Aurobindo Pharma’s Stock Hits Five-Year Low On U.S. FDA Observations For Hyderabad Unit
The U.S. FDA issued a Form 483 to Aurobindo Pharma’s Hyderabad facility after an inspection conducted between Nov. 4-13.
Shares of Aurobindo Pharma Ltd. fell to their lowest in five years after the drugmaker said it received 14 observations from the U.S. health regulator for its manufacturing facility at Hyderabad—a move that may disrupt supplies and delay future approvals.
The U.S. Food and Drug Administration issued a Form 483, a kind of inspection report, to the company’s unit IV, a general injectable formulation manufacturing facility, at Pashamylaram, Hyderabad after an inspection conducted from Nov. 4-13, according to an exchange filing.
While the nature of observations isn’t known as neither the U.S. FDA nor the company has disclosed the Form 483, the company said none of these observations are related to data integrity issues and it will respond to the regulator within a stipulated timeline.
The company, however, can continue to sell existing drugs from the plant but new approvals are withheld by the U.S. authorities till the time the remediation doesn’t happen. According to IIFL’s pharma analyst Abhishek Sharma, the unit-IV has been inspected by the U.S. FDA for the fourth time since September 2016.
Aurobindo Pharma’s stock fell as much as 9.1 percent in opening trade to Rs 394 apiece—the lowest since Sept. 24, 2014. That compares with a 1.08 percent drop in the NSE Nifty Pharma Index. So far this year, the shares have slumped more than 40 percent.
Praful Bohra, analyst at Emkay Global, said unit-IV is the company’s key injectable formulations plant and has around 47 pending filings, accounting for around 30 percent of the overall filings. “The number is on the higher side and likely to keep investors nervous until details emerge,” he said in a note.
The unit-IV, according to Emkay’s calculation, accounted for 9-10 percent of the U.S. sales and 50-60 percent of the company’s total injectable sales in the financial year ended March 2019. The plant also accounted for 8-9 percent of the company’s overall operating profit during the period. The balance injectable sales, Bohra said, come from the company’s unit-XII, Eugia (Hyderabad) and Auronext (Rajasthan) facilities. “Any escalation of Form 483, if at all, can impact future growth meaningfully.”
HSBC pegged unit-IV’s contribution at 15 percent of the U.S. sales and 26 percent of pending abbreviated new drug applications. According to IIFL, of the total 121 pending ANDAs for Aurobindo, 45 are from unit-4—the most for any Aurobindo facility. IIFL’s Sharma said unit-IV is “critical” for Aurobindo as it accounts for more than a third of the pending ANDA filings and comes up for inspection every nine months.
Aurobindo Pharma has been facing U.S. FDA woes throughout the year. Over the last six months, the company’s unit-XI plant has been issued a warning letter, while unit-I and unit-IX have been classified as official action indicated. Its units VII, V and VIII, too, have been inspected by the U.S. FDA this month, though the nature of inspection and observations are unknown.
Credit Suisse said units IV, VII, XI account for more than half of the company’s pending ANDAs and therefore, “clean status” of these facilities is crucial for the stock. The near-term outlook on the stock depends on the inspection outcome for unit-IV and the FDA’s classification for unit-VII, Anubhav Aggarwal, pharma analyst at Credit Suisse, said in a note.