Dr Reddy's Stock Plunges 6% As Revlimid Revenue Concerns Loom Large Despite Positive Q3 Earnings

Dr Reddy’s stock plunges 6% as Revlimid revenue concerns loom large despite positive Q3 earnings

Dr Reddy’s Faces Challenges with Revlimid Decline, But Opportunities Lie Ahead

Dr Reddy’s Laboratories delivered Q3 earnings that slightly surpassed market expectations, but the spotlight was on the declining revenue from Revlimid, the company’s blockbuster cancer drug. Once a significant growth driver, Revlimid’s contribution to the company’s revenue has been shrinking as its patent expiry looms in January 2026. This has raised concerns about future revenue loss, putting pressure on margins and dampening investor sentiment.

The market reacted sharply to these concerns, with shares of Dr Reddy’s falling 6% on January 24, a day after the earnings release. By 9:17 AM, the stock was trading at ₹1,224.20 on the NSE.

What’s Next for Dr Reddy’s?

Investors are now looking to see how the company plans to offset the impact of Revlimid’s decline. While the management has outlined new long-term growth strategies, these plans have yet to spark widespread optimism among analysts.

Analyst Views

HSBC analysts believe the upcoming launch of Semaglutide, an anti-diabetic medication, in Canada in early 2026 could provide some relief. However, they view it as insufficient to fully make up for the revenue loss from Revlimid. HSBC has maintained a ‘Hold’ rating on Dr Reddy’s, with a price target of ₹1,250.

On a more positive note, Nuvama Institutional Equities is optimistic that the company can retain a significant portion of Revlimid’s earnings if it successfully delivers on new opportunities like Abatacept and Semaglutide. Nuvama retained a ‘Buy’ rating on the stock with a target price of ₹1,533.

Similarly, JM Financial sees untapped potential in Dr Reddy’s near-term opportunity with Semaglutide. They highlight the drugmaker’s readiness to capture market share in Canada and 18 other markets opening up from 2026. JM Financial maintained a ‘Buy’ call with a more aggressive price target of ₹1,753, noting that Dr Reddy’s is well-positioned among generic players.

Q3 Performance Recap

For Q3 FY25, Dr Reddy’s posted a 2.5% year-on-year increase in net profit to ₹1,413.3 crore, driven by its newly acquired NRT business, which offset the decline in Revlimid sales. Revenue for the quarter surged 16% to ₹8,358.6 crore, surpassing market expectations.

A Moneycontrol poll of brokerages had projected flat net profit growth at ₹1,369 crore and revenue of ₹7,980 crore. Dr Reddy’s exceeded these forecasts on both counts.

However, pricing pressure in the U.S. and falling Revlimid sales weighed on the company’s operational performance. EBITDA margins contracted to 27.5% for the quarter, compared to 29.3% in the same period last year.

The Road Ahead

Dr Reddy’s Labs is navigating a critical phase as it balances the decline of a legacy product with new growth opportunities. While challenges remain, its strategic focus on Semaglutide and other long-term levers could help mitigate the impact of Revlimid’s sunset years. However, investors and analysts alike are keeping a close watch on how these plans translate into tangible results in the coming quarters.

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