01 — At a Glance
The Pharma Major That Just Lost Its Most Profitable Friend
- 52-Week High / Low₹1,380 / ₹1,020
- Q3 FY26 Revenue₹8,753 Cr
- Q3 FY26 PAT₹1,210 Cr
- Q3 EPS (₹)₹14.50
- Annualised EPS (Q3×4)₹58.00
- Book Value₹432
- Price to Book3.02x
- Dividend Yield0.61%
- Debt / Equity0.16x
- FY25 Full Year EPS₹67.77
Auditor’s Opening Note: Dr. Reddy’s closed Q3 FY26 with ₹8,753 crore revenue (+4.4% YoY), but PAT crashed 14% YoY to ₹1,210 crore. The culprit? Lenalidomide (gRevlimid) is now history, patent expired January 2026, and the company is being deliberately transparent: “treat the old arrangement as zero.” Semaglutide launches India on March 21st — a fixed date commitment from the CEO. Abatacept (biosimilar) on track for US late 2026. Europe is cheering Denosumab approvals. The stock? Up 15% in one year. Down 0.74% yesterday. The market is watching and waiting to see if DRL can pivot faster than Lenalidomide’s patent protection expired.
02 — Introduction
When Your Golden Egg Becomes An Expired Patent
Let’s talk about Dr. Reddy’s Laboratories — a 40-year-old Hyderabad-based pharma giant that spent the last five years enjoying a relationship so profitable it became a liability. The relationship? A limited-time settlement with Celgene (now BMS) that let DRL sell generic Lenalidomide (brand name: gRevlimid) in high-margin, controlled-supply contracts. In Q3 FY26, that relationship just ended. Patent expired January 2026. Game over.
For context: gRevlimid used to contribute meaningfully to North America generics revenue. Now it’s gone. EBITDA margin fell 401 basis points YoY. PAT margin dropped from 17.2% to ~14%. The stock went up anyway because investors suddenly realized DRL has about 15 other things cooking — Semaglutide (diabetes + weight loss), Abatacept (biosimilar), Denosumab (approved in Europe), innovation franchises scaling 15-19% annually in India, and a ₹1.09 trillion operating cash flow machine.
This is a company learning to live without its crutch. And honestly? It’s not even hobbling.
Consolidated revenue in Q3: ₹8,753 crore. IFRS reported (not standalone). FY25 full-year was ₹32,644 crore. The quarterly cadence is lumpy because APIs, formulations, and geographies all move at different speeds. India is growing at 15-19% and “absolutely sustainable” per management. Russia is double-digit despite macro headwinds. The US is in transition. And yet, the company traded P/E 19.5x while Nifty pharma median sits at 27.6x. Which means DRL is either cheap, or everyone’s waiting to see if Semaglutide can actually move the needle.
Management’s Own Guidance (Jan 2026 Concall): “The old arrangement from Q4 onwards should be treated as zero.” Translation: Stop modeling Lenalidomide as a revenue contributor. It’s now just another commodity generic in a hypercompetitive market.
03 — Business Model: The Four-Headed Dragon
APIs, Generics, Biosimilars, and Innovation. Pick Your Underdog Story.
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