It was a rough Wednesday for Dr. Reddy's Laboratories (RDY). The generic drugmaker's stock took a beating after it reported first-quarter fiscal 2027 earnings and revenue that missed Wall Street's expectations. Adding to the pain: a quality issue with its semaglutide supply and a fresh tariff threat from President Trump aimed at bringing generic drug manufacturing back to the U.S.

Trump's Generic Drug Tariff Plan: A Phased Approach

President Trump laid out a detailed plan for tariffs on imported generic drugs. In a social media post, he wrote that generic drugs entering the U.S. would remain tariff-free until August 1, 2028. After that, the tariff would jump to 100% for one year, and then to 200% thereafter. The goal, he said, is to push pharmaceutical companies to move production to the United States. Companies that don't build facilities within the designated timeframe would face the higher rates.

Dr. Reddy's Q1 Miss: Lenalidomide Transition and Semaglutide Woes

Dr. Reddy's reported first-quarter earnings of $0.06 per share, far below the analyst consensus of $0.17. Revenue fell to $853 million from $903 million a year earlier, missing the $925.53 million estimate. Generic drug sales dropped 5% year over year to about $746 million, while active pharmaceutical ingredient (API) sales rose 4% to roughly $89 million.

Co-Chairman and Managing Director G.V. Prasad explained the results: "Our Q1FY27 performance reflected the expected transition beyond lenalidomide revenues, along with an unexpected impact related to semaglutide API. However, our underlying base business continued to deliver healthy double-digit growth across all key geographies."

Semaglutide Supply Halt: Aiming for a November Return

The company discovered that certain batches of semaglutide—the active ingredient in popular diabetes and weight-loss drugs—were out of specification due to an API issue. During the earnings call, executives said they are working to resume supplies as soon as possible and hope to have the product back on the market by November.

Management also noted that relocating manufacturing to the U.S. immediately isn't practical given the current tariff environment—a reality that Trump's plan may eventually force, but not until 2028.

Market Reaction

Investors didn't wait around. Dr. Reddy's shares were down 8.28% at $11.53 at the time of publication Wednesday, reflecting the triple whammy of a missed quarter, a semaglutide hiccup, and the looming tariff threat.