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Dr. Reddy's Q1 Earnings Beat Estimates, Generics Sales Boost Revenues
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Key Takeaways
RDY posted Q1 earnings of 20 cents per ADS and $997M in sales; beats consensus Zacks estimates on both counts.
Global Generics rose 10%, led by Europe's Nicotine Therapy and strong branded market performance.
RDY and ALVO signed a global deal to co-develop a biosimilar to Merck's cancer drug Keytruda.
Dr. Reddy's Laboratories Limited (RDY - Free Report) reported first-quarter fiscal 2026 earnings of 20 cents per American Depositary Share (ADS), which beat the Zacks Consensus Estimate of 18 cents. The company reported earnings of 19 cents per ADS in the year-ago quarter.
Revenues grew 11% year over year to $997 million, surpassing the Zacks Consensus Estimate of $951 million. The year-over-year improvement was primarily driven by growth in global generics revenues.
RDY’s Q1 Results in Detail
Dr. Reddy’s reported revenues under three segments — Global Generics, Pharmaceutical Services & Active Ingredients (PSAI) and Others.
Global Generics revenues totaled INR 75.6 billion, up 10% year over year. The increase was primarily driven by revenues from the acquired Nicotine Replacement Therapy portfolio in the Europe segment and sustained performance in RDY’s branded markets.
Dr. Reddy’s launched five new products in the United States during the reported quarter. However, revenues in the North America segment declined 11% primarily due to increased price erosion in certain key products, including Lenalidomide.
As of June 30, 2025, a total of 73 generic filings were pending approval from the FDA, comprising 70 abbreviated new drug applications (ANDAs) and three new drug applications. Of these 70 ANDAs, 43 were Para IVs.
Shares of Dr. Reddy’s have lost 7.5% year to date compared with the industry’s 11.4% decline.
Image Source: Zacks Investment Research
PSAI revenues amounted to INR 8.2 billion, up 7% year over year. The improvement was driven by the launch of new active pharmaceutical ingredients and favorable forex, partially offset by lower pricing and softer demand. Growth in the pharmaceutical services business also contributed to the year-over-year increase.
Revenues in the Others segment totaled INR 1.65 billion, up significantly on a year-over-year basis.
Gross margin declined 350 basis points to 56.9% in the first quarter of fiscal 2026 due to higher price erosion in generics and reduced operating leverage, partially offset by favorable product mix.
Research and development (R&D) expenses of $73 million were relatively flat year over year.
Selling, general and administrative expenses totaled $299 million, up 13% year over year. The rise was primarily driven by increased sales and marketing investments aimed at enhancing existing brands and supporting new consumer healthcare initiatives.
Key Update From RDY
During the reported quarter, Dr. Reddy’ssigned a collaboration and license agreement with Alvotech (ALVO - Free Report) to co-develop and commercialize a biosimilar candidate to Merck’s (MRK - Free Report) blockbuster PD-L1 inhibitor, Keytruda (pembrolizumab), across the world.
Per the latest agreement, RDY and ALVO will jointly share all costs for developing and manufacturing the biosimilar candidate to MRK’s Keytruda, which is approved for treating several types of cancer indications. Each company will hold the right to commercialize the product globally upon successful development.
Keytruda, Merck’s biggest revenue driver, generated sales worth $29.5 billion in 2024. Sales of the drug grew 6% year over year to $7.21 billion in the first quarter of 2025. Keytruda has played an instrumental role in driving Merck’s steady revenue growth in the past few years.
Dr. Reddy's Laboratories Ltd Price, Consensus and EPS Surprise
Please note that Dr. Reddy’sand Alvotech originally signed a license and supply agreement in 2024 for the commercialization of AVT03, a biosimilar candidate to Amgen’s (AMGN - Free Report) Prolia and Xgeva (denosumab). Earlier this year, RDY and ALVO announced the FDA’s acceptance of a regulatory filing seeking approval of AVT03 for review.
The biologic license application was submitted under the 351(k) pathway, which is the FDA’s biosimilar application process. AVT03 is a human monoclonal antibody developed by Alvotech.
Amgen's Prolia treats osteoporosis in postmenopausal women at high risk of fractures, especially when other treatments are ineffective. AMGN’s Xgeva helps prevent fractures, spinal cord compression and the need for bone-related surgery or radiation in patients with multiple myeloma or bone metastases from solid tumors.
RDY's Zacks Rank
Dr. Reddy’s carries a Zacks Rank #4 (Sell) at present.
Image: Bigstock
Dr. Reddy's Q1 Earnings Beat Estimates, Generics Sales Boost Revenues
Key Takeaways
Dr. Reddy's Laboratories Limited (RDY - Free Report) reported first-quarter fiscal 2026 earnings of 20 cents per American Depositary Share (ADS), which beat the Zacks Consensus Estimate of 18 cents. The company reported earnings of 19 cents per ADS in the year-ago quarter.
Revenues grew 11% year over year to $997 million, surpassing the Zacks Consensus Estimate of $951 million. The year-over-year improvement was primarily driven by growth in global generics revenues.
RDY’s Q1 Results in Detail
Dr. Reddy’s reported revenues under three segments — Global Generics, Pharmaceutical Services & Active Ingredients (PSAI) and Others.
Global Generics revenues totaled INR 75.6 billion, up 10% year over year. The increase was primarily driven by revenues from the acquired Nicotine Replacement Therapy portfolio in the Europe segment and sustained performance in RDY’s branded markets.
Dr. Reddy’s launched five new products in the United States during the reported quarter. However, revenues in the North America segment declined 11% primarily due to increased price erosion in certain key products, including Lenalidomide.
As of June 30, 2025, a total of 73 generic filings were pending approval from the FDA, comprising 70 abbreviated new drug applications (ANDAs) and three new drug applications. Of these 70 ANDAs, 43 were Para IVs.
Shares of Dr. Reddy’s have lost 7.5% year to date compared with the industry’s 11.4% decline.
Image Source: Zacks Investment Research
PSAI revenues amounted to INR 8.2 billion, up 7% year over year. The improvement was driven by the launch of new active pharmaceutical ingredients and favorable forex, partially offset by lower pricing and softer demand. Growth in the pharmaceutical services business also contributed to the year-over-year increase.
Revenues in the Others segment totaled INR 1.65 billion, up significantly on a year-over-year basis.
Gross margin declined 350 basis points to 56.9% in the first quarter of fiscal 2026 due to higher price erosion in generics and reduced operating leverage, partially offset by favorable product mix.
Research and development (R&D) expenses of $73 million were relatively flat year over year.
Selling, general and administrative expenses totaled $299 million, up 13% year over year. The rise was primarily driven by increased sales and marketing investments aimed at enhancing existing brands and supporting new consumer healthcare initiatives.
Key Update From RDY
During the reported quarter, Dr. Reddy’ssigned a collaboration and license agreement with Alvotech (ALVO - Free Report) to co-develop and commercialize a biosimilar candidate to Merck’s (MRK - Free Report) blockbuster PD-L1 inhibitor, Keytruda (pembrolizumab), across the world.
Per the latest agreement, RDY and ALVO will jointly share all costs for developing and manufacturing the biosimilar candidate to MRK’s Keytruda, which is approved for treating several types of cancer indications. Each company will hold the right to commercialize the product globally upon successful development.
Keytruda, Merck’s biggest revenue driver, generated sales worth $29.5 billion in 2024. Sales of the drug grew 6% year over year to $7.21 billion in the first quarter of 2025. Keytruda has played an instrumental role in driving Merck’s steady revenue growth in the past few years.
Dr. Reddy's Laboratories Ltd Price, Consensus and EPS Surprise
Dr. Reddy's Laboratories Ltd price-consensus-eps-surprise-chart | Dr. Reddy's Laboratories Ltd Quote
Please note that Dr. Reddy’sand Alvotech originally signed a license and supply agreement in 2024 for the commercialization of AVT03, a biosimilar candidate to Amgen’s (AMGN - Free Report) Prolia and Xgeva (denosumab). Earlier this year, RDY and ALVO announced the FDA’s acceptance of a regulatory filing seeking approval of AVT03 for review.
The biologic license application was submitted under the 351(k) pathway, which is the FDA’s biosimilar application process. AVT03 is a human monoclonal antibody developed by Alvotech.
Amgen's Prolia treats osteoporosis in postmenopausal women at high risk of fractures, especially when other treatments are ineffective. AMGN’s Xgeva helps prevent fractures, spinal cord compression and the need for bone-related surgery or radiation in patients with multiple myeloma or bone metastases from solid tumors.
RDY's Zacks Rank
Dr. Reddy’s carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.