Dr Reddy's targets new launches, potential M&A as gRevlimid tapers off in America

Narasimham told Moneycontrol in a recent interview that he is confident of achieving ‘sustained double-digit sales growth trajectory’ in FY26, with EBITDA and Return on Capital Employed (ROCE) at 25% or above, even as some analysts have remained circumspect about Dr Reddy’s ability to fully offset the ‘gRevlimid void’ in the medium term.

"Overall, if you ask us, like, what is our growth journey, we are trying to, like, growing this business, both volumes and then how we can bring the new product launches to each of the market," Narasimham said. He also highlighted potential in-licensing and brand acquisitions to shore up revenue.

Dr Reddy's has a net cash surplus of Rs 2450 crore as of March 31, 2025, with strong internal cash generation. The pharma company is investing heavily in its future pipeline, with capital expenditure around Rs 2700 crore in FY25, and a similar corpus expected for FY26, largely for peptide and biosimilar manufacturing capacities. Peptides are chains of amino acids while biosimilars are highly similar biological medicines to already approved reference biologics. Read More

Key biosimilars in the pipeline include Rituximab, for which an approval is targetted for FY26, and launch aimed for FY27. Denosumab is another biosimilar for which Dr Reddy’s expects approval by Q4FY26, and launch in FY27. The FDA submission for Abatacept is planned for December 2025, and a potential US launch could happen in 2027. Rituximab is used in treatment of certain cancers and autoimmune diseases, Denosumab is used against osteoporosis and Abatacept against autoimmune diseases like rheumatoid arthritis.

"Every year, we have a biosimilar that is expected to come into the market," Narasimham said. The company also sees peptides launching in Canada in January 2026 - like semaglutide - followed by India and Brazil. The US launch for semaglutide is further out, likely around 2031-32.

Narasimham said Dr Reddy's is building end-to-end capabilities for peptides (semaglutide is a peptide), from API to finished dosage.

However, pharma analysts wonder how will the company be able to fill the gaping hole left by the loss of limited exclusivity of the product which accounted for a significant 35-40% of its US revenue in fiscal FY25. The US market, where gRevlimid has been a cornerstone, remains pivotal for Dr Reddy’s. In FY25, North America generics, predominantly the US, accounted for 45% of the company’s revenue, and saw 10% year-on-year (YoY) growth to $1.727 billion (Rs 14,516.4 crore).

InCred Research said gRevlimid contributed $550-650 million to Dr Reddy’s topline. The patent expiry is in January 2026, and will open up flood gates of competition, posing a considerable challenge.

Dr Reddy's had entered in an agreement with Celgene, the maker of Revlimid (lenalidomide), in September 2020, which resolved the patent litigation and allowed the company to sell a generic version of Revlimid in the US from 2022 with certain volume restrictions. Celgene entered into such agreement with a few other Indian companies too, and the limited competition has boosted Dr Reddy's US sales in recent years.

Narasimham said during the first half of FY26, the company will still reap benefit from generic Revlimid. "Lenalidomide is going to be there... the patent expiry will happen in January 2026," Narasimham said. He added that the company expects to maintain its current run rate leading up to the expiry.

JP Morgan in its latest report on the company said that while generic Revlimid volumes have increased, it has witnessed ‘increased erosion over the last six months’, and the company expects revenue to be front-loaded in the first half of FY26 as shelf stock adjustments impact volumes closer to the January 2026 expiry.

InCred Research said, "Aggregate incremental revenue from bDesonumab, bAbatacept bRituximab and Semaglutide may not be able to fill the gRevlimid void in FY27F."

“They understand these launches, in aggregate, may not be able to generate incremental revenue of $450-500 million in FY27F and bridge the gRevlimid gap once the settlement period ends in January 2026”, said the InCred Research note, leading them to estimate a 20% decline in US revenue for Dr Reddy's in FY27.

JP Morgan echoed this cautious sentiment, maintaining an "Underweight" stance. Their concerns are premised on "weak core EBITDA margins of ~18% (ex gRevlimid and Haleon) which are lower than most large peers; lacklustre growth in India... a lack of visibility on niche launches in US, also the initial biosimilar launches planned are partnered (shared economics)." They also view the Semaglutide opportunity as potentially "decent" but expect the market to be "competitive."

Dr Reddy’s CFO Narasimham said the focus of the company would be growing sales faster than expenses through productivity measures, new product launches including semaglutide and biosimilars, and continued business development.

Dr Reddy's like other Indian drugmakers is facing the uncertainty on how to navigate the potential US tariffs, that President Donald Trump threatened against pharmaceutical imports.