Cadila sinks 15% on USFDA warning

The stock of Cadila Healthcare took a beating, tumbling by over 15 per cent to touch an intraday low of ₹320.45 on the BSE before closing at ₹327.80, down 14.89 per cent from its previous day’s close, following the drug-maker receiving a warning letter from the US Food and Drug Administration for two of its facilities.

The FDA warning relates to the Gujarat-based healthcare company’s Moraiya formulations facility and Ahmedabad active pharmaceutical ingredient (API) facility(for Zyfine).

Pankaj Patel, Chairman & MD, Cadila Healthcare, told investors, “We had already suspended commercial activity at Zyfine site. This site has not supplied any API to the US market directly or indirectly.” The company’s revenues will not get affected because of the suspension of commercial activity at the Zyfine site, he added. However, he told investors, the Moraiya plant (that makes formulations or finished forms of medicines) accounts for about 60 per cent of its US revenues.

Patel further clarified that the warning letter did not relate to the manufacturing, and, in fact, had to do with “procedures of investigation,” in other words, the company did not follow the “comprehensive investigation” of complaints.

The USFDA actions come even as other Indian drug companies, including Wockhardt, IPCA and Dr Reddy’s Labs deal with the regulatory transgressions pointed out by the US regulator.

The company, however, said that it was too early to asses the impact of the development on its numbers, and it awaited greater clarity on details of the warning letter.

It further added that it would take all necessary steps to ensure that the USFDA is satisfied with its remediation efforts at the facilities.

Angel Broking said it was notable that Cadila Healthcare had begun the process of site transfer for its filings.

Analysts further pointed out that a sharp correction in share prices has provided an opportunity to invest in the stock. “The stock price was expensive and any such event would result into instant reaction from investors. However, looking at the ANDA pipeline of the company and promising business prospects, investors should start investing in the stock at the fair value,” said Kishor P Ostwal, Chairman, CNI Research.