Cadila Healthcare’s Stock Tumbles After U.S. FDA Issues Warning Letter For Largest Unit
The warning letter was issued by the U.S. FDA after the regulator classified the formulation plant as official action initiated.
Shares of Cadila Healthcare Ltd. dropped the most in more than a year after the U.S. drug regulator issued a warning letter for its manufacturing unit at Moraiya, Gujarat, barring fresh approvals from its largest facility that contributes nearly half of its sales in the American market.
The warning letter was issued by the U.S. Food and Drug Administration after the regulator classified the formulation plant as “official action initiated”. Prior to that, the FDA had issued a Form 483 with 14 observations based on its inspection of the unit between April 22 and May 3.
Of the 90 abbreviated new drug applications pending approval for the Ahmedabad-based drugmaker, Morgan Stanley said 32 are from the Moraiya facility—which makes oral solids, injectables and transdermals.
Cadila, in an exchange filing, however, said it has taken multiple steps after the inspection to address the observations received from the U.S. FDA. The warning letter, the drugmaker said, won’t affect its existing business in the U.S. and the existing product supplies from the Moraiya facility will continue.
Brokerage Equirus Capital said the issuance of a warning letter after official action initiated classification is a procedural action undertaken by the U.S. FDA. “It’s already factored in our as well as street estimates. We don’t expect any downtick in estimates consequent to the warning letter.”
After the plant was classified as official action initiated, Cadila said they were performing a site transfer of key injectables to its Liva and Alidac facilities. The company, during a conference call after announcing the first-quarter results, had said compliance issues at Moraiya unit are likely to resolve only in the financial year ending March 2021. The company had also downgraded its overall launch guidance by 10-15 products.
Edelweiss Research, too, said there will be no impact on the existing product revenue. The brokerage expects the the site transfer of the injectables to complete by the end of the ongoing financial year. “We have a ‘buy’ rating on the stock.”
Shares of Cadila Healthcare fell as much as 8.6 percent, the most in over a year, to Rs 233.50 apiece. That compares with the Nifty Pharma Index’s 0.26 percent gain.