Dr. Reddy's Laboratories (DRL) has paused commercial supplies of its generic semaglutide injection until at least October or early November. This decision follows the identification of an unspecified impurity during the scale-up of active pharmaceutical ingredient (API) manufacturing. While DRL assures that products already on the market are safe and were never shipped with the impurity, the halt impacts upcoming supplies for its weight-loss and Type 2 diabetes drug, a generic version of Novo Nordisk's blockbuster Semaglutide.
The supply disruption has led to a major financial impact for DRL. The company's shares plunged nearly 6% on Thursday and an additional 4% on Friday, wiping out over $678 million (approximately Rs 10,600 crore) in market capitalization over two days, bringing its market value below Rs 1.02 lakh crore. Several brokerages, such as Emkay Global and Systematix, have cut their fiscal 2027 and 2028 earnings estimates for DRL and lowered target prices, citing near-term execution risks and the potential loss of first-mover advantage.
Adding to the concerns, Torrent Pharmaceuticals Ltd and USV Ltd, which source some of their semaglutide products from DRL, are recalling certain batches. Torrent Pharma confirmed a voluntary recall of select batches of Semalix injection disposable pens manufactured by DRL, though they stated there was no impact on patient safety. This episode raises doubts about DRL's ability to capitalize on its early entry into India's semaglutide market, with analysts warning that a prolonged delay could allow competitors to gain ground and weaken DRL's pricing power and market share gains.
