Dr. Reddy’s Q1 profit plunges 69% as semaglutide API issue, lenalidomide transition weigh

Dr. Reddy's Laboratories reported a 69% year-on-year decline in consolidated net profit for the June quarter, as an expected moderation in lenalidomide revenues and a one-time provision related to its semaglutide active pharmaceutical ingredient (API) weighed on earnings.

The Hyderabad-based drugmaker posted a consolidated net profit attributable to equity shareholders of ₹443 crore for the quarter ended June 30, compared with ₹1,418 crore a year earlier. Revenue declined 6% year-on-year to ₹8,071 crore from ₹8,545 crore. EBITDA fell 56% to ₹1,009 crore, while the EBITDA margin contracted sharply to 12.5% from 26.7% in the year-ago quarter. Profit before tax dropped 71% to ₹553 crore.

The company said the results included an adverse impact of ₹240 crore arising from a provision towards inventory and other associated costs linked to the semaglutide API issue, which reduced gross profit, EBITDA and profit-before-tax margins by around 300 basis points. The investor presentation also noted that EBITDA margins were further impacted by higher solvent and freight costs due to the ongoing conflict in the Middle East.

Excluding the semaglutide-related impact, revenue stood at ₹8,087 crore, while EBITDA margin would have been 15.4%, compared with the reported 12.5%. The company ended the quarter with a net cash surplus of ₹3,058 crore.

Commenting on the results, Co-Chairman and Managing Director G V Prasad said, "Our Q1FY27 performance reflected the expected transition beyond lenalidomide revenues, along with an unexpected impact related to semaglutide API. However, our underlying base business continued to deliver healthy double-digit growth across all key geographies. Our focus remains on improving the health of our base business through disciplined execution and operational excellence, while building our future pipeline of peptides, biosimilars, and innovative assets to deliver long-term growth."

India, emerging markets offset North America weakness

The company's India business grew 17% year-on-year to ₹1,718 crore, while emerging markets revenue rose 31% to ₹1,833 crore. Europe revenue increased 13% to ₹1,444 crore. However, North America, its largest market, declined 35% year-on-year to ₹2,205 crore, reflecting the expected normalization in lenalidomide sales. Pharmaceutical Services and Active Ingredients (PSAI) revenue rose 4% to ₹852 crore. Branded businesses accounted for 52% of quarterly revenue.

During the quarter, Dr. Reddy's launched the first generic bosutinib 400 mg in the US with 180-day exclusivity, became the first company to launch generic semaglutide injection for Type 2 diabetes in Canada, introduced generic semaglutide tablets in India and expanded its nutrition portfolio through Celevida GLP+ in partnership with Nestlé. The company also said its oncology drug toripalimab crossed the ₹100-crore revenue milestone in India within two years of launch.

Separately, the board approved the appointment of Dr. Sridevi Khambhampaty as Global Head of Biologics and inducted her into the company's Management Council with immediate effect. It also approved the appointment of Deloitte Haskins & Sells LLP as the company's Independent Registered Public Accounting Firm for filings with the US Securities and Exchange Commission.

Shares of Dr. Reddy's Laboratories ended 2.16% lower at ₹1,179.90 apiece on the NSE on Wednesday. The stock has declined nearly 5% over the past year, broadly in line with the benchmark Nifty 50, which has fallen about 4% during the same period.