Cadila Healthcare Shares Rally After U.S. Health Regulator Clears Moraiya Plant
Regulatory clearance for Moraiya plant cheers Cadila Healthcare; stock rallies nearly 20%
Shares of Cadila Healthcare Ltd. surged nearly 20 percent to Rs 429.50 after the U.S. health regulator gave a clean chit to the company’s Moraiya facility in Gujarat. The facility clearance means that the U.S. business which was stuck due to no fresh approvals would get moving.
In a statement to the exchanges, the company said the U.S. Food and Drug Administration (U.S. FDA) inspected its Moraiya facility between February 6, 2017 to February 15, 2017. At the end of the inspection, no observations were issued. This indicates a higher probability of the FDA lifting its warning letter.
Cadila’s said facility had been under a warning letter since December 2015. Moraiya is the largest facility of Cadila accounting for 40 percent of pending drug applications (ANDAs) and 60 percent of current U.S. sales, and hence the plant’s clearance remained the key catalyst for the stock.
Cadila has nearly 200 products under pending approval, Pankaj Patel, Chairman & Managing Director, Cadila Healthcare had said in an earnings conference call earlier this month. He had added that he was expecting about 20 approvals in U.S. in FY18 and the number could be “much higher” in case the Moraiya plant clearance came through, the impact of which will be felt over a longer term.
Cadila Healthcare has been shifting some of its products to alternate manufacturing plants after the December 2015 warning letter. According to JM Financial Institutional Securities’ third quarter earnings update note, important drugs such as Toprol XL, sued to treat high blood pressure and Prevacid ODT, used to treat ulcer could get approvals from another location in Gujarat, called SEZ site by mid-2017; however, approval for ulcer treatment drug Lialda remained contingent on Moraiya facility clearance.
The company had already started selling an authorised generic of ulcer treatment drug, Asacol HD in the U.S. from August 2016 after it failed to receive an approval for its own application from the FDA pending the resolution of the Moraiya warning letter.
A warning letter means new approvals from the facility are blocked till the company finishes remediation and FDA reviews the response or re-inspects the facility.