An employee in protective clothing works inside a medical lab in India. (Photographer: Dhiraj Singh/Bloomberg)

U.S. FDA Inspecting Unit II Of Divi’s Laboratories’ Visakhapatnam Facility

The U.S. drug regulator is inspecting the Unit II of Divi’s Laboratories Ltd.’s Visakhapatnam facility, people with knowledge of the matter said.

The inspection started on Monday and is expected to conclude within a week, a company official aware of the development told BloombergQuint on the condition of anonymity. A vendor who provides raw materials to Divi’s Laboratories also said that the Unit II is currently being inspected.

The U.S. Food and Drug Administration had issued an import alert in March and a warning letter in May for Unit II. Plants on the FDA's import alert list cannot export drugs to the U.S.

Divi's Laboratories management did not respond to BloombergQuint’s email queries and phone calls.

Since European regulators have cleared the plant after inspection, the Divi's Laboratories management is hopeful that the inspection of Unit II will conclude smoothly, the vendor cited earlier told BloombergQuint on the condition of anonymity.

The key reason for U.S. FDA to inspect the facility ahead of schedule could be due to the nature of high-priority and life-saving drug products and raw material manufactured for innovators at Unit II, Amey Chalke, pharma analyst at HDFC Securities Ltd. said on the phone.

In the June quarter, the Hyderabad-based company cut its full-year guidance, and projected a 10 percent revenue decline, compared to its earlier projection of 5 percent growth. The company reported 19 percent drop in revenue and 42 percent slump in profit as the business from U.S. fell due to the import alert and compliance issues at Unit II.

The shares of the drugmaker rose 8.4 percent, the most in two months, to Rs 780 apiece as of 1:17 p.m. The stock has risen for a third straight session. It has declined 0.5 percent so far this year and nearly 40 percent in the last 12 months.

There can be a 20 percent upside to consensus earnings estimates if the U.S. FDA lifts the import alert on the plant.
Amey Chalke, Pharma Analyst, HDFC Securities