Margin revival, Semaglutide launch to drive Dr Reddy’s growth momentum in FY27

ET Intelligence Group: Dr Reddy’s Laboratories (DRL) expects a gradual recovery in the current fiscal year after reporting a significant 26% fall in net profit in FY26, weighed down by pressure on its US business. In addition, the March quarter profit dropped by 86%, affected by several one-time charges. Excluding these disruptions, the drug maker’s operations continued to grow at a healthy pace in India, Europe and emerging markets. Margins are expected to improve in FY27, supported by better product mix, cost controls and the absence of major one-off expenses. Semaglutide could be a key growth driver given that the company has launched it in India and secured approval in Canada. DRL has guided for a capital expenditure (capex) of ₹2,000 crore, largely towards biosimilars and product specific investments.

The US revenue was under pressure, falling sharply both year-on-year and sequentially in the March quarter due to the loss of exclusivity for Revlimid. However, the company expects the base generics business, excluding Revlimid, to return to double-digit growth in FY27, supported by 27 new launches, steady market share and a gradual shift towards higher-value, complex products.

Abatacept, an arthritis drug, could be a key growth driver for Dr Reddy’s following its launch around FY28. The intravenous (IV) version has been accepted by the USFDA, with an inspection pending at the Bachupally facility in Hyderabad, while the subcutaneous version remains on track for US filing.

The research and development (R&D) cost dropped 25% year-on-year with spends easing to 7.3% of sales from 8.5% in the year-ago quarter, largely due to the completion of a significant part of investments in Abatacept. The company expects R&D spends to remain in the 7-8% range, with a greater shift towards partnership-led biologics development.