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Dr Reddy's Laboratories, a prominent player in the pharmaceutical industry, has reported its highest-ever quarterly revenue in Q2, signaling a strong performance amidst ongoing investments in research and development (R&D). The company's strategic focus on biosimilars, generics, and biologics is evident in its substantial R&D expenditure, which is expected to remain around 8.5 percent of total revenue for fiscal year 2025 (FY25).
This commitment to innovation is reflected in Dr Reddy's allocation of R&D funds. A significant portion, 36 percent, is directed towards biologics and original assets, with a particular emphasis on oncology products. Generics, particularly peptides and injectables, along with active pharmaceutical ingredients (APIs), receive the largest share of R&D funding, accounting for 50 percent of the total. The remaining portion is allocated to biosimilars, highlighting the company's strategic emphasis on this growing segment.
Dr Reddy's management has announced plans to launch a key biosimilar in 2027, further strengthening its position in this competitive market. CEO Erez Israeli expressed confidence in a robust pipeline of over 20 high-value products, although specific launch timelines were not disclosed due to their dependence on regulatory approvals. The company's commitment to biosimilars is a testament to the evolving landscape of the pharmaceutical industry and the increasing demand for cost-effective alternatives to branded biologics.
Despite the strong performance in Q2, Dr Reddy's net profit experienced a 15 percent decline to Rs 1,255 crore, attributed to one-off expenses such as acquisition costs, government land tax, minority interest in Nestle, and impairment charges. However, revenue saw a robust 17 percent increase to Rs 8,016 crore, the highest ever recorded by the company. This growth in North America was driven by a rise in volumes, though partially offset by price erosion.
Looking ahead, Dr Reddy's anticipates its EBITDA margins to remain steady around current levels throughout FY25. While the company's star cancer drug, Revlimid, contributed significantly to earnings in FY24, its contribution is expected to remain healthy for the rest of the fiscal year and into FY26. However, the patent expiration for Revlimid in 2026 could potentially lead to increased competition from generic players, potentially impacting revenue potential.
Dr Reddy's strategic focus on R&D, particularly in the biosimilars segment, positions the company for future growth in a dynamic pharmaceutical landscape. The company's record-breaking revenue and consistent commitment to innovation indicate its strong position in the market and its ability to navigate the evolving regulatory and competitive environment.
Source: Dr Reddy's R&D expenses to stay around 8.5% in FY25, to launch key biosimilar in 2027