Aurobindo Pharma Shares Slide After U.S. FDA Warning For Srikakulam Plant
Aurobindo says existing business at the plant will not be impacted and it’s committed toward fixing this issue at the earliest.
Shares of Aurobindo Pharma Ltd. on Thursday fell to their lowest in nearly a year after the drugmaker received a warning letter from the U.S. Food and Drug Administration over manufacturing practices at its Srikakulam plant in Andhra Pradesh—a move that may delay future approvals for exporting to its largest market.
The U.S. FDA warning letter—issued when it finds that a manufacturer has violated a regulated activity—was based on an inspection of the Unit 11 of the drugmaker’s active pharmaceutical ingredient manufacturing facility, Aurobindo Pharma said in an exchange filing. The Srikakulam unit was inspected between February 4 and February 9 and received three observations, according to the Form 483 updated on the website of the U.S. FDA.
The company, however, said the existing business from this facility will not be impacted, and it’s fully committed toward resolving this issue at the earliest. Though the warning letter bars the company from getting new approvals till the remediation process is completed, existing products will be allowed to be sold in the U.S.
The warning letter won’t have much impact as Aurobindo Pharma will be able to switch to other API plants for raw materials, according to Amey Chalke, analyst at HDFC Securities Ltd. But what the U.S. regulator does for its other two plants is crucial, he told BloombergQuint.
Brokerage Equirus Capital Pvt. Ltd. said the warning letter is a procedural thing following the official action indicated classification.
In May, the U.S. FDA had classified three of Aurobindo Pharma’s API plants—Unit 1 (Telangana) and Unit 11 (Andhra Pradesh)—and the intermediates facility of Unit 9 (Telangana) as official action indicated. The status means regulatory and administrative actions will be recommended before a plant is fit to again export to the U.S. market.
Around 25 percent of Aurobindo Pharma’s abbreviated new drug applications pending approval is linked to these sites even though there are no meaningful approvals expected in the near term, Citi analyst Prashant Nair said. Any further delay in resolution of the plants could impact growth rates, he said in a report.
To be sure, the company doesn’t provide plant-wise details. So, the actual impact on revenue can’t be analysed.
Param Desai, vice president at Elara Capital, had earlier told BloombergQuint that in case of a delay in plant clearance, the impact will be on launches in financial year ending March 2021 and not immediately as majority of the products from these plants are for captive consumption.