Dr. Reddy's said in July that supply would restart in November once its own ingredient process passed validation. A backup supplier remains about a year away.
Dr. Reddy's says its generic semaglutide is approved in ten countries. Its 23 October results deck lists them as markets across Latin America, Africa and the Middle East, plus Canada and India. The company says supply will restart in November.
The constraint has been making enough drug ingredient to specification, despite the approvals. Price pressure on branded semaglutide will come from whoever puts pens on shelves, not from whoever holds the most licences.
How the supply problem began
The approvals came early. Dr. Reddy's launched in India in March, when the patent lapsed. On its 22 July results call, management said it was the first to win approval for and launch semaglutide for type 2 diabetes in Canada. The deck's page on emerging markets counts eight approvals there.
Then supply failed. On 9 July Dr. Reddy's said certain batches were out of specification because of an issue with the active pharmaceutical ingredient, the drug substance itself. Commercial supplies would be delayed. It said there was no impact on patient safety or on existing global regulatory filings.
The fault sat inside Dr. Reddy's own plant. On the call that day chief executive Erez Israeli said the company had scaled up its ingredient process at its own facility, aiming for higher output. The ingredient met its specification. An impurity then showed up when the finished drug was tested.
The impurity came from the process, not the equipment, Israeli said. The ingredient degraded while the formulation was being made, through the reaction of the ingredient in the process. Asked about equipment, he said that to the best of his understanding it would not need to change. The company only had to tweak the process settings.
What must happen before the restart
Restart therefore depends on validation. Until three new validation batches pass, Israeli said, the company cannot send ingredient to OneSource, the contract maker that fills the pens. He described a halt lasting until September. The fix would use "the current process and the current API source."
The July plan was precise. If validation passed, Dr. Reddy's would resume supply to its long term partner, OneSource, which would fill 6 to 7 million pens between November and March. Israeli added: "there is a risk of a further delay."
Supply was due back in late October or early November, give or take a week or two, Israeli said in July. Validation could finish by the end of September. OneSource would then fill pens in October.
The restart date depends on two things. One is validation at Dr. Reddy's own plant. The other is OneSource's filling slots, which the company said in July it had agreed anew for the 6 to 7 million pens.
Demand was not the problem. Israeli said that if the company had 15 million pens, it could supply those too. The delay did cost the early months. The company had assumed sales from July through October, and those would not happen.
A backup supplier exists, but it is not the same supplier as the main one. Israeli said adding it needs a pre-approval supplement, a regulatory filing that must be cleared first. That puts it about a year away, give or take. It cannot help in the next few months.
The October update
Dr. Reddy's told investors on 22 July it planned to resume commercial supplies by November. It also said no patient who had consumed the product was at risk. The 23 October deck now says the company is on track to resolve the out of specification issue. It gives no restart date.
The 23 October call gave the date. A Benzinga transcript has Israeli saying the company expects to relaunch semaglutide, directly and through partners, in November 2026, subject to successful validation. He said the ingredient problem is solved and all necessary ingredient has been shipped to the partner.
Validation results are still pending. Israeli said testing the finished drug made from the new ingredient takes about three weeks. Most of the relaunch quantities will go to Canada, he said, with some to Latin America and a little to Africa.
The financial hit and competing brands
The failure cost about $25 million. In the June quarter the company booked a provision of Rs 2,397 million for inventory and related costs. That cut its EBITDA margin, the share of revenue left after operating costs, to 12.5 percent from 15.4 percent without it. The release puts the hit at about 3 points.
EBITDA margin was 12.5 percent in the April to June quarter after a 2,397 million rupee provision for semaglutide API, 15.4 percent without that provision, and 20.6 percent in the July to September quarter.
View data
| Quarter | EBITDA margin, percent |
|---|---|
| Q1 FY27 as reported | 12.5 |
| Q1 FY27 without semaglutide API provision | 15.4 |
| Q2 FY27 as reported | 20.6 |
The EBITDA margin then rebounded to 20.6 percent in the three months to September, the company deck says. Profit attributable to shareholders fell 36 percent to Rs 925 crore on revenue of Rs 8,671 crore, down 1.5 percent. Business Standard links the profit fall to lower lenalidomide sales in North America.
Canada is the open question. On 9 July Israeli said there was no recall concern, and that product already sent to Canada was unaffected. Reuters separately reports a Rs 710 million revenue hit on a semaglutide recall in Canada. The deck does not mention a recall, so the gap between the two accounts is unexplained.
Two new semaglutide brands have appeared in India since the original Obeda injection, made by OneSource, was halted in July. Reuters found Obeda Pro and Obeda Plus, made by Hetero Labs. They appeared in the market from late July in supply invoices.
The new brands were planned well before July, Dr. Reddy's says, and are not evidence that Obeda is being replaced. Several distributors told the reporters they expect Obeda to be discontinued. Both accounts agree on one point: the company has pens under other names in India.
Dr. Reddy's still leads in India, selling about 442,000 semaglutide units through September, Pharmarack data cited by Reuters show. Sun Pharma sold 151,000. The lead is real, but a rival can contest it while supply is short.
The restart date matters even if the disruption is temporary, because rivals can keep entering the market. Every month without pens is a month for a rival to take the shelf. The July call did not say whether the backup, a year away, is linked to the Hetero pens sold in India.
What to watch in November
November is the test. The company's 9 July estimate was late October or early November. On 23 October Israeli said relaunch is expected in November, subject to validation. If validated ingredient clears the drug test of about three weeks, relaunch can start in November, mostly in Canada. The July plan had OneSource filling 6 to 7 million pens between November and March, on an earlier restart. If validation fails, the backup is still about a year away.