Dr. Reddy’s Laboratories Q2 Results: Profit Drops to Rs 9,250 Million

Revenue stood at Rs 86,708 million, down 1.5% YoY; PAT declined 36% YoY to Rs 9,250 million.

Reader Takeaway: Growth in India and Emerging Markets partially offsets US lenalidomide weakness, though regulatory observations remain a focus.

What just happened

Dr. Reddy’s Laboratories posted a consolidated revenue of Rs 86,708 million for the quarter ending September 30, 2026. While revenue saw a marginal 1.5% dip compared to the same period last year, profit after tax (PAT) fell significantly by 36% to Rs 9,250 million. Management highlighted that this performance was primarily due to the expected tapering of sales for the drug lenalidomide in the North American market.

Why this matters

North America, a key market for the company, saw a 23% YoY revenue decline. However, the business model showed resilience elsewhere; India recorded 17% growth driven by new product launches and price hikes, while Emerging Markets posted a robust 24% revenue surge. The firm remains in a strong liquidity position with a net cash surplus of Rs 25 billion and a net debt-to-equity ratio of (0.06).

Business and Operational Highlights

Strategic expansion continues with a new partnership with Takeda to market the dengue vaccine QDENGA in India. Additionally, the company is deepening its ties with Gilead Sciences to manage the distribution of lenacapavir for HIV prevention. Operational updates included the successful launch of a nivolumab biosimilar in India and a sugammadex injection in the US.

Risks to watch

Regulatory scrutiny is a key area for investors to monitor. The company reported receiving Form 483 observations at its FTO-SEZ (Srikakulam) and Bachupally manufacturing facilities. While it achieved a Voluntary Action Indicated (VAI) classification for its Mirfield (UK) site, ongoing regulatory observations at key Indian plants are critical to future export performance. Furthermore, the firm noted the termination of its distribution agreement with Novartis India due to a change in controlling shareholding.