Dr. Reddy's Laboratories shares in focus on the back of this negative development; ADR tanks 8%

Shares of Dr. Reddy's Laboratories will be in focus on Thursday, October 30, after the approval for its Semaglutide injection was delayed.

The company has received the Notice of Non-Compliance (NON) from the Pharmaceutical Drugs Directorate, Canada, for the Abbreviated New Drugs Submission (ANDS) of the Semaglutide injection.

The NON from the Canadian drug regulator seeks additional information and clarifications on specific aspects of the submission. Dr. Reddy's stated that it will submit a response promptly and within the stipulated timeframe.

Dr. Reddy's went on to add that it remains confident in the quality, safety and comparability of the product and is committed to making this available to patients in Canada and other markets at the earliest.

During the second quarter results, Dr. Reddy's had highlighted that the Semaglutide patent expires in January 2026. The management expects the Canadian market to be competitive and that the Semaglutide opportunity can expand to 87 countries via partners or directly in the next 12-15 months.

Other notable opportunities beyond Canada for Dr. Reddy's for Semaglutide include India, Brazil and Turkey. The management expects volume to the tune of 12 million pens to be absorbed in other countries if not Canada.

Analysts are expecting five more filers for the Semaglutide injection and will be awaiting for approval timelines of other companies. While the street is expecting a delay between 5 to 12 months for Dr. Reddy's, analysts are anticipating $100 million in revenue opportunity in financial year 2027 once the approvals are in place.

Brokerage firm Nomura has maintained its "buy" rating on Dr. Reddy's but has cut its price target to ₹1,580. It has also lowered its Earnings Per Share (EPS) estimates for the stock by 3% to 6% assuming lower revenue from Canada.

Morgan Stanley remains "equalweight" on the stock with a price target of ₹1,389. The brokerage sees success in Canada for Semaglutide to be a key driver for Dr. Reddy's earnings in financial year 2027.

Citi has maintained its "sell" rating on the stock with a price target of ₹990. It said that the Revlimid generic-led drag will be tough to offset as Dr. Reddy's complex pipeline is surprising negatively.

Shares of Dr. Reddy's Laboratories ended 2.4% lower on Wednesday at ₹1,258.4. The stock is down 8% so far on a year-to-date basis. Its US-listed shares were down 8% in overnight trading on Wall Street on the back of this development.