Ipca receives warning letter from USFDA; stock crashes 16 per cent

Ipca Laboratories in a stock exchange filing on Monday, informed about receiving a warning letter from the US FDA (Food & Drug Administration) for three of its plants in Ratlam (Madhya Pradesh); SEZ Indore (Pithampur); and Piparia (Silvassa), which are manufacturing units. The company, however, did not provide the details of the warning letter.

Warning letter pertains to the three units for which US FDA conducted inspection in the year 2014 & 2015. During the FDA’s examination of these manufacturing units, certain observation was raised by the regulator in the Form 483 due to alleged violation of CGMPs(Current Good Manufacturing Practices), which subsequently resulted in issuance of import alert on these manufacturing units.

After the observations were raised, company had voluntarily suspended shipments of its APls (Active Pharmaceuticals Ingredients) and formulations for the US market, till US FDA inspection observations were to be resolved. Therefore, since July 2014 the Company has not shipped any APls or formulations to US market except the products which are exempted from import alert.

The issuance of warning letter holds importance due to the fact that company was not successful in plugging the gaps which had been raised by the US FDA in the Form 483. It also raises questions about the ability of the management to take these matters seriously pertaining to important markets like the United States where the company derives almost half of its revenues from.

However, the content of the warning letter is yet not disclosed by the company. As the matter is clarified over the coming weeks, the severity of the damage will be ascertained.

Ipca Laboratories shares crashed more than 16 per cent in trade to hit a fresh 52-week low of Rs 562.05 before recovering from the day’s low to trade at a loss of 2 per cent. Company's regulatory problems have already been factored into the stock price. 

The FDA warning follows similar action on plants of larger rivals like Dr Reddy's Laboratories, Sun Pharmaceutical, Novartis AG and Cadila Healthcare in the gone by quarter. Many of the Indian drug companies have come under US FDA scrutiny in the past year or so as the regulator strengthens its oversight of the pharma companies.