Dr. Reddy’s Laboratories (DRREDDY) investor relations material

Overview of semaglutide supply update

• An impurity was detected in the scale-up batch of semaglutide API during validation, leading to a halt in commercial supply until the root cause is identified and process improvements are validated.

• The issue is limited to new scale-up batches; products already supplied to the market are unaffected and safe, with no recalls required.

• No regulatory filings or approvals are impacted, and no additional submissions are needed for the process change.

Operational and financial implications

• Commercial supply is expected to resume in late October or early November, with 6–7 million pens targeted for supply between November and March.

• There will be a temporary halt in supply for a few months, affecting near-term sales and resulting in a potential write-down of affected inventory.

• No penalties are anticipated from partners due to the supply interruption, though some contract renegotiations may be needed.

• The long-term EBITDA margin target remains unchanged, but there will be a short-term downside due to missed sales.

Technical and process details

• The impurity is related to the degradation of the peptide during the API manufacturing process, not due to raw materials or equipment.

• The root cause analysis and process tweaks are expected to take up to two weeks, followed by validation and sterility testing, with the full process extending to end-September.

• Alternate API suppliers are being qualified, but backup supply will not be available for at least a year.