Dr Reddy’s Q2 Results: Net profit falls as lower Lenalidomide sales hit revenue; beats estimates

Drugmaker Dr Reddy’s Laboratories Ltd on Friday (October 23) reported a 36% year-on-year (YoY) decline in net profit to ₹913.4 crore for the September quarter, compared with ₹1,426.8 crore a year ago. However, net profit was above the CNBC-TV18 poll estimate of ₹650.8 crore.

Revenue declined 1.5% year-on-year (YoY) to ₹8,671 crore from ₹8,805.1 crore, but rose 7% quarter-on-quarter (QoQ). The company’s Q2 revenue exceeded the CNBC-TV18 poll estimate of ₹8,409 crore. For the first half of FY27, consolidated revenue grew 3.5% YoY to ₹16,740 crore.

Revenue growth was affected primarily by lower lenalidomide sales in North America. The underlying base business, excluding lenalidomide in North America, continued to deliver double-digit growth across businesses, except Europe and active pharmaceutical ingredients (API), with favourable currency movements providing additional support.

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 24.2% YoY to ₹1,783 crore from ₹2,351.1 crore. However, the figure was significantly above the CNBC-TV18 poll estimate of ₹1,192.6 crore.

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The EBITDA margin declined to 20.6% in the September quarter from 26.7% a year ago, but was higher than the CNBC-TV18 poll estimate of 14.2%.

Global Generics

Global Generics (GG) revenue declined 0.7% YoY to ₹77.9 billion (₹7,790 crore) in Q2 FY27, while growing 8% QoQ. The segment accounted for 90% of consolidated revenue during the quarter. For H1 FY27, Global Generics revenue declined 2.7% YoY to ₹149.9 billion (₹14,990 crore), also accounting for 90% of consolidated revenue.

Branded businesses, comprising India, Emerging Markets and the acquired consumer health portfolio in Nicotine Replacement Therapy (NRT), accounted for 53% of consolidated revenue in Q2 FY27 and 52% in H1 FY27.

North America

North America revenue declined 23% YoY to ₹24.9 billion (₹2,490 crore) in Q2 FY27 but increased 13% QoQ. For H1 FY27, revenue fell 29% YoY to ₹46.9 billion (₹4,690 crore). The decline was largely attributable to lower lenalidomide sales.

The company launched six new products in North America during the quarter, taking the total to 12 product launches in H1 FY27. It filed five new Abbreviated New Drug Applications (ANDAs) with the US Food and Drug Administration (USFDA) during Q2, bringing the H1 FY27 total to 10.

As of September 30, 2026, 80 filings were pending USFDA approval. These comprised 77 ANDAs, including 46 Paragraph IV applications, of which 27 may have a “First to File” status, and three New Drug Applications (NDAs) filed under Section 505(b)(2), including one Paragraph IV application.

Emerging Markets

Emerging Markets revenue grew 24% YoY and 12% QoQ to ₹20.6 billion (₹2,060 crore) in Q2 FY27, accounting for 24% of consolidated revenue. For H1 FY27, revenue increased 23% YoY to ₹38.9 billion (₹3,890 crore), representing 23% of consolidated revenue. Growth was largely driven by new product launches across markets and favourable foreign exchange movements.

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Russia revenue increased 15% YoY and 12% QoQ to ₹10.1 billion (₹1,010 crore) in Q2 FY27. For H1 FY27, revenue grew 21% YoY to ₹19.1 billion (₹1,910 crore). Growth was supported by acquisitions, price increases and favourable currency movements.

Revenue from other Commonwealth of Independent States (CIS) countries and Romania rose 13% YoY and 21% QoQ to ₹2.6 billion (₹260 crore) in Q2 FY27. For H1 FY27, revenue increased 12% YoY to ₹4.8 billion (₹480 crore). Favourable currency movements were the key growth driver.

Rest of the World (RoW) revenue rose 44% YoY and 11% QoQ to ₹7.9 billion (₹790 crore) in Q2 FY27. For H1 FY27, revenue increased 43% YoY to ₹15 billion (₹1,500 crore). Growth was led by new product launches across countries, supported by favourable currency movements. Dr Reddy’s launched 27 new products across Emerging Markets during Q2 FY27, taking the H1 FY27 total to 70.

India

India revenue increased 17% YoY and 8% QoQ to ₹18.5 billion (₹1,850 crore) in Q2 FY27, accounting for 21% of consolidated revenue. For H1 FY27, revenue rose 17% YoY to ₹35.7 billion (₹3,570 crore), also accounting for 21% of consolidated revenue. Growth was driven by new brand launches, price increases, volume growth and contributions from recently acquired portfolios.

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According to IQVIA data published for September 2026, Dr Reddy’s ranked eighth in the Indian Pharmaceutical Market (IPM) on a Moving Quarterly Total (MQT) basis and ninth on a Moving Annual Total (MAT) basis.

The company continued to outperform the market, with secondary sales growth of 21% against IPM growth of 14.7% on an MQT basis. On an MAT basis, secondary sales grew 19.4%, compared with IPM growth of 13.2%. The company launched four new brands in India during Q2 FY27, taking the total to 11 for H1 FY27.

Europe

Europe revenue increased 1% YoY but declined 3% QoQ to ₹13.9 billion (₹1,390 crore) in Q2 FY27, accounting for 16% of consolidated revenue. For H1 FY27, revenue grew 7% YoY to ₹28.4 billion (₹2,840 crore), representing 17% of consolidated revenue.

Revenue from new generic product launches and favourable currency movements partly offset pricing pressure in generics. NRT revenue declined primarily due to the continuing effect of an operating model change following integration, as reported in Q1 FY27.

NRT revenue declined 6% YoY and was flat QoQ at ₹6.6 billion (₹660 crore) in Q2 FY27. For H1 FY27, NRT revenue fell 4% YoY to ₹13.1 billion (₹1,310 crore). Germany revenue declined 1% YoY and 3% QoQ to ₹3.9 billion (₹390 crore) in Q2 FY27. For H1 FY27, Germany revenue increased 12% YoY to ₹8 billion (₹800 crore).

UK revenue grew 24% YoY but declined 16% QoQ to ₹1.9 billion (₹190 crore) in Q2 FY27. For H1 FY27, revenue rose 29% YoY to ₹4.3 billion (₹430 crore).  Revenue from the rest of Europe increased 20% YoY but declined 2% QoQ to ₹1.5 billion (₹150 crore) in Q2 FY27. For H1 FY27, revenue grew 24% YoY to ₹3 billion (₹300 crore). The company launched six new products in Europe during Q2 FY27, taking the total to 30 for H1 FY27.

Pharmaceutical Services and Active Ingredients

Pharmaceutical Services and Active Ingredients (PSAI) revenue declined 12% YoY and 2% QoQ to ₹8.3 billion (₹830 crore) in Q2 FY27. For H1 FY27, revenue fell 5% YoY to ₹16.8 billion (₹1,680 crore).

Lower volume uptake in the API business was partly offset by double-digit growth in the contract development and manufacturing organisation (CDMO) business and favourable currency movements.

Dr Reddy’s filed 28 Drug Master Files (DMFs) globally during Q2 FY27, taking the total to 66 for H1 FY27.

Gross Margins

Gross margin stood at 52.1% in Q2 FY27, down 254 basis points (bps) YoY but up 562 bps QoQ. The margin comprised 56.2% for Global Generics and 11.8% for PSAI. For H1 FY27, gross margin was 49.4%, down 635 bps YoY, with Global Generics at 54% and PSAI at 1.1%.

The decline in gross margin for both the September quarter and the first half of FY27 was primarily due to lower lenalidomide sales in North America. The company also stated that Q1 FY27 margins were affected by the semaglutide API-related impact.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses increased 6% YoY to ₹28.1 billion (₹2,810 crore) in Q2 FY27, but declined 3% QoQ. SG&A expenses accounted for 32.4% of revenue in Q2 FY27, compared with 30% in Q2 FY26 and 35.7% in Q1 FY27.

For H1 FY27, SG&A expenses rose 9% YoY to ₹56.9 billion (₹5,690 crore). As a percentage of revenue, these expenses stood at 34% in H1 FY27, compared with 30% in H1 FY26.

The YoY increase in SG&A expenses was primarily attributable to higher personnel costs, including increments, adverse currency movements and elevated outward freight costs due to supply chain disruptions arising from the Middle East crisis.

Research and Development Expenses

Research and development (R&D) expenses declined 16% YoY and 9% QoQ to ₹5.2 billion (₹520 crore) in Q2 FY27. R&D expenses accounted for 6% of revenue, compared with 7% in Q2 FY26 and 7.1% in Q1 FY27.

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For H1 FY27, R&D expenses fell 12% YoY to ₹11 billion (₹1,100 crore), accounting for 6.6% of revenue, compared with 7.2% in H2 FY26. The company attributed the lower expenditure to reduced development spending in generics.

Profit Before Tax

Profit before tax (PBT) declined 33% YoY to ₹12.3 billion (₹1,230 crore) in Q2 FY27, but increased 122% QoQ. PBT margin stood at 14.2% in the September quarter, compared with 20.8% in Q2 FY26 and 6.8% in Q1 FY27.

For H1 FY27, PBT declined 52% YoY to ₹17.8 billion (₹1,780 crore). PBT as a percentage of revenue fell to 10.6% from 21.6% in H1 FY26.

Income Tax

Income tax expense stood at ₹3.1 billion (₹310 crore) in Q2 FY27. Tax as a percentage of PBT was 25.6%, compared with 22.2% in Q2 FY26 and 21.3% in Q1 FY27.

For H1 FY27, income tax expense amounted to ₹4.3 billion (₹430 crore), with the effective tax rate at 24.3%, compared with 24.2% in H1 FY26. The company attributed the higher effective tax rate in Q2 FY27 primarily to an adverse jurisdictional mix compared with the year-ago quarter.

Diluted earnings per share (EPS) stood at ₹11.10 for Q2 FY27 and ₹16.42 for H1 FY27. Shares of Dr Reddy's Laboratories Ltd ended at ₹1,224.50, down by ₹14.50, or 1.17%, on the BSE.