Nuvama Institutional Equities has reiterated its 'Buy' rating for Dr Reddy's Laboratories Ltd, setting a target price of Rs 1,365. The brokerage firm points to the anticipated approval of the company's Abatacept biosimilar and the relaunch of semaglutide as critical catalysts poised to drive the pharmaceutical giant's stock performance.
Rituximab Approval Boosts Abatacept Prospects
A significant factor in Nuvama's optimistic outlook is the recent US Food and Drug Administration (USFDA) approval for Dr Reddy's rituximab biosimilar. This development is particularly positive because the drug was filed from the company's Bachupally biologics facility. Nuvama believes this approval substantially increases the likelihood of a near-term nod for Dr Reddy's Abatacept biosimilar.
The Bachupally unit had undergone a pre-license inspection (PLI) by the USFDA in June 2026, which resulted in seven observations. However, the subsequent approval for rituximab from the same facility suggests that Dr Reddy's has successfully addressed the regulator's requirements. Previous inspections in October 2023 and September 2025 also yielded observations, but the rituximab clearance indicates the FDA's satisfaction with the facility's compliance. The agency accepted Dr Reddy's Biologics License Application (BLA) filing for Abatacept in February 2026, with a goal date anticipated around December 2026.
Semaglutide Relaunch and Market Outlook
Beyond Abatacept, the relaunch of semaglutide is identified as another key near-term catalyst. Nuvama views a recent validation setback concerning semaglutide as a temporary, process-related issue rather than a fundamental structural concern. The brokerage maintains that demand for the product remains robust, and Dr Reddy's EBITDA margin trajectory is intact.
Separately, YES Securities, in a note from the previous month, acknowledged Dr Reddy's strong performance in its US business and resilient international operations, partly aided by currency tailwinds. However, YES Securities adjusted its semaglutide revenue estimates downwards to $130 million for FY27 from over $200 million, and to $195 million for FY28. Consequently, YES Securities revised its target price to Rs 1,350 while maintaining an 'Add' rating.
Potential Risks to Investment Thesis
Despite the positive outlook, Nuvama also highlighted several key risks to its investment thesis. These include potential delays in approvals for complex products, higher-than-expected price erosion and increased competition within the US market, failure to secure necessary biosimilar approvals, delays in the ramp-up of the proprietary pipeline, and adverse currency fluctuations.