27, hopefully this fiscal, that's the plan. But of course, we need to see the approval for that. But right now, that's the plan.

Provides a specific, albeit conditional, timeline for the launch of Abatacept IV, a key pipeline product.

Asked by Dr. Bino Pathiparampil

2 min read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

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