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 for the June quarter (Q1FY27) due to a drop in
Hyderabad-based drugmaker Dr Reddy’s Laboratories on Wednesday reported a 69% year-on-year decline in net profit for the June quarter (Q1FY27) due to a drop in US sales and an unexpected setback on semaglutide sales. The pharma major missed estimates, with revenue down 5.6% to ₹8,071 crore, and profit falling to ₹443 crore. A Bloomberg consensus had estimated net profit at ₹737 crore, and revenue at ₹8,221 crore. Ebitda dropped 56% from the previous year to ₹1,009 crore, with the margin shrinking 12.5%. Quick answers to key questions • 5 QUESTIONS 1 What were the reasons behind Dr Reddy’s Laboratories' 69% profit decline in Q1FY27? ⌵ Dr Reddy’s Laboratories reported a 69% decline in profit due to lower US sales and an unexpected setback in semaglutide sales, particularly following the loss of patent exclusivity for Revlimid. 2 How did the US market impact Dr Reddy’s revenue in Q1FY27? ⌵ Dr Reddy’s revenue from the US fell 35% year-on-year to ₹2,205 crore, primarily due to reduced sales of lenalidomide after it lost patent exclusivity earlier in the year.
3 Why is Dr Reddy’s facing challenges with semaglutide sales? ⌵ The company had to halt generic semaglutide sales due to an impurity found in the active pharmaceutical ingredient, which has delayed its market re-entry until approximately November. 4 What growth opportunities is Dr Reddy’s exploring despite financial setbacks? ⌵ Despite setbacks, Dr Reddy’s is optimistic about growth opportunities, focusing on its strong base business in emerging markets and plans for new launches in regions like Latin America and North America. 5 What is Dr Reddy’s strategy regarding the upcoming tariffs on generic drugs in the US? ⌵ Dr Reddy’s management is closely monitoring the situation regarding the proposed 200% tariffs on generic drugs, considering the need to adjust pricing strategies while awaiting official guidelines. However, the company said its base business is growing in double digits across geographies, driven by healthy demand and favourable currency movement. Its US revenue fell 35% y-o-y to ₹2,205 crore, primarily impacted by lower lenalidomide or Revlimid sales, as the drug lost patent exclusivity earlier this year. However, the India business as well as emerging markets and Europe saw double-digit growth during the quarter, driven by new launches and demand.
Apart from the loss of lenalidomide, which the company had previously guided for, it faced a setback when it had to halt sales of generic semaglutide due to an impurity in the active pharmaceutical ingredient (API). “We believe that we understand the chemistry and the root cause. We need to test it in batches. So, results from that are likely to be expected around September,” said chief executive Erez Israeli in a post-earnings press conference. “…we should be able to supply the API to our partner, OneSource, and hopefully come back to the market in November.” Also Read | Pharma Q1FY27 preview: Domestic strength to offset muted US growth While Dr Reddy’s has approval to commercialize the type-2 diabetes and weight loss drug in India and Canada, it also plans to launch in several other countries where the patent is expiring. Due to the API issue, there will be a 3-4 month delay in scale-up plans, but the filings and submissions for approvals are on track, said Israeli. “The most notable countries, in addition to India and Canada, will be markets like Brazil, Turkey, and Mexico, as well as regions like Latin America and North America,” said Israeli.
The BriefWire