This article first appeared on GuruFocus .
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Revenue:INR8,071 crores (USD853 million), a decline of 5.6% year-over-year, growth of 7.4% sequentially.
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EBITDA Margin:12.5%, impacted by semaglutide API-related challenges; excluding this, margin was 15.4%.
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Gross Profit Margin:46.5%, a decrease of 1,039 basis points year-over-year, increase of 169 basis points sequentially.
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SG&A Expenses:INR2,882 crores, 36% of revenues, increased by 12% year-over-year.
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R&D Spend:INR577 crores, 7.1% of revenues, declined by 8% year-over-year.
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Profit Before Tax:INR553 crores (USD58 million), margin of 6.8%; excluding semaglutide impact, margin was 9.8%.
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Effective Tax Rate:21.3%, down from 26% in the previous year.
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Profit After Tax:INR443 crores (USD47 million), margin of 5.5%.
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Operating Working Capital:INR14,353 crores (USD1.52 billion), decreased by INR81 crores from March 31, 2026.
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CapEx Cash Outflow:INR307 crores (USD32 million).
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Net Cash Surplus:INR3,057 crores (USD323 million).
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North America Revenue:$236 million, 27% of overall revenue, declined 41% year-over-year, grew 19% sequentially.
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Emerging Markets Revenue:INR1,833 crores, 22% of overall revenues, growth of 31% year-on-year.
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India Revenue:INR1,780 crores, 21% of overall revenues, growth of 17% year-on-year.
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European Business Revenue:$131 million, 18% of overall revenues, broadly in line year-over-year.
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PSAI Business Revenue:$91 million, 11% of overall revenues, declined 5% year-over-year.
Release Date: July 22, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Dr Reddy's Laboratories Ltd ( NYSE:RDY ) reported healthy double-digit growth in its underlying base business across key geographies, including North America.
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The company successfully launched several key complex generic products, such as Bosutinib in the United States and semaglutide in Canada and India.
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Dr Reddy's Laboratories Ltd ( NYSE:RDY ) achieved significant milestones in its access agenda, including securing Thai FDA approval for Zoliflodacin, a first-in-class treatment for uncomplicated gonorrhea.
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The company maintained a strong cash position with a net cash surplus of INR3,057 crores (USD323 million) as of June 30, 2026.
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Dr Reddy's Laboratories Ltd ( NYSE:RDY ) continues to focus on strengthening its base business and building future growth engines in peptides, biosimilars, consumer health, and innovation.
Negative Points
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The company experienced a revenue decline of 5.6% year-over-year, primarily due to lower lenalidomide sales and semaglutide API-related challenges.
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EBITDA margin was adversely impacted, standing at 12.5% for the quarter, reflecting the semaglutide-related issues and Middle East conflict.
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The SG&A expenses increased by 12% year-over-year, driven by higher personnel costs, adverse ForEx movements, and elevated freight costs.
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Dr Reddy's Laboratories Ltd ( NYSE:RDY ) faced challenges in the US market with a decline in North America revenue due to lower lenalidomide sales.
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The company encountered regulatory challenges, receiving a Form 483 with seven observations from the US FDA at its biologics manufacturing facility.
Q & A Highlights
Q: Given the current high teens EBITDA margin, how should we think about margin improvement, especially with uncertainties around semaglutide? A: Erez Israeli, CEO: The high teens margin is around 18% this quarter. We maintain our guidance of being in the neighborhood of 20% EBITDA margin, even without semaglutide. We expect margins to improve once semaglutide supplies resume in November.
Q: Can you provide an update on the abatacept inspection and any ongoing dialogue with the US FDA? A: Erez Israeli, CEO: The seven observations from the inspection are different from the previous ones and are addressable. We have submitted our response to the FDA. As for the BLA, we have not received any queries, and the goal date remains December.
Q: What is the strategy for semaglutide API supply, and how much capacity is reserved for captive consumption? A: Erez Israeli, CEO: We have ample capacity for both third-party and captive consumption. The theoretical capacity can go up to 550, but the focus is on quality rather than capacity. We plan to supply 6 to 7 million pens between November and March.
Q: How do you assess the competition and market share for semaglutide in targeted markets? A: Erez Israeli, CEO: We expect to sell 6 to 7 million pens, backed by orders. While we lost four months of sales, the demand remains high, and we believe the product will continue to perform well despite new entrants.
Q: What is the impact of the Middle East conflict on freight costs, and how do you see it affecting the rest of the year? A: MV Narasimham, CFO: The conflict has increased solvent and freight costs, impacting EBITDA by about 1%. We expect these elevated costs to persist until December if the conflict continues.
Q: Can you provide clarity on the US business growth despite new product launches and acquisitions? A: Erez Israeli, CEO: The US market faces significant price erosion, which new products have to compensate for. While the US market shows low single-digit growth, the portfolio supports growth in emerging markets and Europe, providing a good ROI overall.
Q: What is the status of the nicotine replacement therapy (NRT) business post-integration? A: Erez Israeli, CEO: The NRT business is on a growth trajectory. The decline this quarter was due to inventory cutoffs and timing of tenders. The business continues to have healthy margins and growth prospects.
Q: What is the outlook for biologics and peptides, and when do you expect them to be profitable? A: Erez Israeli, CEO: Biologics currently account for about 2% of sales. We expect profitability upon the launch of abatacept. The focus is on future growth in peptides and biosimilars, with significant R&D investment in products post-2034.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
