The warning letters have been issued for violation of good manufacturing norms at Srikakulam and Miryalaguda plants in Telangana and oncology formulations unit at Visakhapatnam. These units account for 10-12% of Dr Reddy’s revenues
MUMBAI : Dr Reddy’s Laboratories Ltd received warning letters from the US Food and Drug Administration for violation of good manufacturing norms at three of its manufacturing facilities in Andhra Pradesh and Telangana, the company said.
The warning letters have been issued for the drug maker’s active pharmaceutical ingredient facilities at Srikakulam and Miryalaguda in Telangana, and oncology formulations unit at Visakhapatnam in Andhra. A ban on sale of products from these units in the US may hit 10-12% of total revenues of the company, Chief Financial Officer Saumen Chakraborty told Bloomberg TV. US accounts for almost half the company’s consolidated revenues.
Analysts said the issue is serious, but the company should be able to resolve it in the short-to-medium term as the FDA has not cited any data integrity issues. Dr Reddy’s shares took a severe beating and tumbled 14.65% to Rs 3,629.55 on BSE. During the day, it plunged 14.99% to Rs 3,615. The company’s market valuation dipped by Rs 10,628.05 crore to Rs 61,915.95 crore.
A warning letter from the US FDA highlights each of the issues that need to be addressed in detail, and the company has to respond with corrective measures within 15 days. If the issues are not addressed to the satisfaction of the regulator, it may ban import of products made at these units.
“The company will have to resolve the issues quickly. There are no data integrity issues, so it should not escalate much if the company takes corrective measures,” a senior analyst at a domestic brokerage said. However, delays may cost the company as oncology is a high margin business and it may lose market share to competitors if its products go out of the market, the analyst added.
Also, the company had sought to transfer four to five bulk drug approvals from Srikakulam facility to another facility as it was already under the US FDA scanner. Analysts said the company may face concerns over some key products if the transferred site is the one at Miryalaguda.
The warning letters were issued after the US FDA inspected the plants between Nov 2014 and February this year. “We will respond with a comprehensive plan to address these observations within the stipulated time frame of 15 days,” Chief Executive Officer G.V. Prasad was quoted as saying.
“We will continue to actively engage with the agency to resolve these issues and we have also embarked on an initiative to revamp our quality systems and processes, as an organisation wide policy,” he added. Cogencis had earlier reported that the US regulator had detected some serious slippages in good manufacturing practices at the company’s Srikakulam unit during quality checks.
