Dr Reddy's Laboratories is expanding its semaglutide generic franchise while trimming parts of its oncology pipeline as the company sharpens its focus on the fast-growing obesity treatment market and diabetes care segment. According to India Pharma Outlook, this strategic repositioning reflects the company's commitment to capitalize on the significant growth potential in diabetes and obesity-related therapies. The portfolio restructuring comes as the company expects a gradual recovery in the current fiscal year, supported by new product launches and improved operational efficiency.
Dr Reddy's Laboratories reported a sharp decline in Q4 FY26 profitability with net profit falling to around ₹220 crore, reflecting a steep decline compared to the strong profit base recorded in the corresponding quarter last year. According to latest reports, the weaker profitability was largely linked to lower contribution from key US products, pricing pressure, and normalization after an exceptionally strong prior-year period. Revenue also witnessed pressure during the quarter amid moderation in the US generics business, with the company trading near ₹1,274 on May 13, 2026, recovering from intraday volatility after the earnings announcement. However, Morgan Stanley noted that Jan-March (Q4FY26) adjusted revenue and earnings before interest, taxes, depreciation, and amortisation (EBITDA) missed estimates by 2% and 13% respectively.
Semaglutide continues to be a key growth driver following its launch in India and secured approval in Canada, with the company recently expanding its semaglutide portfolio after launching generic semaglutide products in India and preparing for additional launches in international markets. The approval received in Canada for generic semaglutide products has further strengthened expectations around future growth opportunities. By entering both injectable and oral semaglutide markets, the company is positioning itself to benefit from rising healthcare demand across multiple regions, with global demand for diabetes and obesity-related drugs increasing significantly over recent years. However, Morgan Stanley reports that semaglutide ramp-up is slightly delayed due to Brazil approval delay, with management expecting 6-7 million pen sales in CY26 and over 40 million capacity in FY28.
The company expects a gradual recovery in the current fiscal year, supported by new product launches and improved operational efficiency. As reported by The Economic Times, margins are expected to improve in FY27, supported by better product mix, cost controls and the absence of major one-off expenses. The company has guided for capital expenditure of ₹2,000 crore, largely towards biosimilars and product specific investments. Management clarified that reports regarding large-scale workforce cost reductions were inaccurate, helping ease concerns around operational restructuring. Morgan Stanley analysts noted that execution risks and weak US generics backdrop could keep margin outlook subdued, while the company's US business is stabilizing post gRevlimid with double-digit FY27 growth guidance in place.
The company continues to maintain a diversified pharmaceutical portfolio spanning generics, APIs, biosimilars, and specialty therapies, with expansion into semaglutide and GLP-1 therapies across India and international markets driving long-term growth expectations. Market participants are closely watching whether new product launches and expansion into high-growth therapy areas can support earnings recovery in FY27. The stock is currently trading near ₹1,274 and remains close to its 50-day SMA around ₹1,275.49, with immediate support placed around ₹1,200–₹1,145 and resistance near ₹1,330–₹1,400. Morgan Stanley maintains an equal-weight rating with target price at ₹1,215 (against ₹1,259 earlier), while noting that the company's diversified portfolio spanning generics, APIs, biosimilars, and specialty therapies provides resilience against market volatility.
