New businesses and partnerships hold the key to Dr Reddy's growth

The company’s gross fell 2% sequentially to ₹7083 crore, but the driblet successful Ebitda was steeper astatine astir 12% to ₹1,784 crore. DRL’s US income dropped 2.2% sequentially, driven by little Revlimid income and price-erosion successful a fewer different molecules. 

Some analysts reckon DRL’s US gross from Revlimid, a cardinal product, whitethorn good person peaked successful FY24. If that's the case, the large situation for DRL successful the coming quarters is to physique alternate gross streams earlier Revlimid goes off-patent successful January 2026. 

Fingers successful galore pies

The institution is already moving toward this, having adopted a multi-pronged strategy involving partnerships and licensing agreements for complimentary products; acquisitions; and a absorption connected processing caller products. 

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DRL has formed abstracted concern agreements with Sanofi and Bayer to administer immoderate of their products successful India, and has different licensing statement with a US company. In April, it formed a associated task with Nestle for nutraceutical brands. 

As for acquisitions, the institution bought a women’s wellness products concern successful the US and has been looking for much opportunities. It had acquired a cardiovascular marque from Novartis successful FY23 for astir ₹500 crore. With astir ₹6,500 crore of surplus cash, it has capable leverage to scout adjacent bigger opportunities. 

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Dr Reddy's has besides launched 2 caller products successful the UK and a wearable instrumentality successful Germany and South Africa. The institution launched 21 caller molecules successful the US successful FY24 and is preparing to motorboat much than 20 successful FY25. Its R&D walk jumped 24% successful Q4FY24 and 18% successful FY24 arsenic a whole.

Taking stock

Though the institution is successful the heavy of the action, determination is inactive uncertainty astir erstwhile these businesses volition commencement adding to the topline. 

Regarding its JV with Nestle, the institution has said it volition instrumentality clip and concern to bring those brands to India and that it expects them to lend importantly to gross lone 2 oregon 3 years down the line. 

DRL besides indicated during the investors’ telephone that contempt each its R&D expenditure connected Biosimilars, it expects that this portfolio won't statesman generating meaningful gross earlier FY27. 

Put together, these factors should forestall immoderate crisp upside successful the stock, which has gained 20% implicit the past year.

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