Dr. Reddy's Laboratories Q3 Earnings Call Highlights

Core Insights - Dr. Reddy's Laboratories reported a resilient performance in its fiscal third quarter of FY26, with revenue growth and steady profitability despite product-specific headwinds, particularly lower lenalidomide sales and pricing pressure in generics markets [7] Financial Performance - Profit after tax attributable to equity holders was ₹1,210 crore ($135 million), down 14% year over year and 16% sequentially, with diluted EPS of ₹14.52 [1] - Consolidated revenue rose 4.4% year over year to ₹8,727 crore ($971 million), though it declined 0.9% sequentially [6] - The company ended the quarter with a net cash surplus of ₹3,069 crore ($342 million) and reported free cash flow of ₹374 crore ($42 million) [1] Research and Development - R&D spend was ₹615 crore ($68 million), down 8% year over year, attributed to lower biosimilar development spend as significant investment related to Abatacept has been completed [2] Selling, General and Administrative Expenses - SG&A increased 12% year over year to ₹2,692 crore ($300 million), accounting for about 31% of revenue, reflecting targeted investments in branded franchises and foreign exchange effects [3] Margins - Gross margin fell to 53.6%, down 505 basis points year over year and 104 basis points sequentially, due to lower lenalidomide sales and price erosion in unbranded generics [4] - Reported EBITDA margin was 23.5%, including a one-time provision related to changes in employee benefit obligations; excluding that provision, EBITDA margin was 24.8% [5] Strategic Initiatives - The company is focused on base business growth, efficiency, and advancing key pipeline programs, including collaborations and new product launches [8] - A strategic collaboration with Immutep for commercialization of the immunotherapy drug eftilagimod alpha includes a $20 million upfront payment and potential milestones of up to $350 million [9] Product Launches and Approvals - The company launched a novel recombinant vaccine for hepatitis E virus infection in India and plans to launch semaglutide injection in India on March 21 [10][11] - The company received European Commission approval for its ustekinumab biosimilar and launched the product in Germany [15] Regional Performance - North America generics revenue was $338 million, down 16% year over year, attributed to lower lenalidomide sales and price erosion [18] - Emerging markets revenue rose 32% year over year to ₹1,896 crore, driven by new launches and favorable foreign exchange [21] - India revenue increased 19% year over year to ₹1,603 crore, supported by innovation franchise and new brand launches [22] Future Outlook - Management reiterated its focus on execution, including advancing semaglutide and abatacept, improving base business growth, and pursuing value-accretive acquisitions [23]