Dr Reddy’s Laboratories warned by FDA, shares dip

The company informed the stock exchanges that it has received warning letters from US FDA relating to its API manufacturing facilities at Srikakulam, AP and Miryalaguda, Telangana as well as Oncology Formulation manufacturing facility at Duvvada, Vishakapatnam, AP.

This action follows the earlier inspections of these facilities by the agency in November 2014, January 2015 and February 2015 respectively. The affected plants account for more than 10 per cent to 12 per cent of the company’s sales.

The shares of Dr Reddy’s Laboratories tanked 14.65 per cent on the Bombay Stock Exchange (BSE) to close the day at Rs 3,629.55.

“We take quality and compliance matters seriously and stand by our commitment to fully comply with the current good manufacturing practice (CGMP) quality standards across all our facilities. We will respond with a comprehensive plan to address these observations within the stipulated time frame of 15 days,” said G.V. Prasad, CEO, Dr Reddy’s.

Mr Prasad further added that his company would continue to actively engage with the agency to resolve these issues and have also embarked on an initiative to revamp its quality systems and processes as an organisation wide priority.

“The impact of the active pharmaceutical ingredient (API) facilities would depend upon how quick the company fixes the US FDA issues. Nonetheless, the near term performance of the company will be impacted. The stock has corrected around 15 per cent on back of the news, which we believe should discount most of the negatives in the stock,” said Sarabjit Kour Nangra, VP, research, pharma, Angel Broking.