Mumbai: There is a particular silence that follows a great run of luck. Dr Reddy’s Laboratories Ltd (DRL) heard it in July, when it reported that first-quarter profit had fallen by nearly 70%, with North American sales—long the company’s engine—down by more than a third. To read the headlines, you would think a champion had stumbled. To listen to G.V. Prasad, the Hyderabad drugmaker’s co-chairman and managing director, is to understand that the music simply stopped.
The bad news came with a name attached: semaglutide. DRL had been racing to launch a generic of the molecule behind diabetes and weightloss drugs Ozempic and Wegovy, the most coveted franchise in medicine—in Canada. During scale-up, a batch of the active ingredient failed validation. That botched batch resulted in a ₹2.4 billion charge; a launch meant to deliver about 12 million pens in its first year was cut to 6–7 million. On top of that bit came war-inflated freight and solvent costs.
Vishal Manchanda, who tracks the company for Systematix Institutional Equities, described the June quarter performance as “materially weaker-than-expected”. His verdict was a downgrade in all but name: a ‘Hold’, a target of just ₹1,213, and a warning that the company’s next two years hinge on executing the very launches that have just tripped.
For four years, Dr Reddy’s had sold lenalidomide—the cancer drug the world knows as Revlimid—under a settlement that let only a handful of copycats into the American market at a time. By Manchanda’s estimate, Indian generic makers extracted $4–5 billion from the drug between 2022 and 2026, with Dr Reddy’s the biggest beneficiary.
The catch was in the calendar: the same settlement allowed those companies to sell without any volume limit from 31 January 2026. What looked like the lifting of a ceiling was actually the end of the shelter—the caps came off, the crowd rushed in, prices fell, and the windfall thinned. Ask Prasad about it and he is philosophical.
“Those are [winning] lottery tickets,” he says. “You don’t get them predictably. You use the cash to build your muscle. You can’t think, I’ll have a lenalidomide every year.” He goes further, dismantling the very drug that made him rich. “It’s nothing great. It’s a generic product. It was an isomer of thalidomide,” he says—thalidomide is the compound once infamous for causing birth defects. “But just imagine how much money it made for generic companies. How many companies made money, and for how long?” And then the line that frames everything: “It’s never going to happen again.”
That is the dilemma at the centre of Dr Reddy’s, sharper than its serene balance sheet lets on. The company is at the edge of its own success with a presence in 66 countries, a net cash surplus and FY26 revenue of nearly ₹33,600 crore. Its most lucrative arrangement has ended, the market that made it big is turning against it, and the one road everyone agrees leads to lasting value—real drug innovation—is the one Prasad is least willing to promise.
None of this means the generics engine is dying. But the easy, outsized wins are growing rarer: fewer blockbuster molecules are coming off patent, and every one that does now draws a crowd.
Rajeev Nannapaneni, chief executive of Natco Pharma, frames the shift precisely: the opportunities in small-molecule generics have not shrunk, but the innovators’ money has moved on—toward niche treatments for late-stage cancers or specific genetic mutations, not the mass-market medicines that once minted fortunes. “Nobody is really trying to do a better statin, or a better hypertension drug… which are mass molecules,” he says.
Apart from the GLP-1 weight-loss drugs, cutting-edge research has migrated to hyper-specific therapies. Revlimid, in that sense, was a crest—and its passing is why the industry’s biggest names are scattering toward different exits: Sun Pharmaceutical Industries Ltd, India’s largest drugmaker, has gone into new geographies, while Glenmark Pharmaceuticals Ltd and Wockhardt Ltd have made the long gamble of original research.
Erosion of identity
From the outside, Dr Reddy’s has always been harder to read than its peers. Sun Pharma has the swagger of the serial acquirer; Glenmark and Wockhardt made concentrated bets on novel molecules; Cipla Ltd has largely declined to chase the brutal US generics market. Each tells a clean story.
Dr Reddy’s tells several at once—a generics and API house, an early and unproven oncology innovator, and, since it bought a clutch of European nicotine-replacement brands from the UK-headquartered Haleon Plc, a consumer-health company, too. (APIs, or active pharmaceutical ingredients are the core components in a drug that make the medicine work.)
Prasad organises the sprawl into three legs, and is frank about how uneven they are. “We have scale in generics and APIs. We don’t yet have scale in consumer health, but we have a nice, profitable, stable business. In our innovation-driven business, we are still in the early stages.”
The Revlimid cash, at least, has not sat idle. Prasad has funnelled it into bets far from the US price war: the European nicotine-replacement business behind the new consumer-health arm, a biosimilars programme, drugs in-licensed from Chinese biotech, a nutrition venture with Nestlé, and a $100 million contract-manufacturing arm.
Prasad does not hide the erosion of the founding identity. “We are still a deep science and technology company—I’d like to believe that,” he says, then qualifies it: “We are not as distinctive as we used to be. I hope we can come back and claim that position of being the most scientifically driven pharmaceutical company from India.” The self-assessment is blunt: “I’m not very happy with where we are today. But that is how we compete.”
The falling knife
Start with the leg that pays the bills. Prasad describes the American generics market—still the largest prize in the industry—with the weariness of a 30-year veteran. When he started, five filers for a product counted as fierce competition. “Today there are 20,” he says. “Twenty filers cannot sell a product. Each of us will fight for a bigger market share and then race to the bottom. It’s become competitive. It’s become commoditized. It’s become difficult to sustain margins.”
The damage shows in the accounts. In the June quarter, North America revenue fell about 35% to roughly ₹2,200 crore, after already contracting sharply the year before as US prices eroded. “In the US, if you don’t do anything, you keep declining. So it’s a falling knife,” Prasad says. “Your rate of launching products must counter the decline in pricing and then provide growth. That’s a much harder problem in the long run.”
The branded markets he has cultivated behave the opposite way: “The growth curve is flatter, but it’s always growing.” India and emerging markets, with the new consumer-health portfolio, now make up more than half of revenue and are growing in double digits—the reward for consciously steering capital toward stabler markets.
So, the near-term answer is unglamorous, and he says so without flinching. “The US is still the largest market—you cannot replace it with any one thing. I’m managing it, but it’s a struggle,” he says. “From a billion to three billion is very different, because every year your base is declining.”
The only lever, for now, is operational: “It’s all execution and efficiency. It’s not innovation at this point.”
DRL’s day to day operations are run by a team led by chief executive Erez Israeli, who joined the company in 2018. Prasad, 65, focuses on long-term strategy and the innovation agenda, while chairman Satish Reddy manages industry and policy affairs.
Following the innovators
The medium-term answer is biology. As the science shifts to large biologics, the generics playbook migrates, too—and Dr Reddy’s, an early biosimilars mover that let its lead slip, is scrambling back. “We were among the first biosimilars in the world, but we never really built that business,” Prasad says. Now, he has no choice: “We follow the innovators. If the pipeline is moving towards large molecules, we have to go there.”
He is clear-eyed about how punishing the field is. When a biologic drug loses patent protection, rivals can sell near-copies called biosimilars—but, unlike ordinary generics, these are hugely expensive to make, win no exclusivity, and must still be marketed doctor by doctor. “The innovator knows you’re coming; he’ll defend his market share. The equations are not adding up,” Prasad says.
The DRL chief expects the looming contest over Keytruda, the world’s best-selling cancer drug, to be savage. With some 20 companies poised to launch copies the moment its protection lapses, prices will crash. “That will be a blood bath,” he says.
The prize is large enough to justify the pain—biosimilars could be a $70 billion market by 2035, according to a report by research firm Marketsandmarkets—yet Indian firms have circled it warily, unnerved by shifting rules on whether a biosimilar can be swapped automatically for the original. Sun Pharma stayed out for years before buying its way in through its Organon deal; building the capability from scratch, chairman Dilip Shanghvi said in April, would have taken six to eight years. “The reason we were not investing in biosimilars is there was no clarity about substitution as well as interchangeability,” he said.
Dr Reddy’s is committing regardless. “A significant amount of money will be going to biologics. Already has gone,” says Prasad. Nuvama’s Shrikant Akolkar reckons the company’s next two years will turn on the semaglutide fix and on timely US approvals for its own copies of rheumatic arthritis drugs abatacept and rituximab.
Patient-backward
Then there is the leg Prasad cares about most and trusts least to arrive on time—and here, the founder’s ghost enters. K. Anji Reddy, his late father-in-law, was a scientist first. “When you spoke to Anji Reddy, you couldn’t speak about anything apart from innovation. I am not like him,” Prasad recalls. “He was much more scientifically driven than me."
The difference is a philosophy, cleanly stated. “He would go science-forward. I want to go patient-backward. What problem are we solving for the patient, and how do we make life better?” In a business of unmet needs, he insists, “you start from the unmet need and then find the solution”.
This is not Dr Reddy’s first tilt at invention, and the earlier attempts are a cautionary tale. It began chasing new drugs in the mid-1990s in areas where the scientific bar proved punishingly high, then pivoted to reformulating existing medicines—among them a nasal-spray version of a migraine injection—only for a US regulatory warning letter to derail it. It sold that business.
What survived is Aurigene, its oncology unit, which Prasad says holds one of India’s largest innovation pipelines but is still years from a drug of its own: “We are only in early-stage discovery and small trials. We’ve done one large phase two, which didn’t meet the endpoints.” That history is also why acquisitions and licensing, not pure in-house discovery, are likely to carry much of the load. “There will be an inorganic angle,” he concedes.
Prasad is scathing about the industry’s favourite phrase, that companies should “move up the value chain”. “I don’t subscribe to that notion. If you want to innovate, it is not a value chain. It’s not the same game at all,” he says. Nor are the stakes comparable: a generic filing might cost single-digit millions of dollars, a biosimilar, 70–100 million dollars, “and innovative assets will be multiples of that”. And the market won’t wait: Indian firms are valued on quarterly profit, he notes, while innovation demands sustained spending over a decade.
Why persist, when the odds are so poor? Because, he says, it is what the company is about. “We like to solve difficult problems. Our success rate is not that great—I hope it improves. But that is the DNA of the company: we solve problems very few companies in the world can. That gives us energy.”
The probabilities
What makes Prasad an unusual narrator is that he will not tie the story up. The bottleneck, he says, is no longer discovery but development—“getting clinical trials done, regulators agreeing, the speed of patient recruitment”. And AI helps only at the front end. He is candid, too, that India’s regulatory machinery is not yet deep enough to referee genuine innovation, while China has aggressively modernised its own.
China, in fact, haunts the conversation. “It is number two in the world now in innovation. They’re not competing with us; they’re competing with the US,” he says. His view is pragmatic, not defiant—“We’ll compete with the Chinese. We’ll also collaborate with them.”—though he notes pointedly that the flood of US licensing money going to Chinese biotech is not coming to India.
The Street cannot agree on what any of this is worth. Nomura’s Saion Mukherjee waved the semaglutide stumble away as a hiccup and holds a Street-high target of ₹1,740; Nuvama’s Akolkar trimmed his numbers but kept a ’Buy’ at ₹1,465; Systematix, at ₹1,213, sits at the bottom. The earnings per share, or EPS, forecasts span a bear case near ₹40 a share and a bull case above ₹65 two years out (FY28)—a spread wide enough to read as an admission that the outcome is unknowable.
Prasad himself is the least willing of all to bank the result. Press him on where Dr Reddy’s will be in a decade and he offers no triumphant vision, only probabilities. “It’ll still have a dominant generics business, because I cannot predict the curve of innovation,” he says. “Hopefully, we will have innovative products developed all the way by us. But can I guarantee that? I’m not sure. We will try to get there.” And on focus: “I’d like to be focused. But if what I’m focusing on is difficult to compete in, I’ll look for growth somewhere else, where my skills are still relevant.”
It is not the speech of a top boss selling certainty. It is the speech of a man who has watched one lottery ticket cash out, knows another will not come, and is betting that the instinct of his father-in-law—to go after problems few others can solve—will outlast any single molecule. Whether the market has the patience to wait for the payoff is the one variable Prasad cannot control.