Dr. Reddy's shares are under pressure after its Q1FY27 results. At first glance, the numbers may look disappointing, but the real story is about two major headwinds that are impacting the company's growth.
Let's break it down.
The US Business Took a Big Hit:
The biggest reason behind the weak quarter was the sharp fall in gRevlimid (Lenalidomide) sales.
The US business reported revenue of ₹2,200 crore, down 35% YoY, although it was up 26% QoQ. The US now contributes around 27% of the company's total revenue.
So, what changed?
Lenalidomide is a generic version of Revlimid, a medicine used to treat cancers like multiple myeloma and certain blood disorders.
While Revlimid lost its main primary patent earlier in 2019, companies like Dr. Reddy's were allowed to sell the generic version only under volume-restricted agreements with the innovator company Bristol Myers Squibb. That changed on January 31, 2026, when these restrictions ended.
Now, every generic player can sell unlimited quantities, leading to higher competition, lower prices, and a sharp fall in profits. This impact had already started in Q4FY26, and Q1 clearly reflects it.
The Semaglutide Problem Came at the Wrong Time
The second major challenge is Semaglutide, one of Dr. Reddy's biggest future growth opportunities.
Recently, the company found an impurity in its Semaglutide API, forcing it to stop supplies shortly after launching the product.
The company had sold only around 180,000 pen units before the issue emerged.
Because of this, Dr. Reddy's expects to lose around 3-4 million pen units in potential sales, while management also admitted there is still a 10-20% risk that the issue may not be fully resolved during the September testing.
Management is now targeting November 2026 to restart supplies. This delay means the company has lost valuable early-mover advantage in India's fast-growing GLP-1 market.
The Rest of the Business Was Actually Strong
If we keep aside these two issues, the overall performance was quite healthy. The India business grew 17% YoY, helped by better pricing, higher volumes, and contributions from the acquired Stugeron portfolio. Management expects this business to continue delivering mid-teen growth going forward.
The Europe business also performed well, with revenue growing 13% YoY to ₹1,440 crore, mainly driven by strong performance in Germany. These businesses continue to perform steadily.
Our takeaway:
Dr. Reddy's is not facing a problem with its overall business. Instead, it is dealing with two major short-term challenges.
First, gRevlimid has lost its exclusivity, reducing one of its biggest profit drivers. Second, the Semaglutide quality issue has delayed what could have been its next major growth engine. The next few quarters will depend on how quickly Dr. Reddy's can restart its Semaglutide business and build its next set of blockbuster products. That's the key thing investors should watch from here.
Disclaimer — This article is for information purposes only and should not be considered investment advice or a recommendation to buy or sell any security. Please conduct your own research or consult a qualified financial advisor before making any investment decision. Reco Wealth is a SEBI-registered Research Analyst.