Dr. Reddy's Laboratories Flags Semaglutide Supply Delay, Says No Recall Risk

Key Points

• Dr. Reddy’s Laboratories said a scale-up issue involving the API for its semaglutide injection will delay commercial supply, after an impurity was found out of specification during validation testing. The company said the problem is tied to new validation batches, not previously shipped material.
• Management stressed there is no recall or patient safety concern, because products already sold to the market were not affected and remain safe. The issue also does not affect the company’s existing global regulatory filings or its oral semaglutide tablets.
• Dr. Reddy’s expects validation work could be completed around September, with commercial supply potentially restarting in late October or early November if successful. The delay means the company will miss some expected sales in the July-to-October period, though demand for semaglutide remains strong.

Dr. Reddy's Laboratories NYSE: RDY said a scale-up issue tied to the active pharmaceutical ingredient for its semaglutide injection will temporarily delay commercial supplies, though management emphasized that products already supplied to the market are not affected and do not raise patient safety concerns.

Chief Executive Officer Erez Israeli said on a company call that Dr. Reddy's identified an out-of-specification impurity during testing connected to the validation of a scaled-up synthetic API manufacturing process. The API itself met specifications, he said, but an impurity degraded during formulation testing of the finished drug product.

“While the API itself met the specification, one of the impurities were found to be out of specification upon testing,” Israeli said. He added that the issue was identified in scale-up validation batches and was “not related to the old material that we sent.”

Commercial supply expected to resume after validation

Israeli said Dr. Reddy's is investigating the root cause and will make process adjustments before repeating validation. The company expects to produce three validation batches, send them to OneSource for drug product manufacturing, and complete testing, including sterility testing.

Based on the company's current timeline, Israeli said the work could be completed around September. If successful, commercial API supply to OneSource could resume in October, with product supply to the market potentially restarting in late October or early November.

“Is there a risk that we can fail again? Always,” Israeli said. “There is a confidence, but naturally, there is a risk that a further delay.”

Dr. Reddy's said it remains on track, subject to successful validation, to supply about 6 million to 7 million semaglutide pens between the third and fourth quarters of fiscal 2027, with Israeli later describing that output as expected from November through March. He acknowledged that the interruption means the company will miss sales it had previously expected during July, August, September and October.

No recall tied to the scale-up issue

Management repeatedly said the affected scale-up batches did not reach the market. Israeli said there is “no recall concern” related to the issue and that products already supplied remain safe.

“Whatever was sent to the market is safe, is released, and there is no concern about recalls or patient safety as related to this validation,” Israeli said.

The company also said there is no impact on existing global regulatory filings, whether approved or under review, and no prior regulatory approval is required for the current validation work because specifications and filings are not changing. Israeli said the manufacturing facility continues to operate in compliance with applicable cGMP and global regulatory requirements.

Israeli noted separately that there had been a recall of one batch in India, but said it was unrelated to the semaglutide scale-up issue discussed on the call.

Canada and oral semaglutide

Asked about the Canadian market, Israeli said semaglutide already supplied there was not affected because it was made at a different scale. However, he said Canada would see a future supply impact because Dr. Reddy's will not be able to supply product for the next couple of months.

The company also said the issue does not affect oral semaglutide tablets, which use a different API source.

Inventory, partners and backup supply

Chief Financial Officer M.V. Narasimham said inventory at OneSource remains Dr. Reddy's inventory and has not been commercially sold. Israeli said the company may need to provide for or write down batches associated with the issue, though he declined to quantify the value because the company is in a silent period ahead of its Q1 FY2027 results.

Israeli said Dr. Reddy's has informed partners and customers about the supply disruption. He said there are no penalties “as such,” though some arrangements involving down payments may need to be renegotiated.

Dr. Reddy's is also qualifying another supplier as a backup, but Israeli said that route would require a Prior Approval Supplement and would not help in the next few months. He indicated the alternative supplier option is about a year away.

Despite the delay, Israeli said demand for semaglutide remains strong. “If we had 15 million pens, we could supply that also,” he said. “There is no shortage of demand.”

About Dr. Reddy's Laboratories NYSE: RDY

Dr. Reddy's Laboratories Ltd. is an India‐based multinational pharmaceutical company that develops, manufactures and markets a wide range of pharmaceutical products and services. Established in 1984 by the late Dr. Kallam Anji Reddy, the company has grown into a diversified healthcare enterprise offering generic and proprietary medicines, active pharmaceutical ingredients (APIs), biosimilars and custom research and manufacturing services (CRAMS). Its portfolio spans therapeutic areas such as oncology, cardiovascular care, dermatology, gastroenterology and pain management.

The company's core activities include the development and commercialization of cost‐effective generic treatments for branded drugs that have lost patent protection, along with in‐house research into innovative molecule development.

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