Dr Reddy’s shares surged by 4% after Nuvama upgraded their rating to a buy
Shares of Dr Reddy’s Laboratories surged by 4% on Wednesday to reach Rs 1,404.60 on the BSE following an upgrade in its rating by brokerage firm Nuvama Institutional Equities. The firm expressed confidence in the pharmaceutical company’s proactive measures to counter the expected financial impact of the patent expiration of its blockbuster cancer drug, Revlimid, in 2026.
Nuvama Institutional Equities has set a target price of Rs 1,553 for Dr. Reddy’s Laboratories, indicating a potential 15% increase from the previous day’s closing price. Revlimid, which currently contributes around 40% of Dr. Reddy’s FY24 EBITDA, is anticipated to lose patent protection in 2026, posing a significant risk to the company’s earnings growth. However, the company’s proactive strategies to address this issue have been well-received by Nuvama, suggesting a favorable risk-reward balance.
Despite the looming threat of Revlimid’s patent expiration, Nuvama believes that Dr Reddy’s proactive measures will help mitigate approximately 80% of the expected EBITDA impact. The company is gearing up to launch Semaglutide, a drug targeting a $2 billion market, in Canada by January 2026. This early launch will capitalize on the company’s backward integration capabilities, positioning it as a key player in the segment.
Furthermore, Dr Reddy’s plans to introduce its Abatacept biosimilar in the US, a market valued at $2.8 billion, in FY27. This biosimilar, the only one in development for the fusion protein, is expected to generate substantial revenue, according to Nuvama. In the nicotine replacement therapy (NRT) segment, Dr. Reddy’s is driving growth through new product launches, investments, and expansion into new markets.
The Hyderabad-based company, Nuvama, is not only implementing effective mitigation strategies but is also strategically positioned for long-term growth in its key markets of India, Russia, and China. Nuvama has highlighted the expansion of its field force, opportunities for vaccine distribution, and the joint venture with Nestlé as additional growth drivers.
Nuvama recently raised its FY27 earnings projections for Dr Reddy’s by 15%. The brokerage firm expects that the company’s margins will remain in line with its guidance range, thanks to a decrease in research and development expenses after 2026.
In the last year, Dr Reddy’s shares have surged by more than 18%, with the stock’s Relative Strength Index (RSI) currently standing at 59.7, indicating strong momentum in the market.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.