Dr Reddy's Clarifies Semaglutide Status in Canada as Analysts Turn Cautious; Biologics Facility Observations in Focus
Key Insights
Dr Reddy's Laboratories confirmed it has not yet received Notice of Compliance for its Semaglutide Injection from Health Canada, though it received Drug Identification Numbers on April 22, 2026.
Citi (search) and Goldman Sachs (search) downgraded the stock, citing overstated upside from unconfirmed semaglutide approval and warning of limited near-term pipeline and price erosion concerns.
The US FDA (search) completed an inspection at the company's Bachupally biologics facility, issuing seven observations, most related to the new block for biosimilar Abatacept.
Dr Reddy's Laboratories found itself at the center of analyst scrutiny this week as the company issued a stock exchange clarification regarding its semaglutide regulatory status in Canada, while separately navigating a US FDA (search) inspection at its key biologics manufacturing facility in Hyderabad.
The company addressed a CNBC-TV18 report in a stock exchange filing, confirming that it "has not yet received approval ('Notice of Compliance') for its Semaglutide Injection from Health Canada." However, Dr Reddy's disclosed that as part of the regulatory review process, it received Drug Identification Numbers (DINs) for Semaglutide Injection from Health Canada on April 22, 2026. The company stated it "continue[s] to engage constructively with the regulatory authority and remain[s] committed to bringing the product to the Canadian market upon approval."
The clarification came amid a 9% rally in the company's shares, which brokerages suggested was driven by unconfirmed generic semaglutide approval news in Canada. Following the clarification, shares of Dr Reddy's slipped 1.13% to Rs 1,316 on the NSE.
Analyst Downgrades and Revenue Concerns
Citi (search) maintained a 'Sell' rating on Dr Reddy's with a target price of Rs 1,070 per share, arguing that the recent rally "likely overstated the upside." The brokerage estimated FY28 revenue of $50 million in a six-player market, while projecting FY27 revenue of $80-100 million in a three-player market with a 65% generic discount. Citi warned that upside to $150-180 million "appears unlikely due to competition and possible price cuts," and cautioned that the ex-Revlimid impact in Q4FY26 could trigger earnings estimate cuts.
Goldman Sachs (search) downgraded Dr Reddy's to 'Sell' from Neutral, setting a target price of Rs 1,075 per share. The brokerage noted that even if approval materializes, "the Ozempic opportunity in Canada may be short-lived because of faster competition." Goldman Sachs added that the company's near-term pipeline "remains limited to Ozempic and the Abatacept biosimilar," while ongoing price erosion in base products remains a concern. The firm cut FY26-28 EPS estimates by 8-26% on slower growth and the Ozempic impact.
Biologics Facility Inspection: Seven Observations
In a separate development, Dr Reddy's shares extended their gaining streak to six consecutive sessions, hitting a 52-week high of Rs 1,414.90 on the NSE, after the US drug regulator completed an inspection at the company's biologics facility in Bachupally, Hyderabad, and issued seven observations. The company said it would address the observations within the stipulated timeline.
According to brokerage Nomura (search), as cited by Informist, the Bachupally manufacturing facility comprises two blocks, with most of the seven observations pertaining to the newly commissioned block for biosimilar Abatacept. The older block manufactures Rituximab, while the new block has been developed for biosimilar Abatacept.
Nomura (search) characterized the outcome as "modestly encouraging," noting the company's clarification that most observations relate to the new block. However, the brokerage emphasized that "securing regulatory clearance for commercial use of the facility would remain a key hurdle." It added that product-specific regulatory risks are "relatively limited as the approval pathway for the biosimilar does not seek substitutability or interchangeability."
Abatacept Biosimilar: A Potential Growth Driver
Nomura (search) maintained a 'buy' rating on Dr Reddy's with a target price of Rs 1,740, identifying biosimilar Abatacept as a key growth driver. The drug targets a global market estimated at $3.7 billion, with the brokerage estimating the product's net present value at $1.6 billion, translating into a potential value accretion of about Rs 186 per share.
The company remains optimistic about launching biosimilar Abatacept in the fourth quarter of FY27 (January-March 2027). If launched as expected, Nomura (search) estimated the product could contribute more than 30% upside to the company's earnings in FY28 and FY29. The brokerage noted that the stock's forward price-to-earnings multiples of 25 times and 20 times based on FY27 and FY28 earnings estimates, respectively, "remain attractive."
Trading volumes surged to approximately 4 million shares, nearly double the average of 1.76 million shares over the previous seven sessions, with a traded value of Rs 543.76 crore.