Sun Pharma vs Dr Reddy's (2026): Specialty Drugs, US Reset, Growth & Which Is Better?
Sun Pharma and Dr Reddy's are moving away from the same old generic-drug model, but they are doing it in very different ways.
Sun Pharma has built an increasingly important global specialty-medicines portfolio and is attempting to transform its scale through the proposed Organon acquisition. Dr Reddy's is diversifying away from dependence on high-value US generics by growing India, emerging markets, Europe, consumer health and complex products.
The latest quarter exposes the difference sharply. Sun's revenue and profit grew. Dr Reddy's revenue fell and profit collapsed because two unusually important earnings drivers reversed at the same time.
The valuation gap is smaller than the current profitability gap
Dr Reddy's trades roughly seven P/E points below Sun Pharma, but Sun currently produces much stronger margins and capital returns.
Sun Pharma's net profit margin in Bull Run's current fundamental series is approximately 20.2%.
Dr Reddy's is around 9.7%.
Sun's ROE is approximately 14.7%, compared with Dr Reddy's around 11.7%.
ROCE is approximately 19.3% for Sun Pharma and 14.8% for Dr Reddy's.
This means Dr Reddy's valuation discount is real, but so is the present difference in profitability.
The investment question is whether Dr Reddy's Q1 weakness represents a temporary reset or a structurally lower earnings base after lenalidomide.
Sun Pharma vs Dr Reddy's: current financial scoreboard
| Metric | Sun Pharma | Dr Reddy's | Current Edge |
|---|---|---|---|
| Market capitalisation | ₹468,821 Cr | ₹102,660 Cr | Sun Pharma |
| P/E | 38.76x | 31.86x | Dr Reddy's |
| P/B | 5.61x | 2.71x | Dr Reddy's |
| Industry P/E | 34.89x | 34.89x | Dr Reddy's below, Sun above |
| ROE | 14.74% | 11.75% | Sun Pharma |
| ROCE | 19.31% | 14.80% | Sun Pharma |
| Net profit margin | 20.19% | 9.70% | Sun Pharma |
| Debt-to-equity | 0.05 | 0.17 | Sun Pharma currently |
| Interest coverage | 45.61x | 15.39x | Sun Pharma |
| Current ratio | 2.82x | 1.80x | Sun Pharma |
| Operating cash flow / PAT | 1.08x | 1.35x | Dr Reddy's |
| 5-year sales growth | 11.78% | 12.09% | Dr Reddy's slightly |
| 5-year profit growth | 31.64% | 16.54% | Sun Pharma |
| 5-year free cash flow | ₹41,050 Cr | ₹11,253 Cr | Sun Pharma |
| Dividend yield | 0.82% | 0.65% | Sun Pharma slightly |
| Promoter holding | 54.48% | 26.64% | Different ownership structures |
| Promoter pledge | 1.42% | 0% | Dr Reddy's |
| FII holding | 15.94% | 21.14% | Dr Reddy's |
| DII holding | 21.00% | 30.72% | Dr Reddy's |
| Bull Run Score | 66.4/100 | 41.0/100 | Sun Pharma |
Q1 FY2027 could hardly have looked more different
Sun Pharma's revenue increased about 10.5% and reported profit increased roughly 27%; Dr Reddy's revenue fell 5.6% and attributable profit fell almost 69%.
Sun Pharma
Revenue from operations reached approximately ₹15,300 crore.
India formulations grew 16%.
Global innovative medicines grew approximately 12.9% to $351 million.
Reported consolidated profit attributable to owners reached approximately ₹2,895 crore.
Dr Reddy's
Revenue was approximately ₹8,071 crore.
EBITDA fell to approximately ₹1,009 crore and EBITDA margin contracted to 12.5%.
Profit attributable to equity holders fell to approximately ₹444 crore.
The result was hit by the disappearance of much of the previous lenalidomide contribution and a ₹240 crore semaglutide-related inventory and cost provision.
Dr Reddy's 69% profit decline needs context
The headline decline looks disastrous, but it does not mean every part of Dr Reddy's business contracted.
Management explicitly said the underlying base business excluding lenalidomide continued to grow at healthy double-digit rates across key geographies.
The problem is that lenalidomide was extremely profitable.
When that revenue disappeared, the comparison base reset sharply.
The company was then hit by another unusual item: ₹240 crore of provision related to semaglutide API inventory and associated supply challenges.
Those two effects together explain why EBITDA margin dropped from the unusually high levels seen while lenalidomide was contributing.
The more useful question is what Dr Reddy's earns after these temporary and fading profit pools are stripped out.
North America remains Dr Reddy's biggest current problem
Dr Reddy's North America revenue fell about 35% year on year to roughly ₹2,205 crore in Q1 FY2027.
In local currency, management reported revenue of approximately $236 million, representing about 27% of company revenue.
The decline was primarily driven by lower lenalidomide sales.
Yet management also said the underlying North American business excluding lenalidomide grew at a double-digit rate.
New launches included bosutinib and nintedanib, with bosutinib receiving a first-to-market opportunity on one strength.
The next phase of Dr Reddy's US story therefore depends on whether complex launches can replace part of the extraordinary economics that lenalidomide once produced.
Sun Pharma has already moved further away from commodity US generics
Sun's US conventional generics business is also under pressure, but the company now has a separate innovative-medicines growth engine.
US formulations revenue fell approximately 10% to around $427 million in Q1 FY2027.
At the same time, global innovative medicines sales increased about 12.9% to $351 million.
Products including ILUMYA, LEQSELVI and UNLOXCYT are part of this transition.
That mix matters because successful specialty medicines can produce higher margins and lower price erosion than commodity generics.
They also require higher R&D spending, clinical risk and commercial investment.
India is strong at both companies, but Sun has far greater scale
Sun Pharma remains the larger Indian branded-pharma franchise, while Dr Reddy's is currently growing faster from a smaller base.
Sun's India formulations business generated approximately ₹5,475 crore in Q1 FY2027, up 16%.
Dr Reddy's India revenue was about ₹1,718 crore, up 17%.
Dr Reddy's management said organic India growth excluding acquisitions was approximately 15.5%.
It also said the company outgrew the Indian pharmaceutical market on both moving-quarterly and moving-annual measures.
Dr Reddy's launched seven new brands during the quarter.
Sun's absolute India franchise remains much larger, with leading positions across several chronic therapies.
Dr Reddy's emerging-market growth deserves more attention
Emerging Markets revenue increased 31% to approximately ₹1,833 crore in Q1 FY2027.
This was one of the strongest parts of the quarter.
The business accounted for roughly 23% of total revenue.
Dr Reddy's launched 43 products across emerging markets during the period.
India, Emerging Markets and the consumer-health nicotine-replacement portfolio together represented approximately 52% of company revenue.
That is important because it means Dr Reddy's is no longer simply a US generics company with some international businesses attached.
Europe is becoming another stabiliser for Dr Reddy's
Dr Reddy's Europe business continues to expand its relevance following the integration of the nicotine-replacement portfolio.
Reported Q1 Europe revenue was approximately ₹1,444 crore in the IFRS revenue table.
Management described the European business as broadly stable in local currency, with generic launches offsetting price erosion and operating-model changes.
Twenty-four new generic products were launched across European markets during the quarter.
The business does not have Sun Pharma's specialty economics, but it broadens Dr Reddy's revenue mix beyond the US.
Sun Pharma's next chapter is much more ambitious, and much riskier
The proposed Organon acquisition could change Sun Pharma more dramatically than any current product launch.
Sun agreed to acquire Organon in an all-cash transaction with an enterprise value of approximately $11.75 billion.
Organon would add a large women's-health portfolio, biosimilars and established global brands.
Strategically, the transaction could give Sun a much broader global commercial platform.
Financially, it introduces debt, integration, goodwill and return-on-capital risk.
Today's strong balance-sheet and ROCE figures may therefore not resemble the post-acquisition company.
Dr Reddy's strategy is less dramatic but more distributed
Dr Reddy's is pursuing several smaller growth engines rather than one transformation-sized acquisition.
Its priorities include complex generics, branded businesses, emerging markets, India, consumer health, biosimilars and selected innovative products through partnerships.
The company launched oral semaglutide in India and has been building a broader metabolic-health franchise.
It also continues to expand complex US products and international access programmes.
This approach can reduce one-deal integration risk, but it requires several businesses to execute simultaneously.
Which company is stronger on long-term growth?
Sales growth is almost tied, but Sun Pharma has converted growth into profit much more effectively.
Dr Reddy's five-year sales growth is approximately 12.09%.
Sun Pharma's is approximately 11.78%.
The difference is negligible.
Five-year profit growth is not.
Sun Pharma has compounded profit at approximately 31.64% in Bull Run's current series, while Dr Reddy's is around 16.54%.
That gap helps explain Sun's higher valuation.
Do not use Dr Reddy's raw five-year EPS CAGR without adjusting for its stock split
Dr Reddy's completed a 1:5 stock split effective October 28, 2024.
Each ₹5 face-value share was split into five ₹1 shares.
Official financial statements restate comparable EPS where required, but automated historical per-share datasets can still create misleading CAGR results if the series is not fully adjusted across every period.
Bull Run's current raw five-year EPS growth field for Dr Reddy's is therefore not used as a deciding metric in this comparison.
Total profit growth, revenue growth and official adjusted EPS history are more reliable for this purpose.
Sun Pharma has the better current balance-sheet ratios
Sun currently carries lower leverage, higher interest coverage and stronger liquidity than Dr Reddy's in Bull Run's consolidated series.
Sun's debt-to-equity ratio is approximately 0.05 versus Dr Reddy's at around 0.17.
Sun's current ratio is about 2.82x compared with Dr Reddy's 1.80x.
Interest coverage is approximately 45.6x for Sun versus 15.4x for Dr Reddy's.
Dr Reddy's nevertheless remained in a net cash position at June 30, 2026, with management reporting net cash surplus of approximately ₹3,057 crore.
The two sets of measures are not contradictory. Consolidated accounting ratios can include leases and other liabilities while a company still holds more cash than conventional debt on a net basis.
Dr Reddy's converts current earnings into cash more effectively
Bull Run's operating-cash-flow-to-net-profit ratio is approximately 1.35x for Dr Reddy's versus 1.08x for Sun Pharma.
That gives Dr Reddy's the edge on this current conversion measure.
Sun's absolute five-year free cash flow is much larger at approximately ₹41,050 crore, compared with roughly ₹11,253 crore for Dr Reddy's.
The comparison therefore splits into two answers: Dr Reddy's has stronger current cash conversion, while Sun has generated substantially more cumulative free cash flow in absolute terms.
Valuation is where Dr Reddy's case becomes interesting
Dr Reddy's currently trades below the pharma-industry P/E while Sun Pharma trades above it.
Dr Reddy's P/E is approximately 31.86x.
Sun Pharma trades around 38.76x.
Bull Run's current pharma-industry P/E is approximately 34.89x.
Dr Reddy's price-to-book ratio is also much lower at about 2.71x versus Sun at 5.61x.
Investors are therefore paying Sun's premium for better margins, stronger long-term earnings growth and specialty optionality.
Dr Reddy's becomes attractive if the post-lenalidomide earnings base recovers faster than the market expects.
The market has clearly preferred Sun Pharma over the last year
| Market Metric | Sun Pharma | Dr Reddy's |
|---|---|---|
| Price on 25 Aug 2026 | ₹1,922 | ₹1,193.50 |
| 1-month return | -2.03% | +3.63% |
| 3-month return | +4.21% | -9.51% |
| 6-month return | +7.63% | -9.54% |
| 1-year return | +16.01% | -7.04% |
| 52-week high | ₹2,046.90 | ₹1,414.90 |
| 52-week low | ₹1,548 | ₹1,101 |
| RSI (14) | 36.53 | 65.35 |
Sun remains relatively close to its 52-week high.
Dr Reddy's has recently recovered above its 20-day moving average but remains below its 50-day, 100-day and 200-day averages.
Those technical observations describe current market positioning, not future business value.
Sun Pharma: what investors are paying a premium for
Strengths
- Large India branded-pharma franchise.
- Global specialty medicine platform.
- 20%+ current net profit margin.
- 19.3% ROCE.
- 31.6% five-year profit growth.
- Large five-year free-cash-flow base.
- Strong current earnings momentum.
- Potential Organon scale benefits.
Risks
- P/E above industry benchmark.
- Organon transaction financing risk.
- Integration risk.
- Specialty R&D failures can be expensive.
- US generics remain under pressure.
- Current ROCE could change materially after a large acquisition.
Dr Reddy's: what the recovery thesis depends on
Strengths
- Lower P/E and P/B than Sun Pharma.
- Emerging Markets revenue up 31%.
- India revenue up 17%.
- Underlying base business growing despite lenalidomide decline.
- Strong current operating cash conversion.
- Net cash surplus at June 2026.
- Complex generic and branded product pipeline.
- No promoter pledge.
Risks
- North America revenue fell sharply.
- Q1 EBITDA margin fell to 12.5%.
- Lenalidomide profit pool has largely reset.
- Semaglutide supply issue created a ₹240 crore provision.
- ROE and ROCE remain below Sun's.
- Replacement launches need to rebuild earnings quality.
Sun Pharma vs Dr Reddy's: which wins each category?
Market scale: Sun Pharma.
P/E valuation: Dr Reddy's.
P/B valuation: Dr Reddy's.
ROE: Sun Pharma.
ROCE: Sun Pharma.
Net profit margin: Sun Pharma.
Five-year sales growth: Dr Reddy's slightly.
Five-year profit growth: Sun Pharma.
Absolute five-year free cash flow: Sun Pharma.
Current operating cash conversion: Dr Reddy's.
India business scale: Sun Pharma.
Current Emerging Markets growth: Dr Reddy's.
Global specialty medicine exposure: Sun Pharma.
Current Q1 earnings momentum: Sun Pharma.
Current one-year market performance: Sun Pharma.
Bull Run Score: Sun Pharma.
Sun Pharma vs Dr Reddy's FAQs
Which stock is cheaper?
Dr Reddy's. It trades at roughly 31.9x earnings compared with Sun Pharma at about 38.8x.
Which has higher ROE?
Sun Pharma, at approximately 14.7% versus Dr Reddy's at around 11.7%.
Which has higher ROCE?
Sun Pharma, at approximately 19.3% versus Dr Reddy's at about 14.8%.
Why did Dr Reddy's profit fall so sharply?
The main factors were lower lenalidomide revenue and a ₹240 crore semaglutide-related inventory and associated-cost provision.
Is Dr Reddy's US business collapsing?
Reported North America revenue fell sharply, but management said the underlying base business excluding lenalidomide continued to grow at a double-digit rate.
Which has the stronger India franchise?
Sun Pharma has the larger India business. Dr Reddy's current India growth rate is also strong.
Why is Sun Pharma's valuation higher?
Sun currently has higher margins, stronger return ratios, faster long-term profit growth and greater global specialty-medicine exposure.
What is the biggest risk to Sun Pharma?
The proposed Organon acquisition significantly increases financing, integration and capital-allocation risk.
Research sources
- Bull Run current fundamental, ownership and technical data
- Bull Run Smart Screeners
- Bull Run Sun Pharma vs Cipla comparison
- Sun Pharma investor information and Q1 FY2027 financials
- Sun Pharma quarterly results and earnings materials
- Sun Pharma Organon and regulatory disclosures
- Dr Reddy's investor centre
- Dr Reddy's Q1 FY2027 earnings call transcript
- Dr Reddy's Q1 FY2027 regulatory earnings release
- Dr Reddy's stock-split disclosure and annual report
Disclaimer
This article is for educational and informational purposes only. Pharmaceutical revenue and earnings can be affected by product exclusivity, regulatory actions, clinical outcomes, launches, price erosion, acquisitions, currency movements and supply interruptions. Sun Pharma's proposed Organon acquisition may materially change its future balance sheet and return ratios. Dr Reddy's historical per-share comparisons also require care because of its 2024 stock split. Financial and market data changes over time. Nothing here recommends buying, selling or holding Sun Pharma, Dr Reddy's or any other security. Bull Run is not a SEBI-registered Research Analyst or Investment Adviser.