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Informist, Wednesday, Jul. 8, 2026

 

By Eshitva Prakash and Gunjan Rajput

 

MUMBAI – After a conference call with the management of Dr. Reddy's Laboratories Ltd., where top officials of the company explained the quality issues found in one batch of semaglutide, analysts are convinced the disruption in supply of the drug will not have a significant impact on the company's numbers for the financial year 2026-27 (Apr-Mar). Consequently, there is unlikely to be any ratings downgrade or even downward revision of the target price for the stock. While their optimism is driven by semaglutide's limited contribution to Dr. Reddy's top line, they are nonetheless concerned that the company is likely to face a hiccup in ramping up production of the drug, particularly in Canada, where it recently won long-sought sales approval from regulator Health Canada.

 

Semaglutide sales for Dr. Reddy's were projected to be $120 million–$130 million in FY27. Now a part of this revenue is at risk, Mehul Sheth, research analyst at HDFC Securities Ltd., said. Another analyst from a medium-sized broking firm said he now expects semaglutide sales of around $70 million in FY27, down from the earlier estimate of $100 million. A third analyst said the sales projection for the drug for FY27 would be cut by $20 million to $100 million.

 

Assuming the worst-case scenario of a fall of $30 million in sales of semaglutide in FY27, Dr. Reddy's would take a hit of INR 2.86 billion on its revenue assuming the rupee is at 95.39 to the dollar. This would amount to just 1.3% of the company's FY26 top line of INR 337 billion. Considering sales in FY27 will be higher than in FY26, the extent of the impact on FY27 revenue would be even lower than 1.3%. If the company's 12.5% net profit margin for FY26 were to be applied to the revenue shortfall of INR 2.86 billion, the estimated shortfall in net profit on this account would be around INR 429 million. This estimated shortfall in net profit would again be just 1% of its FY26 net profit. Again, the impact on FY27 profit would be still lower.

 

The disruption in supply of the drug will result in the company missing out on a full quarter of semaglutide sales, which is why it has decided to lower its sales guidance for the drug to 6-7 million pens from 12 million earlier. Another reason why analysts' target prices and earnings-per-share estimates for Dr. Reddy's are likely to remain unchanged is that they were already expecting sales of the drug to be much below the company's guidance. One analyst had projected sales of just 2–3 million pens while another had priced in a sales volume of 4–5 million pens. These analysts are not fully convinced that the company will be able to achieve even its revised lower guidance.

 

Dr. Reddy's semaglutide sales disruption adds to existing concern about the drug's long-term prospects. "The initial surge in India's generic semaglutide market appears to be fading as launch-led gains plateau," Sheetal Sapale, vice-president, commercial, Pharmatrac, said. "However, the longer-term growth narrative is increasingly shifting back toward innovator brands. Wegovy, Ozempic, Poviztra, and other Novo Nordisk brands are strengthening their position through an expanding pool of eligible patients, growing physician familiarity, and a loyal prescriber base."

 

Analysts said Dr. Reddy's may miss out on a large growth opportunity in Canada, where it had early mover advantage among generic drugmakers. Zydus Lifesciences Ltd., Lupin Ltd., and Sun Pharmaceutical Industries Ltd. have already stated their intent to launch generic semaglutide in Canada in FY27 or early FY28. In the domestic market, Dr. Reddy's has the lion's share of the semaglutide market. Cipla Ltd., Lupin., Eris Lifesciences Ltd., Glenmark Pharmaceuticals Ltd., and Sun Pharmaceutical pose the biggest market share risk to Dr. Reddy's in India, according to data from Pharmatrac.

 

Dr. Reddy's Thursday said it found degradation impurities in an active pharmaceutical ingredient used in semaglutide. Consequently, generic semaglutide will not be available in India and supplies in Canada will be disrupted until at least late October. The disruption has also hit Torrent Pharmaceuticals as the company decided to recall selected batches of its Semalix injection pens for technical evaluation ‌after a notification from Dr. Reddy's, which makes the injectables for it.

 

For the March quarter, Dr. Reddy's had reported a consolidated net profit of INR 2.21 billion on revenues of INR 15.93 billion. Thursday, its shares ended at INR 1,269.50 on the National Stock Exchange, down nearly 6% from Wednesday, after the company said it had found quality issues in some batches of semaglutide and that supply of the drug would be disrupted. Shares of Lupin, Sun Pharmaceuticals, and Zydus Lifesciences ended 1-3% higher.   End

 

US$1 = INR 95.38

 

Edited by Rajeev Pai

 

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