Dr Reddy’s semaglutide delay clouds FY27 pen target

Stock slides as semaglutide plan hits a snag

Dr Reddy’s Laboratories (DRL) shares came under pressure on Friday, July 10, after the company said it would miss its annual semaglutide production target due to supply disruption linked to quality issues in the active pharmaceutical ingredient (API). The stock fell as much as 3.74% to ₹1,222 per share during the session. At 9:58 am, it was trading at ₹1,239.40, down 1.75% from the previous close. The decline extended a sharp two-day move, with the stock down more than 9% over two sessions. The selling reflected investor concern that the disruption could slow Dr Reddy’s commercial momentum in a newly opened and highly competitive semaglutide market.

What the company disclosed on July 9

On Thursday, July 9, 2026, Dr Reddy’s announced the suspension of commercial distribution of its generic semaglutide after an issue was identified in the API used in the product. In its filing, the company said certain batches of semaglutide were “out of specification” due to the API-related issue, and commercial distribution would be postponed until it is rectified. The company also told stakeholders that there is no effect on patient safety or on existing global regulatory submissions. It added that new shipments are expected to recommence only towards late October or early November.

CEO’s explanation: impurity spotted during scale-up

During an evening call with analysts, CEO Erez Israeli said the halt was triggered by the discovery of an unidentified impurity during the scale-up phase of production. He said the company would conduct a comprehensive investigation to identify the root cause and implement required manufacturing process improvements. Commercial supplies would resume only after full validation of the updated production method. Management indicated the disruption would affect customer availability in both India and Canada. The CEO also clarified that there is no safety risk associated with products currently in the market, and the off-specification items identified during scale-up were not dispatched.

Availability in India and Canada, and what stays unaffected

Dr Reddy’s said supplies of its generic semaglutide would remain unavailable in India and face disruptions in Canada until at least late October. Reuters also reported that generic semaglutide supplies would remain unavailable in India and disrupted in Canada until at least late October due to API impurities. Importantly, Dr Reddy’s said the supply of oral semaglutide tablets remains unaffected because they use different sources for their APIs. That distinction matters for investors tracking how much of the franchise can continue without interruption while the injectable supply chain is repaired.

FY27 pen guidance at risk, with a revised near-term view

The company had guided for 12 million pens for FY27 but said it would miss that annual target due to the supply disruption. With commercial supplies unlikely to resume for over three months, management indicated it may fall short of the earlier target. The CEO projected sales of approximately 6-7 million pens in the third and fourth quarters of FY27. The revised timeline and volume outlook became the central input for broker models, given that semaglutide scale-up was a key monitorable for FY27 earnings and FY28 recovery assumptions.

Market reaction: two-day fall and market-cap hit

The stock’s sell-off accelerated after the disruption was disclosed. On Thursday, the shares closed at ₹1,269.80, down 5.85% on the BSE. Reuters also reported shares closed down 5.9% at ₹1,269.50, marking the steepest one-day decline in more than three years. On Friday, the shares fell to ₹1,222, the lowest level in nearly three months. Over two sessions, the fall wiped out more than ₹10,600 crore in market capitalisation, taking the company’s market value below ₹102,000 crore.

What brokerages said: ratings largely intact, targets trimmed

Brokerages offered mixed takes, with many retaining their ratings but cutting targets and estimates to reflect delayed supply and lower near-term semaglutide contribution.

Choice Institutional Equities retained an ‘Add’ rating with a target price of ₹1,335, describing the scale-up disruption as a temporary speed bump while flagging execution as the key monitorable. JM Financial maintained ‘Buy’ and reiterated a target price of ₹1,561, valuing the stock at 20x FY28 estimated earnings, while saying it believes the company can ramp up to the previously guided levels by FY28. JM Financial also cited an Abatacept opportunity in FY28, stating this should drive EPS to ₹78, and noted the stock trades at 16x FY28E earnings.

Motilal Oswal Financial Services (MOFSL) maintained a ‘Neutral’ rating and cut its target price by 5% to ₹1,210. It cut FY27 and FY28 earnings estimates by around 11% and 2%, respectively, factoring in the slower semaglutide ramp-up and pressure in FY27 amid lower gRevlimid contribution and delayed semaglutide supplies. Separately, MOFSL also referenced a lower target price of ₹1,195 in another note. Systematix Institutional Equities downgraded the stock from ‘Buy’ to ‘Hold’ and reduced its target to ₹1,398, citing potential erosion of first-mover advantage. Emkay Global cut its fiscal 2027 earnings estimates by about 7%, while Elara Securities downgraded the stock to ‘Reduce’ from ‘Accumulate’ with a target price of ₹1,283. Nuvama maintained ‘Buy’ but reduced its target price to ₹1,465 from ₹1,560.

Key numbers at a glance

Why semaglutide matters, and why the timing is sensitive

Reuters noted that India’s semaglutide market opened up after the drug’s patent expired in March, setting up an intense race across manufacturers. Against that backdrop, any interruption tied to manufacturing quality can change the pace of ramp-up and influence competitive positioning, especially if rivals enter earlier than expected. Some analysts explicitly flagged the risk that a disruption could erode Dr Reddy’s first-mover advantage, potentially affecting pricing power and market share gains.

At the same time, company commentary that patient safety is not impacted, and that off-specification batches were not shipped, narrows the issue to process control and validation rather than a broader regulatory setback. The fact that oral semaglutide tablets are unaffected also helps isolate the disruption to specific API sources and injectable batches.

Conclusion

Dr Reddy’s semaglutide disruption has introduced a clear FY27 execution risk, with supplies expected to resume only in late October or early November and the 12 million pen target now likely to be missed. The sharp two-day stock move and broker estimate cuts show how central semaglutide volumes are to near-term earnings expectations. The next milestones for investors will be updates on the root-cause investigation, process validation, and the restart of commercial shipments across India and Canada within the stated timeline.