Indian drugmaker Dr Reddy's slips on margin, semaglutide supply woes

Shares of Dr Reddy’s Laboratories fell as much as 6.9% on Thursday after many brokerages cut their earnings forecasts for the Indian drugmaker following weaker-than-expected quarterly results and semaglutide supply disruptions.

The stock was trading 3.2% lower at 1,145 rupees as of 09:40 a.m. IST, and was the top loser on the pharma index and the Nifty 50.

At least eight brokerages cut their target price on the company’s stock as of Thursday morning, according to LSEG compiled data.

The company’s weak June-quarter results have reignited concerns about profitability, with analysts warning that the pace of recovery now hinges on the successful restart of semaglutide supplies and the timely approval of biosimilar abatacept.

Dr. Reddy’s, which sees semaglutide as a key growth driver in India and select overseas markets, said earlier in Julyits generic version would remain unavailable in India and disrupted in Canada until at least late October.

India’s Dr Reddy’s posts quarterly profit slump on semaglutide inventory costs

J.P. Morgan maintained its “underweight” rating and cut its target price on Dr. Reddy’s stock to 1,100 rupees from 1,200 rupees, saying weak core profitability persisted despite branded business growth.

The brokerage also lowered its fiscal 2027 fiscal 2028 earnings estimates by 12% to 17% and warned that any delay in semaglutide’s relaunch or abatacept approval could pose further risks.

Citi reiterated its “sell” rating and reduced its target price to 1,040 rupees, saying first-quarter margins reinforced concerns about the company’s core business and prompted earnings downgrades.

Analysts expect the next leg of earnings recovery to depend on semaglutide supply resuming in November and regulatory progress for abatacept, which management expects could be approved by the end of 2026.

However, brokerages cautioned that any further delays could trigger additional earnings cuts and keep pressure on the stock.