Divi's Laboratories: company expects limited impact of US FDA alert

On March 21, the US FDA issued an import alert to Divi’s Laboratories Ltd., on products manufactured at Company’s unit-II at Visakhapatnam, Andhra Pradesh, mentioning violation of goods manufacturing practices, but exempted 10 products, including drugs to treat epilepsy, cancer and HIV. The import alert means products manufactured in the unit will not be allowed to be marketed in the US.

The Vizag unit II, Andhra Pradesh contributes approximately 60-65% of overall sales, of which US accounts for 30-32%. But, the Company’s management has indicated that overall impact of this import alert on revenue will be limited to 5%, as the alert excludes majority of the high-volume products being produced at Unit 2 (major one being Naproxen).

On the revenue front, Divi's chairman said, that they were expecting a 10 per cent yoy growth in FY18E, and in the following financial year, but, they will review the prospects on the back of the import alert.

Divi's and a few of its customers would be approaching US FDA for exemption of a few more products, both generic APIs and custom synthesis products from the import alert, on the same concerns of a possible scarcity in the market, following the supply disruption due to the import alert.

Also, the Company will be filing a fresh response to US FDA on remedial measures at Unit 2, by March 31, 2017.

Furthermore, company would be investing Rs 175 crore on Unit-1 at Hyderabad in the next financial year; and Rs 25 crore on upgradation of facilities in the unit.