Dr Reddy's Laboratories on Wednesday, 22 July 2025, reported a steep 69 per cent year-on-year fall in consolidated net profit for the first quarter of FY27, with earnings collapsing to ₹4,435 crore from ₹14,178 crore in the same period last year. The pharmaceutical major blamed a combination of weak global generics revenue, a sharp drop in North America sales, and costly disruptions in its semaglutide supply chain for the sharp deterioration.

Headline Numbers at a Glance

Revenue from operations declined 5.5 per cent year-on-year to ₹8,070.5 crore, down from ₹8,545.2 crore in the year-ago quarter, according to the company's regulatory filing with the National Stock Exchange (NSE). Operating performance deteriorated even more sharply: EBITDA fell 60.4 per cent to ₹861 crore from ₹2,173 crore, while the EBITDA margin contracted to 10.6 per cent from 25.3 per cent a year earlier — a contraction of nearly 15 percentage points. Other income offered a marginal cushion, rising to ₹355 crore from ₹290 crore in the corresponding quarter.

Semaglutide Disruption Weighs Heavily

A key drag on the quarter was the company's semaglutide supply crisis. Dr Reddy's made a provision of ₹240 crore towards inventory write-downs and associated costs arising from the disruption. Earlier this month, the company disclosed that an impurity issue in the active pharmaceutical ingredient (API) had forced it to suspend production of new batches, leaving its generic semaglutide unavailable in India and disrupted in Canada until at least late October.

Semaglutide — the active ingredient in the blockbuster weight-loss drug Wegovy — recently went off patent in India, triggering a rush by domestic generic manufacturers to capture the fast-growing market. The production halt threatens to delay Dr Reddy's ability to establish a meaningful position in this segment, ceding early-mover ground to rivals at a critical juncture.

North America Revenue in Sharp Decline

The company's largest market delivered its most painful quarter in recent memory. North America revenue fell 35.3 per cent year-on-year to ₹2,205 crore, reflecting both the semaglutide supply gap and broader pricing pressure in the US generics market. North America has historically contributed the largest share of Dr Reddy's top line, making the scale of this decline particularly consequential for the full-year outlook.

Market Reaction and What Comes Next

Shares of Dr Reddy's Laboratories closed 2.16 per cent lower at ₹1,179.90 per share on the NSE on Wednesday, reflecting investor concern over the quarterly miss. The stock's muted reaction relative to the scale of the profit decline suggests markets had partly anticipated the semaglutide-related provisioning.

The resolution of the API impurity issue and the timeline for resuming semaglutide production will be the key variable to watch in the coming quarters. A successful relaunch before the end of October could allow the company to recapture lost ground in a market that analysts expect to scale rapidly.