Dr Reddy’s reports muted Q1FY27 results, net profit drops 69%
Hyderabad-based drugmaker Dr Reddy’s Laboratories on Wednesday reported a 69% year-on-year decline in net profit in the June quarter (Q27) due to decline in US sales and unexpected decline in semaglutide sales.
Pharmaceutical industry’s revenue missed estimates, falling 5.6% ₹8,071 crore and profits are falling ₹443 crore. A. Bloomberg The net profit forecast was as follows: ₹737 crore and income ₹8,221 crore.
EBITDA decreased by 56 percent compared to the previous year ₹1,009 crore while the margin decreased by 12.5%.
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Dr Reddy’s Laboratories reported a 69% drop in profits due to reduced sales in the US and an unexpected downturn in semaglutide sales, particularly following the loss of Revlimid’s patent exclusivity.
Dr Reddy’s revenue from the US fell 35% year-on-year to ₹2,205 crore due to lower sales of lenalidomide after it lost patent exclusivity earlier in the year.
The company was forced to discontinue sales of generic semaglutide due to an impurity in the active pharmaceutical ingredient, delaying its re-entry into the market until approximately November.
Despite the setbacks, Dr. Reddy’s is optimistic about growth opportunities, focusing on its strong core business in emerging markets and planning new launches in regions such as Latin America and North America.
Dr Reddy’s administration is closely monitoring the situation regarding the proposed 200% tariffs for generic drugs, considering the need to adjust pricing strategies while awaiting official guidelines.
However, the company stated that its core business showed double-digit growth in different geographies, driven by healthy demand and positive foreign exchange movements.
US revenue down 35% year over year ₹2,205 crore, mainly affected by lower sales of lenalidomide or Revlimid due to the drug losing patent exclusivity earlier this year. However, the India business as well as emerging markets and Europe also recorded double-digit growth in the quarter, driven by new launches and demand.
Besides the loss of lenalidomide that the company had previously navigated, it also faced a setback when it was forced to halt sales of generic semaglutide due to an impurity in the active pharmaceutical ingredient (API).
“We believe we understand the chemistry and the root cause. We need to test it in batches. So the results are probably expected around September,” CEO Erez Israel said in the post-earnings press conference. “…we should be able to provide the API to our partner OneSource and hopefully be back to market in November.”
While Dr Reddy’s has approval to commercialize its type 2 diabetes and weight loss drug in India and Canada, it also plans to launch it in several other countries where the patent has expired. Israeli said there will be a 3-4 month delay in scale-up plans due to the API issue, but approval applications and submissions are on track.
“Besides India and Canada, the most notable countries will be markets such as Brazil, Türkiye and Mexico, as well as regions such as Latin America and North America,” Israeli said.
The drugmaker expects to sell 6-7 million units of semaglutide this fiscal year.
Despite the negativities, company management is optimistic about the rest of the year. “We are definitely continuing the growth trajectory in both sales and profit,” Israel said, adding that growth in all markets, including the U.S., looks promising.
The company had a net cash surplus ₹3,058 crore by the end of the first quarter and management said it would also focus on exploring inorganic growth opportunities.
Shares of Dr Reddy’s Laboratories closed 2.16% lower. ₹1,179.90 per capita on the NSE on Wednesday, largely due to the broader backlash following US President Donald Trump’s announcement of imposing tariffs on imported generic drugs in 2028.
“From our point of view, we will see what develops first. All we have is a tweet,” the Israeli said, adding that the company will wait for official guidelines and industry bodies in both countries to meet and discuss the path forward before taking any action.
