Dr. Reddy’s outlines semaglutide relaunch in November 2026 and reiterates 6M-7M devices target

Earnings Call Insights: Dr. Reddy's Laboratories Limited (RDY) Q2 FY '27

Management View

• CFO Mannam Venkatanarasimham reported, "The business reported a 1.5% year-over-year decline in revenue, while EBITDA margin was at 20.6% for the quarter," adding, "Consolidated revenue stood at INR 8,671 crores, which is USD 905 million," and "Diluted EPS for the quarter is at INR 11.1."

• CEO Erez Israeli said, "We remain consistent with -- in our strategic priorities of delivering double-digit growth across geographies and sustainable profitability," and tied Q2 margin delivery to execution: "We achieved an EBITDA margin of 20.6%, supported by the strength of our base business and our continued efforts to drive productivity."

• On semaglutide recovery, CEO Israeli stated, "Subject to successful validation, we expect to relaunch semaglutide both directly as well as through our partners in November 2026," and emphasized continued pipeline progress: "We also remain focused on advancing abatacept and other complex generics as they move through the regulatory review process in the coming quarters."

• CEO Israeli highlighted multiple partnerships and approvals, including, "We partnered with Takeda to bring India's first approved dengue vaccine, we call it QDENGA, to the private markets in India in the first half of 2027," and, "We received U.S. FDA approval for rituximab biosimilar, which will be commercialized in the U.S. through our partners, Fresenius Kabi."

• In segment performance commentary, CEO Israeli said, "Our North America generic business reported revenue of $264 million for the quarter," and described launch activity: "During the quarter, we launched 6 new products, including first-to-market launch of sugammadex injection."

Outlook

• On semaglutide demand and restart mechanics, CEO Erez Israeli said, "I'm very confident. And the confidence is based on orders that we already have," while noting gating items: "We still need to have the results of the validation. So this is still pending but I'm confident that it will be successful. And then we are ready to launch."

• CEO Israeli reiterated volume targets and longer-run planning: "You've talked about we are still adhering to our guidance of 6 million to 7 million devices this year," and, "the run rate of 12 million to 15 million pens that we discussed in the past is still my estimate... take it as a very tentative number."

• On gross margin framing, CFO Mannam Venkatanarasimham said, "we want to be, gross margin in the range of 50% to 55%," and CEO Israeli added directionally, "It will only go better from here."

• On R&D intensity, CFO Venkatanarasimham guided, "coming quarters, what we believe our R&D is going to be in the range of 7% to 8%."

Financial Results

• CFO Mannam Venkatanarasimham detailed profitability and drivers: "Consolidated gross profit margin was at 52.1%," "The SG&A spend was at INR 2,808 crores," "The R&D spend was at INR 524 crores," and "The profit before tax was at INR 1,228 crores."

• Cash and balance sheet items included, "Cash flow during the quarter was INR 171 crores," and "As of 30th September, we have a net cash surplus of INR 2,502 crores, which is USD 261 million."

• On cost pressure persistence linked to geopolitics, CFO Venkatanarasimham said, "we have seen the increase in the -- on the 3 fronts," and quantified, "overall, it has an impact close to 100 basis points on the EBITDA... we believe... this trend will continue for Q3 and Q4 as well."

Q&A

• Neha Manpuria, BofA Securities: asked if semaglutide resumption uses Dr. Reddy’s own API/partner and confidence vs prior guidance; CEO Erez Israeli replied, "The main issue was with our ability to scale up the API. This problem is solved and we shipped all the necessary API to our partner," adding, "Most of the quantities will go to Canada."

• Neha Manpuria, BofA Securities: asked what drove gross margin improvement and if it is the bottom; CFO Mannam Venkatanarasimham said, "This improvement... is a combination of the new products and the business mix," and CEO Erez Israeli added, "And your assumption is correct" and "It will only go better from here."

• Kunal Dhamesha, Macquarie: asked about a large INR 1,370 crores change in other assets/liabilities; CFO Venkatanarasimham said, "this SSA claim... the payments have happened this quarter," adding, "If you remember, $50 million what we have provided in the Q4 during this H1."

• Kunal Dhamesha, Macquarie: asked drivers of U.S. sequential revenue and margin delta; CEO Erez Israeli said, "the main driver is actually the business mix," and added, "The second is... the U.S. is more profitable because of the contribution of the new product."

• Damayanti Kerai, HSBC: asked why API shipped before validation and the validation sequence; CEO Israeli explained, "you need now to do validation on the drug products using that API... about 3 weeks," and added, "you have basically validation in each stage."

• Damayanti Kerai, HSBC: asked semaglutide approvals expansion; CEO Israeli said, "The right number is now 89 markets," and "Some of the approval in some other markets got delayed because of the scale-up as we needed to ship them samples."

• Damayanti Kerai, HSBC: asked NRT recovery timing; CEO Israeli said, "it's -- the comparison year-over-year will be until we will finish the year," and, "The profitability is way above the expectations that we put in the business model."

• Tausif Shaikh, BNP Paribas: asked abatacept update; CEO Israeli said, "We are still waiting for the EIR to come," and, "the goal date is indeed December 22 and we are hoping for an approval."

• Foram Parekh, BOB Capital Markets: asked Europe growth trajectory and NRT; CEO Israeli said, "The next quarter should be better," and, "as for Europe, I'm expecting growth but it will not be significant growth this year," adding, "Ex-NRT Europe... should grow probably single digit this year."

• Vishal Manchanda, Systematix: asked rituximab Europe market share and capacity; CEO Israeli said, "We have a single digit of market share in Europe," then clarified, "Low single digits," and added, "we were constrained by capacity."

• Vivek Agrawal, Citi: asked abatacept market share potential and approval risk; CEO Israeli said, "a fair market share can be any number from 15% to 25%," and cautioned, "If you ask me, is there a chance that we'll get a CRL, there is a chance."

• Aman Vij, Astute Investment: asked semaglutide launches in Brazil and other markets; CEO Israeli said, "Brazil likely in Q4, the beginning of Q4," and, "Some of it may come to the markets in Q3, some will come in January."

• Saion Mukherjee, Nomura: asked PSAI/CDMO growth and $100 million-plus revenue mix; CEO Israeli said, "Our CDMO business under Aurigene Pharmaceutical Services generated revenues over $100 million in the last 12 months," and projected, "I believe that this business should grow and should reach 2 to 3x of these numbers in the next 3 to 4 years."

Sentiment Analysis

• Analysts’ tone was slightly negative to pressing on execution risk and sustainability, reflected in repeated probing on semaglutide restart, margins, and abatacept approval risk (e.g., "how confident are we of meeting the guidance" and "any possibility of getting CRL").

• Management tone was slightly positive in prepared remarks and more assertive in Q&A, with CEO Erez Israeli stating, "I'm very confident," and reinforcing margin ambition: "we're actually aiming for the famous 25%."

• Compared with the prior quarter’s focus on disruption and provisions, the current call’s tone shifted toward normalization and relaunch readiness, with CEO Israeli saying semaglutide timing is "consistent with the time lines communicated earlier," versus Q1’s emphasis on semaglutide-related margin drag and remediation.

Quarter-over-Quarter Comparison

• Profitability language tightened from Q1’s reported "EBITDA margin of 12.5%" (including semaglutide-related provision) to Q2’s reported "EBITDA margin was at 20.6%," alongside management’s repeated references to mix and cost control as margin supports.

• Semaglutide narrative progressed from Q1 planning to "resume semaglutide commercial supplies by November" to Q2 stating, "we expect to relaunch semaglutide... in November 2026," while remaining contingent on validation.

• Business mix commentary sharpened in Q2, with CEO Israeli pointing to higher-profit geographies: "India, EM and the NRT... went to 53%," compared with Q1’s greater emphasis on disruptions (semaglutide provision, Middle East freight/solvents) as primary drivers.

Risks and Concerns

• CEO Erez Israeli flagged remaining execution risk on semaglutide restart: "We still need to have the results of the validation. So this is still pending."

• CFO Mannam Venkatanarasimham cited cost headwinds tied to geopolitics and logistics: "elevated freight costs due to supply chain disruptions arising from the Middle East crisis," and said the trend should persist: "we believe... this trend will continue for Q3 and Q4 as well."

• On abatacept outcome uncertainty, CEO Israeli said, "It's obviously in the hand of the U.S. FDA," and separately added, "there is a chance" of a CRL.

Final Takeaway

Management presented Q2 as a margin-recovery quarter driven by base-business growth and mix, while positioning semaglutide for a November 2026 relaunch pending validation and keeping the 6 million to 7 million device target intact. Leadership also emphasized near-term biosimilar milestones (rituximab U.S. approval via partner and abatacept awaiting a December 22 goal date), while acknowledging ongoing risk from validation timing, U.S. FDA outcomes, and continued cost pressure from Middle East-related inputs and logistics.

Read the full Earnings Call Transcript

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