Dr Reddy'S Laboratories Ltd

Latest Results (10.02.2026):

Dr Reddy'S Laboratories Ltd — Q2 FY26 (quarter ended September 30, 2025): Consolidated Q2 revenues were ₹88,051 Mn (up 9.8% YoY, 3% QoQ) and profit after tax attributable to equity holders was ₹14,372 Mn (up 14% YoY). EBITDA was ₹23,511 Mn (26.7% of revenues). Gross margin narrowed to 54.7% (down ~492 bps YoY) driven by U.S. product price erosion, lower Lenalidomide sales and some one‑time inventory provisions. Management cited branded market momentum and NRT (nicotine replacement therapy) contributions that helped offset U.S. generic weakness; key one‑offs (VAT provision and pipeline discontinuation charges) influenced margins and SG&A. Net cash surplus stood at ₹27.5 B and free cash flow for the quarter was ₹5.8 B.

Major financials

Q2FY26 revenues ₹88,051 Mn (+9.8% YoY, +3% QoQ); EBITDA ₹23,511 Mn (26.7% of revenues); PBT ₹18,350 Mn (down 4% YoY/QoQ); PAT attributable to equity holders ₹14,372 Mn (+14% YoY); diluted EPS ₹17.25 for the quarter. H1FY26 revenues ₹173,503 Mn (+11% YoY) and H1 PAT ₹28,549 Mn (+8% YoY).

Margins and costs

Gross margin fell to 54.7% in Q2 (from 59.6% a year ago) due to U.S. price erosion, lower Lenalidomide volumes and inventory provisions; SG&A rose to 30.0% of revenues (driven by NRT and branded investments plus a ~₹0.7 B potential VAT liability), while R&D was 7.0% of revenues (lower YoY as biosimilar spend moderated).

Segment performance

Global Generics grew ~10% YoY (₹78,498 Mn). North America declined (Q2 ₹32,408 Mn, -13% YoY) due to price erosion and Lenalidomide decline. Europe surged (Q2 ₹13,762 Mn, +138% YoY; excluding NRT growth +17% YoY) largely driven by the acquired NRT portfolio. India +13% YoY; Emerging Markets +14% YoY; PSAI +12% YoY.

Cash, balance sheet and capital

Cash & equivalents + investments ₹74,393 Mn; net cash surplus ₹27,508 Mn; net debt/equity (0.08) (net cash position). Operating working capital ₹133.3 B as of Sep 30, 2025. Q2 capex ₹5.1 B and quarterly free cash flow post-acquisitions ₹5.8 B. Annualised RoCE at 21.9%.

Business development & launches

Q2FY26 included acquisition of STUGERON® portfolio (~$50.5M), further integration of NRT business (two‑thirds integrated), and multiple launches: Linaclotide (Colozo®) and Tegoprazan (PCAB®) in India; U.S. launches including sacubitril‑valsartan generic and an authorized generic of fluorouracil cream; first INN loxoprofen launch in Russia.

Pipeline & regulatory progress

Positive CHMP opinion for denosumab biosimilar candidate; SEC recommended permission for semaglutide injection in India; IND accepted for COYA 302 (ALS). Filed ANDAs and DMFs: US filings pending 75 (73 ANDAs incl. 45 Para IV) and ongoing submissions in H1FY26.

Regulatory inspections and risks

Several U.S. FDA outcomes: multiple Form 483s (FTO‑11 Srikakulam, biologics facility Bachupally, Mirfield UK API) and three VAI outcomes (Srikakulam PAI classified VAI; CTO‑5 Miryalaguda VAI; Middleburgh API VAI). Management highlighted these inspection observations and one‑time charges related to discontinued pipeline items as near‑term considerations.

ESG & other highlights

Retained MSCI ESG Rating A; improved Sustainalytics score (23.6 → 18.4); achieved TÜV SÜD Diamond Standard for 99.9% waste diversion; Srikakulam formulations facility received LEED Platinum (existing buildings) — first in India for pharma.

Management commentary

Co‑Chairman & MD G V Prasad said Q2 growth was driven by branded markets and NRT offsetting U.S. Lenalidomide decline; priorities remain strengthening core business, advancing pipeline assets, productivity and business development.