Nuvama Upgrades Dr. Reddy's to 'Buy', Optimistic on Revlimid

Nuvama Institutional Equities, has upgraded its rating for Dr. Reddy's Laboratories to "buy" due to its optimistic outlook on the company’s proactive strategies to offset the anticipated impact of Revlimid's patent expiration in 2026.

On Tuesday, Dr. Reddy’s shares ended flat at ₹1,351.55 on the NSE.

The blockbuster cancer drug Revlimid is expected to lose patent protection in 2026, posing a considerable challenge to the company’s earnings, as it accounted for approximately 40% of its FY24 EBITDA. However, Dr. Reddy’s management has been proactive in implementing measures to address this risk. Nuvama’s analysts believe that key product launches, such as Semaglutide in Canada and an Abatacept biosimilar in the US, are likely to offset most of the revenue and about 80% of the EBITDA losses caused by the patent expiry.

These strategic moves have led Nuvama to project a favorable risk-reward scenario, assigning a price target of ₹1,553 for the stock, which suggests a potential 15% upside from Tuesday’s closing price.

Dr. Reddy's is gearing up to launch Semaglutide in Canada, a market worth around $2 billion, in January 2026. With the support of its backward integration capabilities, the company aims to secure a leading position in the Semaglutide segment.

The company is also preparing to release its Abatacept biosimilar in the US, targeting a $2.8 billion market in FY27. This product holds significant revenue potential, as it is currently the only biosimilar under development for this fusion protein. Additionally, Dr. Reddy’s growth strategy in the nicotine replacement therapy (NRT) market focuses on investments, new product rollouts, and expansion into new markets.

Nuvama remains confident that these strategic initiatives will help Dr. Reddy's effectively mitigate the impact of the Revlimid patent expiry. The brokerage has also revised its FY27 earnings estimates for the company, increasing them by 15% to reflect the anticipated contributions of key product launches.

Moreover, analysts believe that the company’s strong research and development pipeline, combined with its track record in biosimilar launches, positions it well to navigate challenges in the competitive pharmaceutical market. In recent years, Dr. Reddy’s has been expanding its global footprint and strengthening its partnerships to ensure better market access. The company’s backward integration and manufacturing capabilities provide a significant cost advantage, allowing it to compete effectively in high-value markets.

In addition to its core strategies, the company is expected to benefit from its efforts to diversify its portfolio across geographies and therapeutic areas. By focusing on innovative formulations and biosimilars, Dr. Reddy’s aims to reduce its dependency on a small number of high-revenue products. Industry experts view these initiatives as crucial for ensuring long-term, sustainable growth in a rapidly evolving regulatory and market landscape.

The upcoming product launches and market expansions reflect the company’s commitment to staying ahead of competitive pressures and strengthening its global leadership in specialty medicines and generics.