Divi’s Labs Falls To Over 2-Year Low On Concerns Raised By U.S. Health Regulator
Divi’s said a response to the U.S. FDA observations will be issued within the permitted time.
Shares of Divi’s Labs declined as much as 12 percent to their lowest level since August 2014. This follows a nearly 28 percent intraday decline on Friday after brokerage firm Emkay Global, in a report, raised concerns over five observations made by the U.S. health regulator.
The U.S. Food and Drug Administrator inspected Unit-II of the company’s Visakhapatnam plant in Andhra Pradesh between November 29 and December 6 and issued a Form 483 to the unit with five observations, the drugmaker said in a stock exchange filing on December 7.
The observations are lack of proper controls over computer systems to ensure drug quality, improper maintenance of facility and equipment, R&D division allowing activities inconsistent with manufacturing norms, failure to investigate batches of products containing impurities and improper maintenance or falsification of records.
Clarifying on the report, the company said a response to the five U.S. FDA observations will be issued within the time permitted.
According to broking firm Motilal Oswal, the plant is critical for the company as it accounts for around 60-65 percent of its total sales.
It believes one of the biggest challenges for the drugmaker would be to provide confidence to its existing client set. “It is very important that Divi's does not lose its key clients in the U.S. and European Union because of these 483s,” the broking firm said in note.
It said there is a high risk that the European regulator may also inspect this facility. Given that EU accounts for more than 40 percent of sales, the company cannot afford supply disruption to this region, the broking firm said.