Aurobindo Pharma’s Stock Jumps The Most In A Decade On U.S. FDA Relief

Shares of Aurobindo Pharma Ltd. jumped the most in over a decade after the U.S. drug regulator concluded an inspection at its Hyderabad plant and said it may not pursue further regulatory action.

The U.S. Food and Drug Administration issued a ‘Voluntary Action Initiated’ status to the drugmaker’s Unit-IV plant—which makes general injectable formulations, according to its exchange filing. The stock soared as much as 18 percent on Wednesday, the most since January 2009.

The VAI status means Aurobindo Pharma will now have to make voluntary changes to the plant if needed but any adverse action by the regulator is unlikely. The plant currently contributes 10 percent of the drugmaker’s U.S. sales.

The U.S. FDA had inspected eight plants of the company last year and issued adverse observations that may affect production.

Cyndrella Carvalho, an analyst at Centrum Broking, said there was a fear it will get the stringent ‘Official Action Indicated’ status—which leads to regulatory and administrative actions—for this unit as its Unit-VII had earlier received from U.S. FDA last month.

“It’s a major positive coming in for Aurobindo as it may lead to higher approvals and the next key trigger to look forward to would be Sandoz acquisition to close soon. We continue to maintain strong buy,” she said.

According to Prabhudas Lilladher, while the status category was easier to address, eventual approvals of the pending Abbreviated New Drug Application from the Unit-IV depend on the resolution in the near term. “There are no approvals to Dr. Reddy’s Laboratories Ltd. from its injectable plant at Duvvada though it has been categorised as VAI for more than 12 months,” the brokerage said.

Aurobindo has guided for remediation work to continue till April-May this year. With the VAI status and pending review of remediation work, the brokerage expects U.S. FDA to visit the plant in 11 months after the last visit.

It also expects the drag on profitability to continue due to the possibility of a further delay of pending approvals in Unit-IV.

There are 46 ANDAs pending approvals (25 percent of filings) from this plant out of its total 111 pending approvals.