Cipla Vs Dr. Reddy’s: Which pharma giant offers better risk-reward as spotlight shifts to US pipeline 

A breakdown of both pharma majors:

Cipla vs Dr Reddy: Q1FY27 highlights

Cipla started FY27 on a strong note, reporting its highest-ever first-quarter revenue of Rs 7,100 crore in Q1 FY27. The company said its One India business also recorded its highest quarterly revenue, growing 12% year-on-year, while the branded prescription business expanded 15.4%, ahead of the market. Respiratory grew 15%, anti-diabetes 43% and cardiac 20%, while chronic therapies increased their share of the domestic portfolio to 60.4%. The management also highlighted encouraging traction for Yurpeak in obesity and continued momentum from new launches across respiratory and immunology.

Achin Gupta, Managing Director and Global Chief Executive Officer, Cipla, said, “We have delivered the highest ever Q1 revenue with revenues of Rs 7,100 crore. Achieving a record first quarter provides a strong start to the year and strengthens our confidence in sustaining long-term growth.”

Dr. Reddy’s reported revenue of Rs 8,071 crore in Q1 FY27, down 5.6% year-on-year but up 7.4% sequentially. Management attributed the decline to lower lenalidomide sales and the Rs 240 crore provision linked to the semaglutide API issue. At the same time, it said the underlying business continued to record healthy double-digit growth across major markets, including North America, supported by new product launches and favourable currency movements. 

Mannam Venkatanarasimham, Chief Financial Officer and Member of the Management Council, Dr. Reddy’s Laboratories, said, “The underlying base business, excluding lenalidomide, continued to deliver healthy double-digit growth across all key geographies, including North America, supported by new product launches and favorable currency movements.”

Cipla vs Dr Reddy: How the margins stack up after Q1

The June quarter showed two different margin trends. Cipla maintained strong profitability despite continued investments in its product pipeline, while Dr. Reddy’s margins came under pressure from lower lenalidomide sales, the semaglutide API issue and higher freight and solvent costs. Both management teams, however, maintained that their underlying businesses remained healthy and that investments in new products would support earnings over the coming quarters.

Cipla reported an EBITDA margin of 29.5% in Q1 FY27, supported by a favourable business mix and sustained growth in its India business. Management reiterated that the company remains focused on profitable growth while continuing to invest in respiratory products, peptides and other differentiated assets.

Dr. Reddy’s reported an EBITDA margin of 12.5% in Q1 FY27, while the company said the margin would have been 15.4% excluding the semaglutide-related provision. Gross margin stood at 46.5%, while higher solvent costs arising from the Middle East conflict also weighed on profitability.

Cipla vs Dr Reddy Post-Earnings: What’s Next

Both companies indicated that upcoming launches will determine the pace of growth through the rest of FY27.

Cipla expects North America to strengthen sequentially, supported by four major launches, comprising three respiratory products and one key peptide opportunity. Management reiterated its ambition of achieving a $1 billion North America exit revenue run rate and said generic Advair, alongside the broader respiratory portfolio, will strengthen its position in the US market. 

Dr. Reddy’s expects growth to improve during the second half of FY27 as semaglutide supplies resume. Erez Israeli, Chief Executive Officer and Member of the Management Council, Dr. Reddy’s Laboratories, said the company plans to resume semaglutide commercial supplies by November 2026 and remains confident of a strong second half of FY27. He added, “We remain confident of a strong second half of the fiscal with the resumption of semaglutide supplies. The strength of our base business and our ongoing productivity initiatives will continue to support double-digit base business growth and steady margin improvement.” 

Cipla vs Dr Reddy after Q1: Brokerage views

Brokerages remained constructive on Cipla after the June quarter, citing the company’s improving execution in complex respiratory products and the potential for higher North America revenue over the next few quarters.

 Nomura retained its ‘Buy’ rating on Cipla with a target price of Rs 1,510 after the USFDA approved generic Advair Diskus. The brokerage expects the product to generate $30-40 million in annual revenue and believes the approval strengthens Cipla’s execution track record in complex inhalation products. It also expects North America Generics revenue to increase from $162 million in Q1 FY27 to about $250 million by Q4 FY27, supported by respiratory launches including generic Advair, generic Symbicort and generic Gattex. 

The brokerage views on Dr. Reddy’s were more divided. Nomura retained its ‘Buy’ rating with a target price of Rs 1,740, stating that the market has yet to price in a recovery in semaglutide and the potential upside from the abatacept biosimilar. The brokerage expects EBITDA margin to recover toward 20% as one-off costs subside, volumes improve and higher-value launches contribute to earnings. 

Emkay Global, however, maintained its ‘Reduce’ rating with a target price of Rs 1,200, saying the June quarter margin miss was steeper than expected and earnings downgrades could continue in the absence of a meaningful positive catalyst. The brokerage noted that India formulations remained the standout performer with 17% year-on-year growth, but weaker US performance and elevated costs continued to weigh on profitability. 

Conclusion

The June quarter showed that Cipla and Dr. Reddy’s are at different points in their growth cycle. Cipla entered FY27 with record first-quarter revenue, sustained momentum in India and a pipeline of respiratory launches Dr. Reddy’s, meanwhile, dealt with temporary pressure from the semaglutide API issue and lower lenalidomide sales, while reiterating confidence in its underlying business.

Disclaimer: The article is for informational purposes only and reports on corporate financial results and third-party brokerage coverage. It does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Readers are advised to conduct their own research and consult a SEBI-registered financial advisor before making any investment decisions.

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