Dr. Reddy's Declines in Mumbai After FDA Posts Warning Letter

  • Company says it's preparing a response to the FDA's letter
  • Indian generic drugmakers are facing increased scrutiny

Dr. Reddy’s Laboratories Ltd. fell to a nine-month low after the U.S. Food and Drug Administration posted a previously disclosed letter warning the company over violations of good manufacturing practices.

The shares fell 8.5 percent to 3,100.75 rupees at the close in Mumbai on Thursday, compared with a 0.7 percent climb in the benchmark S&P BSE Sensex index. The company said it’s preparing a response to the letter and has until Dec. 7 to submit it.

The Indian drugmaker previously said it received a warning letter over two locations making pharmaceutical ingredients and another making cancer formulations. According to the letter posted online Nov. 24, the FDA in three inspections since November last year found a quality control laboratory that was “previously unknown to FDA,” open access to systems allowing the deletion of data, inadequate investigations into quality issues, and actions that compromised the sterility of products.

Several violations are “recurrent or represent long-standing failures to adequately resolve significant manufacturing quality problems,” the letter, addressed to Chairman Satish Reddy, said. “It is apparent that you have not implemented a robust quality system at your sites.”

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. Hyderabad-based Dr. Reddy’s has been asked by the FDA to evaluate its manufacturing sites around the world “comprehensively and immediately.”

A warning letter means that Dr. Reddy’s will have to revamp its manufacturing facilities to meet FDA standards, and future product approvals from the sites could be withheld until the regulator’s concerns are addressed.

“Data integrity related observations are there” in the letter, said Surya Patra, an analyst at PhillipCapital India Pvt. in Mumbai. “That came out as a negative surprise for us.” 

The problems with data integrity could derail the company’s plans to transfer products to new facilities, Patra said.

“Over the next year, there’s no visibility on progress on the plant front, and you also may not see progress on the approvals front,” he said.

The company has not been told to stop manufacturing or shipping products from the three sites, the company said in an e-mailed response to questions today. It is in the process of responding to the FDA’s letter and is taking “various actions to raise the bar of our quality management system at an organization-wide level.”

“We are hopeful that our actions and responses will address all concerns raised by the U.S. FDA,” it said. 

Indian markets were closed Wednesday for a holiday.

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