Dr Reddys Q1 Results: Profit Slumps 69%, Revenue Declines as Semaglutide Disruption, Weak US Sales Weigh on

Semaglutide Supply Disruption Hits Q1 Earnings

A major reason behind the sharp decline in profit was a Rs 240 crore provision related to semaglutide, a medicine used to treat diabetes and obesity.

Earlier this year, Dr Reddy's had announced that supplies of semaglutide would remain unavailable in India and face disruptions in Canada after quality issues were detected in one of the active pharmaceutical ingredients used to manufacture the drug. The issue forced the company to suspend production of fresh batches, resulting in additional costs during the quarter.

The company said the provision mainly relates to inventory and other expenses arising from the disruption. Semaglutide is considered one of the fastest-growing medicines globally because of rising demand for diabetes treatment and weight management. It is the active ingredient used in several popular obesity and diabetes drugs.

As patents expire in India, many pharmaceutical companies are preparing to introduce generic versions of the medicine. Dr Reddy's is also expected to benefit from this opportunity. However, the current supply disruption may temporarily delay the company's plans to strengthen its presence in this high-growth segment.

North America Revenue Falls 35% Amid Generic Drug Pricing Pressure

Apart from the semaglutide issue, Dr Reddy's also witnessed weakness in its largest overseas market. Revenue from North America declined 35.3% year-on-year to Rs 2,205 crore, mainly because of lower sales of key generic medicines and continued pricing pressure in the US pharmaceutical market.

The company also reported weaker sales of Lenalidomide, its generic version of the cancer drug Revlimid. The product had previously contributed significantly to earnings, but increasing competition has reduced both prices and market share.

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