Dr. Reddy's Laboratories NYSE: RDY reported what Chief Financial Officer M.V. Narasimham described as a resilient FY 2026 performance, with record annual revenue despite pressure from lower lenalidomide sales and several one-time charges during the fourth quarter.
Narasimham said the company’s underlying base business delivered double-digit growth in both the quarter and the full year, even as reported results were affected by a shelf-stock adjustment tied to lenalidomide, provisions for potential tax liabilities and impairments related to discontinued research programs.
One-Time Items Weigh on Quarterly Results
The company recorded a lenalidomide-related shelf-stock adjustment of INR 453 crores as a reduction in revenue during the quarter. Narasimham also cited an additional INR 114 crores provision related to a potential VAT liability at one subsidiary, as well as impairment charges tied to portfolio decisions.
Those impairments included INR 135 crores, including an INR 6 crores R&D charge, related to discontinuation of CAR T therapy programs, and INR 93 crores related to the discontinuation of a trial by partner Immutep following an interim futility analysis.
After adjusting for these items, Narasimham said profit before tax was INR 994 crores for the quarter, compared with reported PBT of INR 199 crores. For the full year, adjusted PBT was INR 6,463 crores, compared with reported PBT of INR 5,482 crores.
Adjusted revenue, excluding the shelf-stock adjustment, was INR 7,969 crores, or $849 million, for the quarter, down 6% year over year and 9% sequentially. Full-year adjusted revenue was INR 34,046 crores, or $3.63 billion, up 4.6%.
Narasimham said the revenue decline was primarily due to lower lenalidomide sales, while the base business excluding lenalidomide continued to grow at a double-digit rate.
Margins, Cash Flow and Dividend
Gross margin on the adjusted revenue base was 48% for the quarter and 53.5% for the full year. Narasimham said the decline was largely due to lower lenalidomide sales and price erosion in unbranded generics. He said the company expects margins to improve and remain above 50% in FY 2027, supported by cost efficiencies, productivity improvements and new product launches.
Adjusted EBITDA, including other income, was INR 1,554 crores, or $166 million, for the quarter, representing a 19.5% margin on adjusted revenue. For FY 2026, adjusted EBITDA was INR 8,419 crores, or $897 million, representing 24.7% of adjusted revenue.
Profit after tax attributable to equity holders of the parent was INR 220 crores, or $23 million, for the quarter, with diluted EPS of INR 2.64. For the full year, profit after tax was INR 4,285 crores, or $457 million, and diluted EPS was INR 51.42.
The board recommended a dividend of INR 8 per equity share of face value INR 1 each, subject to shareholder approval. The company ended March 31, 2026, with a net cash surplus of INR 3,271 crores, or $349 million.
Semaglutide, Abatacept and Pipeline Updates
Chief Executive Officer Erez Israeli said the company remained focused on a two-pronged strategy: strengthening the base business while investing in future growth drivers across peptides, biosimilars, consumer health and innovation.
Israeli highlighted semaglutide and abatacept as key pipeline assets. He said Dr. Reddy’s became the first company to secure regulatory approval for semaglutide injection for type 2 diabetes in Canada, and noted that the company had launched its semaglutide brand, Obeda, in India following patent expiry. He also said the company’s oral semaglutide version is being approved by India’s CDSCO.
On the earnings call, Israeli said the current Canadian semaglutide market includes Novo Nordisk and two approved generic players, with additional competition likely over time. He said Dr. Reddy’s list price in Canada would be “about half” of Novo Nordisk’s list price, while customer arrangements would not be disclosed.
Israeli said the company still expects meaningful semaglutide volume, though the timing has shifted due to delays in Brazil. He indicated the company expects 6 million to 7 million units by the end of calendar 2026 across markets that receive approval, and said the earlier 12 million-unit expectation may now extend into the beginning of FY 2028.
For abatacept, Israeli said the U.S. Food and Drug Administration accepted the company’s biologics license application for the intravenous presentation of its biosimilar candidate in February 2026, following a December 2025 filing. In response to analyst questions, he said the IV abatacept launch is likely at the beginning of calendar 2027, subject to approval and inspection requirements.
Regional Performance
North America generics revenue was $199 million for the quarter and $1.3 billion for FY 2026. Excluding the one-time shelf-stock adjustment, revenue was $251 million for the quarter, down 40% year over year and 26% sequentially, and $1.36 billion for the full year, down 21%. Israeli said the decline was primarily due to lenalidomide.
The company added seven new products in North America during the quarter and 25 for the year. During the Q&A, Israeli said North America should grow in double digits in FY 2027 excluding lenalidomide and excluding semaglutide, with launches expected to contribute.
Emerging markets revenue was INR 1,806 crores in the quarter, up 29% year over year but down 5% sequentially. Full-year revenue in the segment was INR 6,761 crores, up 23%. Israeli attributed the growth to new product launches, higher volumes and favorable currency movements.
India revenue was INR 1,566 crores in the quarter, up 20% year over year, and INR 6,219 crores for the full year, up 16%. Israeli said India performance was driven by the innovation franchise, new brand launches, price increases and volume growth.
The European business, including the acquired nicotine replacement therapy consumer health business, posted revenue of 136 million in local-currency terms for the quarter, down 3% year over year and sequentially. Full-year revenue was 542 million, reflecting acquisition-led growth of 37%. Israeli said the quarterly decline was mainly due to generics price erosion.
The PSAI business reported Q4 revenue of $101 million, down 10% year over year and up 10% sequentially. Israeli said the decline was mainly due to lower API volume uptake.
FY 2027 Outlook
Narasimham said SG&A spending is expected to remain around FY 2026 levels in nominal terms, while R&D spending is expected to be in the range of 7% to 8% of revenue in FY 2027. He also guided to an effective tax rate of 24% to 25% for the year ahead.
Management said it expects continued cost optimization, new product launches and semaglutide contributions to support profitability. Israeli said the base business is planned to remain around a 20% EBITDA margin, while semaglutide could help move the company closer to its aspirational 25% margin, depending on volume, price and market mix.
Looking ahead, Israeli said Dr. Reddy’s will continue advancing differentiated programs such as semaglutide and abatacept, pursue operational efficiencies and evaluate value-accretive inorganic opportunities to support long-term growth.
About Dr. Reddy's Laboratories NYSE: RDY
Dr. Reddy's Laboratories Ltd. is an India‐based multinational pharmaceutical company that develops, manufactures and markets a wide range of pharmaceutical products and services. Established in 1984 by the late Dr. Kallam Anji Reddy, the company has grown into a diversified healthcare enterprise offering generic and proprietary medicines, active pharmaceutical ingredients (APIs), biosimilars and custom research and manufacturing services (CRAMS). Its portfolio spans therapeutic areas such as oncology, cardiovascular care, dermatology, gastroenterology and pain management.
The company's core activities include the development and commercialization of cost‐effective generic treatments for branded drugs that have lost patent protection, along with in‐house research into innovative molecule development.
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