Dr Reddy's Rises 3% Even as Q2 Profit Falls 36% on a Rs 239 Crore Semaglutide Charge

Shares of Dr Reddy's Laboratories climbed about 3% on Monday morning, making the drugmaker one of the few bright spots in a weak opening session. The stock rose as much as 3.18% to Rs 1,268.60 on the BSE and was among the top gainers on the Nifty 50, alongside JSW Steel and BSE, at a time when most sectoral indices were in the red and the Nifty Pharma index was the only sector index trading higher.

The move came despite a sharp fall in quarterly profit.

A one-off charge hides the operating picture

For the September quarter, Dr Reddy's reported consolidated net profit of Rs 913.4 crore, down about 36% from Rs 1,426.8 crore a year earlier. Revenue fell 1.5% to Rs 8,671 crore from Rs 8,805.1 crore. A large part of the profit hit came from a provision of about Rs 239 crore against semaglutide active ingredient inventory, linked to supply problems with its generic versions of the diabetes and weight-loss drug.

Excluding that charge, the underlying performance was closer to what the market expected, and the headline profit still came in above some consensus estimates. EBITDA margin was about 20.6%, with gross margin near 52%.

Why investors bought the dip

The market's attention is on what comes next. Management reaffirmed that it expects to relaunch semaglutide in November 2026, subject to successful validation, with approvals already in place in around 10 countries. Semaglutide, the molecule behind Ozempic and Wegovy, is coming off patent in several markets, and early generic players stand to capture meaningful volumes in the coming years. A clean relaunch would let Dr Reddy's recover sales lost in the quarter and remove the overhang that the inventory provision represents.

Brokerages also pointed to a US Food and Drug Administration approval for its biosimilar of abatacept, a rheumatoid arthritis treatment, as another potential driver. HSBC was among those flagging the semaglutide relaunch and the abatacept approval as the two catalysts to watch.

The risks that remain

The quarter underlines how concentrated Dr Reddy's near-term growth has become. Revenue is shrinking year on year, and the semaglutide opportunity has already slipped once because of supply issues. If the November timeline moves again, the provision taken this quarter may not be the last. Competition is also likely to be intense, since several generic makers are chasing the same molecule as patents lapse.

Monday's rally suggests investors are treating the September quarter as a reset rather than a warning. The December quarter, which should show the first contribution from the relaunch, will be the real test of that bet.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.