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Semaglutide Scale-up Hits a Speed Bump, Execution in Focus

DRRD has temporarily paused commercial Semaglutide API supplies after identifying an out-of-specification impurity in a scale-up validation batch. The management clarified that the issue is processrelated, with no impact on patient safety, regulatory filings, or products already supplied to OneSource or the market. The company expects commercial API supplies to OneSource to resume by October 2026, with market resupply commencing from November 2026, translating into approximately 6-7 Mn pens during Q3–Q4FY27E. The management also reiterated that underlying demand remains robust, although a potential inventory write-down is likely, with the quantum expected to be disclosed along with the Q1FY27E results. We had not factored in any meaningful Semaglutide contribution in our estimates and, therefore, expect a limited impact on our forecasts. However, we remain watchful on execution and await successful resumption of supplies before building in a meaningful Semaglutide ramp-up.

Nature of the Issue

* The management indicated that the root cause is process-related, specifically within the reaction step and does not involve raw material quality.

* The issue is expected to be addressed through process parameter optimisation and does not require any equipment modifications.

* Importantly, the observation is limited to the new scale-up validation batch and does not affect material already supplied to OneSource or commercial product in the market at present.

* OneSource inventory, which is DRRD-owned, may need to be written down, the quantum of which shall be disclosed in Q1FY27 results.

Timeline to Resolution

* The company expects to complete the root cause investigation and process modification within 2 weeks.

* DRRD will then manufacture three new validation batches using the revised process, which will be supplied to OneSource for fill-finish manufacturing and testing.

* The validation process, including sterility testing, is expected to be completed by September’26 end.

* Commercial API shipments to OneSource are expected to resume in October ’26, and commercial supply of injections is expected to restart in late October or early November ’26. * Based on this timeline, the company continues to expect 6-7 Mn pens to be supplied during Q3-Q4 FY27E.

* The management, however, acknowledged the a risk of further delays if the revised validation batches do not succeed on the first attempt.

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