Dr. Reddy’s Laboratories Q2 Profit Drops 36% amid North American Revenue Headwinds

Q2 FY27 Net Profit stood at Rs 9,250 million, while consolidated revenues reached Rs 86,708 million.

Reader Takeaway: Strong base business growth is currently offset by lower lenalidomide sales and regulatory pressures in key US facilities.

What just happened

Dr. Reddy’s Laboratories reported a consolidated net profit of Rs 9,250 million for the quarter ended September 2026, marking a 36% decline compared to the same period last year. Consolidated revenues for the quarter were Rs 86,708 million, reflecting a 1.5% year-on-year decrease, though revenue saw a 7% improvement on a sequential basis. The company’s EBITDA was reported at Rs 17,828 million, representing an EBITDA margin of 20.6%.

Why this matters

The decline in profitability is largely attributed to a drop in revenues from lenalidomide in the North American market. Despite this, the company highlighted double-digit growth in its base business across several segments. Branded businesses, including operations in India, Emerging Markets, and consumer health portfolios, now account for 53% of total revenue, providing a buffer to the volatility in US generic sales.

Management and Board Changes

The Board has appointed Mr. Akhil Ravi as Head of API and Services, effective November 13, 2026. Mr. Ravi, who is the son-in-law of Co-Chairman G V Prasad, will continue to lead the company's wholly owned subsidiary, Aurigene Pharmaceutical Services Ltd. This appointment is significant as the CDMO arm recently crossed $100 million in revenue for the 12-month period ending September 2026.

Risks to watch

The company is navigating regulatory scrutiny, having received USFDA Form 483 reports for its FTO-SEZ Process Unit-02 and FTO-3 Bachupally facilities. Additionally, the company is working on supply resumption for semaglutide following out-of-specification findings in previous periods. Furthermore, the termination of the Novartis India distribution agreement due to changes in their shareholding structure remains a point of transition.

What to track next

Investors should monitor the resolution of USFDA observations and the performance trajectory of the newly expanded collaborations, specifically the partnership with Gilead Sciences for lenacapavir and the launch of the QDENGA dengue vaccine in India.