Dr. Reddy's Laboratories Limited RDY reported second-quarter fiscal 2025 earnings of 18 cents per American Depositary Share (ADS), which missed the Zacks Consensus Estimate of 19 cents per ADS. The company reported earnings of 21 cents per ADS in the year-ago quarter.

The bottom line was hit by a one-time acquisition cost and impairment charge on non-current assets.

Revenues grew 17% year over year to $957 million, which outpaced the Zacks Consensus Estimate of $879 million. The year-over-year improvement was primarily driven by growth in global generics revenues.

Shares of Dr. Reddy’s have risen 5% year to date compared with the industry’s 18.4% growth.

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RDY’s Q2 Results in Detail

Dr. Reddy’s reports revenues under three segments — Global Generics, Pharmaceutical Services & Active Ingredients (PSAI) and Others.

Global Generics revenues totaled INR 71.6 billion, up 17% year over year. The increase was primarily driven by improved sales volumes and new product launches.

Dr. Reddy’s launched four new products in the United States during the reported quarter.

As of Sept. 30, 2024, cumulatively, 80 generic filings were pending approval from the FDA (75 abbreviated new drug applications [ANDAs] and five new drug applications). Of these 75 ANDAs, 44 were Para IVs.

PSAI revenues amounted to INR 8,4 billion, up 20% from the year-ago level. The improvement was driven by momentum in base business volumes, growth in services business and revenues from new products.

Revenues in the Others segment totaled INR 0.2 billion, down 74% year overyear.

Gross margin improved to 59.6% from 58.7% in the year-ago quarter due to a favorable product mix and overhead leverage. However, the uptick was partially offset by price erosion in generics markets.

Research and development expenses jumped 33% year over year to $87 million, driven by ongoing development efforts across generics, biosimilars and novel oncology assets.

Selling, general and administrative expenses totaled $275 million, up 22% year over year, primarily owing to investments in business growth and other initiatives. The company also incurred a one-time acquisition related cost on the acquisition of Nicotine Replacement Therapy (‘NRT’) portfolio.

Key Pipeline Updates From RDY

Dr. Reddy’s acquired an NRT portfolio outside the United States and paid GBP 458 million in cash consideration pursuant to an agreement with Haleon plc.

The company entered into a non-exclusive patent licensing agreement with Takeda to commercialize vonoprazan, a novel gastrointestinal drug, in India.
Last month, RDY signed a voluntary licensing agreement with Gilead Sciences GILD to manufacture and commercialize lenacapavir in India and other countries.

GILD’s lenacapavir is indicated for the treatment of human immunodeficiency virus type 1 (HIV-1) infection in heavily treatment-experienced adults with multidrug resistant HIV-1 infection failing their current antiretroviral regimen due to resistance, intolerance, or safety considerations. Additionally, lenacapavir is currently under investigation for the prevention of HIV (PrEP).

Regulatory Updates

Dr. Reddy’s obtained marketing authorization from European Commission for the proposed biosimilar of rituximab following a positive opinion from the CHMP of the European Medicines Agency.

The company also received approval from the FDA for an investigational new drug application for AUR-112, a highly differentiated, potent and selective inhibitor of MALT1 being developed for the treatment of lymphoid malignancies.

The joint venture between Dr Reddy’s and Nestle India was operationalized in August 2024 to undertake the business of nutraceutical products and supplements in India and Nepal. 49% of the shares in the subsidiary have been transferred to Nestlé India.

RDY’s Zacks Rank & Other Stocks to Consider

Dr. Reddy’s currently carries a Zacks Rank #2 (Buy).

A couple of other top-ranked stocks in the same sector are Bausch Health BHC and Teva TEVA, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, the Zacks Consensus Estimate for BHC’s 2024 earnings per share (EPS) has moved north 12 cents to $3.73. During the same period, EPS estimate for 2025 has increased to $4.29 from $4.17.

BHC’s earnings beat estimates in three of the trailing four quarters and missed once, delivering an average surprise of 0.32%.

In the past 30 days, estimates for TEVA’s EPS have moved up a cent to $2.44. TEVA’s earnings beat estimates in three of the trailing four quarters and missed the mark once, delivering an average surprise of 8.62%.


 

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