Alkem Gets 13 Observations For Daman Unit, Five Of Them A Repeat Of 2016

Alkem Laboratories Ltd. received 13 observations, five of them a repeat of 2016, from the U.S. drug regulator regarding quality controls and manufacturing practices at its largest facility in Daman, Gujarat that contributes about half of its sales in the U.S.

The observations stem from last month’s surprise inspection conducted from March 19-27. BloombergQuint has obtained a copy of the Form 483 issued by the U.S. Food and Drug Administration to the drugmaker.

U.S. accounts for about 16 percent of the total sales for the company, and Daman unit contributes about half of the American sales. The facility makes capsules, tablets, injectables, dry syrups. The plant is important for Alkem as 60-70 percent of its future filings (abbreviated new drug applications) will come from the facility.

Six out of the 13 observations that the facility got relate to quality controls and laboratory records, and two relate to equipment. One each is about written procedures, control procedures, contamination testing, building and employee training.

Shares of the drugmaker pared early gains and slipped as much as 2.7 percent to Rs 1,766 apiece on the National Stock Exchange today. The stock has fallen nearly 20 percent in a month, making it the worst performing member of the S&P BSE Healthcare index.

Here’s are the 13 observations:

1. There is no quality control unit.
2. Quality control unit lacks responsibility to approve and reject all components, in-process materials and drug products.*
3. Laboratory controls lack control for test procedures for strength, quality and purity.*
4. Responsibilities and procedures applicable to the quality control unit are not fully followed.*
5. The written stability testing program is not followed.*
6. Laboratory records do not include complete data derived from all tests necessary.*
7. Established laboratory controls mechanisms are not documented at the time of performance.
8. In-process control procedures were deficient.
9. Processing lines and equipment not identified at all times.
10. Equipment and utensils are not at appropriate intervals to prevent drug purity.
11. Drug products were not tested for presence to cross contamination.
12. The building is not maintained in clean and sanitary condition.
13. Employees lack training.

(Repeat observation of 2016*)

Given the repeat observations, the corrective action plan can take longer and could also escalate for further U.S. FDA action implying slower US growth, Prakash Agarwal, an analyst at Axis Capital, said in a note to clients. While observations mention of out-of-specification testing, Alkem has indicated that the products were not sold in the U.S. market, it said.

Nomura, in a note after the inspection, had pointed to the observations after an interaction with the company. Observations were concerning and highlight that the system is not adequately equipped/staffed to carry out tests in a timely manner, Nomura said. The observations also raised concerns about data protection and reliability to some extent, it said.

Alkem Laboratories has had a relatively clean track record with the U.S. FDA. The company last received a Form 483 with 13 observations for the Daman plant in September 2016 but got an all-clear in December that year. The company has six U.S. FDA-approved facilities—three for formulations and three in active pharmaceutical ingredients.