Drug major Lupin’s stock price fell 7 per cent in early trade today on the news of negative United States Food and Drug Administration (US FDA) observations at its Goa facility. In a response to BSE inquiry, the management later confirmed that in the inspection which took place last week, the US FDA had cited nine observations all relating to inadequacy and adherence to standard operating procedures (SOP).
The stock is the biggest loser in the S&P BSE Sensex, which is down a little more than half-a-percent.
In February 2015, Lupin’s Pithampur facility in Madhya Pradesh had received six regulatory observations from the US FDA. The earlier warning received from US FDA in May 2009 for its Mandideep site was sorted out in seven months’ time.
Over the last year or so, almost all the drug majors – Sun Pharma, Dr Reddy’s, CIPLA and IPCA Labs – have fallen victim to the strict protocol followed by US FDA during its inspections. The US regulator has upped its standards with particular attention paid to Current Good Manufacturing Practices (cGMP).
While these observations may not result in an immediate warning letter or import ban, to prevent any adverse impact, Lupin is expected to take prompt and remediate action to tackle and address issues surrounding these observations. Any obscurity or delays afflicting these inspections will create a negative overhang on its stock price.
Lupin reported muted top line growth of less than a per cent for the nine months ending December 2015, with sales coming in at Rs 9,610 crore, with the US accounting for 42 per cent of its revenue. During the same period, net profit came in at 1,463 crore, down 21 per cent. The company has upped its spend on R&D to 11.4 per cent of sales versus 8.7 per cent for FY 2014-15.
The company has 11 facilities in India – 9 of which are manufacturing and 2 are research. The company also has a manufacturing and R&D presence in Japan, Russia and the Americas