Dr. Reddy's Q2 Earnings Beat Estimates, Generics Sales Boost Revenues

Dr. Reddy's Laboratories Limited RDY reported second-quarter fiscal 2026 earnings of 19 cents per American Depositary Share (ADS), which beat the Zacks Consensus Estimate of 18 cents. The company reported earnings of 17 cents per ADS in the year-ago quarter.Revenues grew 9.8% year over year to $992 million, surpassing the Zacks Consensus Estimate of $983 million. The year-over-year improvement was primarily driven by growth in global generics revenues.RDY’s Q2 Results in DetailDr. Reddy’s reported revenues under three segments — Global Generics, Pharmaceutical Services & Active Ingredients (PSAI) and Others.Global Generics revenues totaled INR 78.5 billion, up 10% year over year. The increase was primarily driven by revenues from the acquired Nicotine Replacement Therapy portfolio in the Europe segment and sustained performance in RDY’s branded markets.Dr. Reddy’s launched seven new products in North America during the reported quarter. However, revenues in the North America segment declined 13% primarily due to increased price erosion in certain key products, including Lenalidomide, partly offset by favorable forex and contribution from new product launches.As of Sept. 30, 2025, a total of 75 generic filings were pending approval from the FDA, comprising 73 abbreviated new drug applications (ANDAs) and two new drug applications. Of these 73 ANDAs, 45 are Para IVs.Shares of Dr. Reddy’s have lost 7.6% year to date against the industry’s 0.6% growth.Image Source: Zacks Investment ResearchPSAI revenues amounted to INR 9.5 billion, up 12% year over year. The improvement was driven by the launch of new active pharmaceutical ingredients (APIs) and favorable forex. Growth in the pharmaceutical services business also contributed to the year-over-year increase.Revenues in the Others segment totaled INR 0.1 billion, down 42% on a year-over-year basis.Gross margin declined 492 basis points to 54.7% in the second quarter of fiscal 2026 due to higher price erosion in generics and reduced operating leverage.Research and development (R&D) expenses of $70 million were down 15% year over year as investments in biosimilars tapered following the completion of major funding for the Abatacept biosimilar candidate. R&D spending instead focused on complex generics, biosimilars, APIs and novel biologics, particularly in oncology, peptides, and injectables.Selling, general and administrative expenses totaled $298 million, up 15% year over year. The rise was primarily driven by increased sales and marketing investments aimed at enhancing existing brands and supporting new consumer healthcare initiatives.Key Update From RDYLast month, Dr. Reddy’s announced that the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion recommending marketing authorization for AVT03 (denosumab), a proposed biosimilar to Amgen’s AMGN Prolia and Xgeva. The opinion will now be reviewed by the European Commission, which will make the final decision on marketing authorization across the European Economic Area, including the EU, Norway, Iceland, and Liechtenstein. A separate submission to the regulatory body in the United Kingdom is also planned.The development of AVT03 stems from a 2024 partnership between Dr. Reddy’s and Alvotech ALVO, under which Alvotech is responsible for development and manufacturing, while Dr. Reddy’s handles regulatory and commercialization activities in key markets. Dr. Reddy’s holds exclusive commercialization rights in the United States and semi-exclusive rights in Europe and the United Kingdom. Once approved, the biosimilar will be marketed as Acvybra (60 mg/mL) and Xbonzy (70 mg/mL). Earlier this year, RDY and ALVO also announced the FDA’s acceptance of a regulatory filing seeking approval of AVT03 in the United States for review. AVT03 is a human monoclonal antibody developed by Alvotech.Amgen's Prolia treats osteoporosis in postmenopausal women at high risk of fractures, especially when other treatments are ineffective. AMGN’s Xgeva helps prevent fractures, spinal cord compression and the need for bone-related surgery or radiation in patients with multiple myeloma or bone metastases from solid tumors.RDY and ALVO also have a partnership agreement to co-develop and commercialize a biosimilar candidate to Merck’s MRK blockbuster PD-L1 inhibitor, Keytruda (pembrolizumab), across the world. Per the agreement, RDY and ALVO will jointly share all costs for developing and manufacturing the biosimilar candidate to MRK’s Keytruda, which is approved for treating several types of cancer indications. Each company will hold the right to commercialize the product globally upon successful development.Dr. Reddy's Laboratories Ltd Price, Consensus and EPS Surprise Dr. Reddy's Laboratories Ltd price-consensus-eps-surprise-chart | Dr. Reddy's Laboratories Ltd QuoteKeytruda, Merck’s biggest revenue driver, generated sales worth $29.5 billion in 2024. Sales of the drug grew 6.6% year over year to $15.1 billion in the first half of 2025. Keytruda has played an instrumental role in driving Merck’s steady revenue growth in the past few years.In September, Dr. Reddy’s signed an agreement to acquire the Stugeron portfolio from Johnson & Johnson, marking its entry into the anti-vertigo market. The deal includes the flagship Stugeron brand and its variants across 18 markets in APAC and EMEA, with India and Vietnam as key focus areas. Stugeron, a leading cinnarizine brand for vertigo treatment, enhances Dr. Reddy’s central nervous system portfolio and expands its presence in a growing therapeutic segment.RDY's Zacks RankDr. Reddy’s carries a Zacks Rank #3 (Hold) at present.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.See "2nd Wave" AI stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dr. Reddy's Laboratories Ltd (RDY): Free Stock Analysis Report Merck & Co., Inc. (MRK): Free Stock Analysis Report Amgen Inc. (AMGN): Free Stock Analysis Report Alvotech (ALVO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks