Dr. Reddy's Falls Most in 11 Years on U.S. FDA Warning

  • FDA issued warning letter over compliance issues on Nov. 5
  • FDA warning for pharma ingredient, oncology product facilities

Dr. Reddy’s Laboratories Ltd. plunged, falling the most in 11 years after receiving a warning letter from the U.S. Food and Drug Administration over manufacturing facilities making pharmaceutical ingredients and oncology products.

The warning letter was related to the company’s facilities making active pharmaceutical ingredients in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana in southern India as well as an oncology products facility, the company, India’s second largest drugmaker, said in a statement today.

Pharmaceutical companies in India and China have come under greater scrutiny from the FDA as these countries supply an increasing portion of the generic drugs and ingredients used in the U.S. Dr. Reddy’s will respond with a comprehensive plan to address the observations within the stipulated 15-day period, and will work to revamp its quality systems, it said in the statement.

Dr. Reddy’s closed 15 percent lower at 3,630.65 rupees for its biggest drop since March 2004.

Oncology Products

“This is going to be pretty bad -- I think the company’s revenue, as well as margin, from their profitable businesses, like oncology injectables, will be impacted,” said Surajit Pal, an analyst at Prabhudas Lilladher Pvt. in Mumbai.

“Given the U.S. FDA’s attitude towards oncology or sterile products -- they have a zero tolerance attitude -- if they have doubts, they are quick to put import alerts,” Pal said. “If the company isn’t able to resolve it, they will ask them to stop supplying to the U.S.”

Dr. Reddy’s has faced delays in approvals for U.S. products this year, including a generic version AstraZeneca Plc’s heartburn drug Nexium. An FDA inspection last year of the company’s Srikakulam plant, where it was going to manufacture the bulk ingredient for the product, found manufacturing issues the company has been working on resolving.

The FDA last November issued a Form 483, an inspection report detailing possible violations of the Food Drug and Cosmetic Act, for the Srikakulam plant. Dr. Reddy’s had transferred the technology for manufacturing the bulk ingredient for Nexium to another site, Chief Operating Officer Abhijit Mukherjee said in an interview in March.

Before it's here, it's on the Bloomberg Terminal.