Dr Reddy's Laboratories Ltd. was among the top losers on the benchmark Nifty 50 index on Friday.
Goldman Sachs downgraded the stock to 'Sell' from 'Neutral' and cut its target price to Rs 1,075 from Rs 1,225. The new target implies a potential downside of 20% over the previous close.
The brokerage said the opportunity for Ozempic (Semaglutide), a prescription injection for adults with Type 2 diabetes, in Canada is likely to be lower than earlier expectations. It added that valuations are running ahead of fundamentals, prompting the downgrade.
Goldman Sachs also flagged ongoing price erosion in key products within Dr Reddy's base business as a lingering concern. As a result, it has cut its FY26–FY28 earnings per share estimates by 8-26% to factor in slower topline growth.
Morgan Stanley, meanwhile, has maintained an 'Equal-weight' rating on Dr Reddy's with a target price of Rs 1,259. The brokerage noted that the company has received a Drug Identification Number (DIN) for Semaglutide in Canada, while the Notice of Compliance (NOC), or final approval, is still awaited.
Analysts said that in most cases, the issuance of a DIN is followed by the NOC within a few days. Overall, this development suggests that Dr Reddy's is closer to launching Semaglutide in Canada and is likely to be the first generic entrant. The brokerage said it has built in $200 million in revenue from Semaglutide in Canada in its FY27 estimates.
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