A man rides past an Aurobindo Pharma Ltd. production facility in Jadcherla in Telangana. (Photographer: Prashanth Vishwanathan/Bloomberg)

Aurobindo Pharma Falls After U.S. FDA Classifies Three Plants For Official Action

Shares of Aurobindo Pharma Ltd. slumped in early trade today after it informed the exchanges that the American drug regulator has classified three of its plants that export to the U.S. as “official action indicated’, necessitating regulatory and administrative action.

The U.S. Food and Drug Administration’s action came after it inspected the company’s plants that make active pharmaceutical ingredients (Units 1 and 11) and an intermediate facility (Unit 16) between January and March. Unit 11 is located in Andhra Pradesh, while the others are in Telangana. That means the company won’t be able to secure approval for products in the future from the FDA pending remediation.

“We have submitted our initial response to U.S. FDA and are sending further updates on committed corrective actions,” the Hyderabad-headquartered company said in the filing. It said it’s confident that the classification won’t disrupt its supplies or revenue from operations at these facilities.

Unit 1 was inspected between Jan. 28 and Feb. 2 and received six observations. Unit 11 was inspected between Feb. 4 and Feb. 9, getting three observations. Unit 16 was inspected between Feb. 22 and March 1 and received 11 observations. It would be difficult to determine the exact impact on the drugmaker’s revenue as it doesn’t give out plant-wise details.

IIFL thinks that this could turn out to be a systemic risk for Aurobindo Pharma. It said in a sales note that with the company being highly vertically integrated, any adverse impact will slow its overall approval rate for abbreviated new drug applications. IIFL had initially highlighted that these API inspections could go against Aurobindo, as U.S. FDA had unearthed issues related to blood pressure drug Valsartan product that was manufactured at these facilities.

Param Desai, pharma analyst at Elara Capital, told BloombergQuint that delays in plant clearance will have an impact only on the company’s launches for FY21. “Most of the products from these plants are for captive consumption.”