Prabhudas Lilladher Maintains Accumulate on Dr Reddy's
Prabhudas Lilladher maintained Accumulate on Dr Reddy's with a ₹1,400 target cutting FY27 estimates by 5% after the company halted Semaglutide supplies due to API impurity issues. Resolution expected by October November 2026. FY28 estimates largely unchanged as the brokerage expects the issue to be temporary.
Semaglutide is the active ingredient in blockbuster weight loss and diabetes drugs like Ozempic and Wegovy. Dr Reddy's was developing a generic version a massive opportunity given the global obesity drug boom. Being first to market in countries like Canada gives a significant revenue and market share advantage called first mover advantage. Any delay risks losing this edge to competitors.
The API Active Pharmaceutical Ingredient used in Semaglutide had impurity issues. This is a serious quality concern impure drugs cannot be supplied to any regulated market. Dr Reddy's halted supplies voluntarily a responsible move but one that costs significant near-term revenue. ₹180 million of Semaglutide sales are factored into FY28 estimates this number is at risk if resolution takes longer than expected.
Dr Reddy's has been reinvesting cash flows from its gRevlimid business into building a pipeline across peptides, biosimilars and GLP products including Semaglutide. This multi year investment cycle is now entering monetisation phase similar to what we saw with Shilpa Medicare. Benefits should be visible from FY27 as new products launch.
Dr Reddy's Semaglutide supply halt taught me that pharma companies developing complex drugs face quality and regulatory risks that can temporarily derail near term revenues, and that tracking API quality issues, resolution timelines and first mover advantage windows is essential for evaluating specialty pharma stocks like