Dr. Reddy’s Says It Faces U.S. Scrutiny Over Packaging Rules

  • Stock falls more than 2 percent after commission sends letter
  • Company says it complied with rules and will defend itself

Dr. Reddy’s Laboratories Ltd. said a U.S. consumer safety watchdog has asked the nation’s Department of Justice to take action against India’s second-largest drugmaker for its alleged failure to comply with packaging and reporting rules.

The company’s shares fell 1.9 percent to 3,079.05 rupees at 12:12 p.m. in Mumbai, the most since May 6, after dropping as much as 2.4 percent earlier. The company has complied with all legal requirements and will defend itself against the allegations, according to an e-mailed statement from the Hyderabad-based company.

The U.S. Consumer Product Safety Commission’s recommendation comes as Dr. Reddy’s faces ongoing scrutiny from another U.S. regulator, the Food and Drug Administration, which issued a warning letter last year over manufacturing practices at its factories that halted new product approvals from those facilities until they are brought up to standard.

The allegation that they are “not able to comply, with not only the manufacturing practices, but even the packaging and other guidelines is what is actually hampering the stock,” said Fathima Khan, an analyst at Khambatta Securities Ltd. in Mumbai.

Dr. Reddy’s shares are down almost 30 percent since the FDA warning letter was issued in November.

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