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Divi’s Labs Clocks Biggest Single-Day Jump On Visakhapatnam Plant Relief

The U.S. FDA had issued an import alert in March and a warning letter in May for Unit II.



An employee inspects a handful of  cardiovascular treatment tablets (Photographer: Martin Leissl/Bloomberg)
An employee inspects a handful of cardiovascular treatment tablets (Photographer: Martin Leissl/Bloomberg)

Divi’s Laboratories Ltd. rallied after the U.S. drug regulator said it would lift the import alert on Unit-II at Visakhapatnam, paving the way for the company to sell medicines in the crucial market.

The Food and Drug Administration will also move to close the warning letter issued in May, the Hyderabad-based drugmaker said in an exchange filing. Plants on the FDA's import alert list cannot export drugs to the U.S.

U.S. currently contributes 33 percent of Divi's Laboratories' total sales, Edelweiss Securities said in its report. The import alert was imposed in March, but some of the larger products were exempted given the drug supply situation in the U.S., the brokerage added.

Divi’s Laboratories stock rallied as much as 21 percent to Rs 1,117.6, the most on record, before cooling off.

‘Downside Risk Eliminated’

The lifting of the import alert will eliminate a downside risk for the company’s earnings, according to Edelweiss Securities. The development will boost Divi's Laboratories' sales by up to 5 percent in the future, Surajit Pal, pharma analyst at Prabhudas Lilladher told BloombergQuint. However, Pal does not expect any medium-term impact.