Dr Reddy's unit fails to get compliance certificate from German regulator

In the absence of certificate, Dr Reddy's cannot export drug products to EU from Hyderabad facility

In a setback to Dr Reddy's Laboratories Limited, German regulatory authority has revoked GMP (good manufacturing practices)clearance in respect of the company's formulations manufacturing unit  2 plant in Hyderabad.

In the absence of compliance certificate, Dr Reddy's will not be able to export drug products to European Union from this facility. The German regulator's decision came after a recent inspection of the facility by its team.

"betapharm Arzneimittel GmbH, Germany (Dr Reddy's wholly owned subsidiary) received a communication from the Regulatory Authority of Germany last night, that the GMP compliance certificate in respect of the company's formulations manufacturing unit 2 in Bachupally is not renewed consequent to the recent inspection of the plant. Pending revocation of the non-compliance notification, the plant will not be able to make any further despatches to the European Union until the next inspection, to be initiated by an invitation from betapharm," Dr Reddy's said in a filing.

The plant contributes to 20% of the European generics sales, according to a senior company official. 

It may be recalled that Dr Reddy's US business was hit after the US Food and Drug Administration(US FDA) issued a warning letter in respect of three of its facilities in 2015, owing to the dwindling sales and product launches in the US market during the past 6 quarters.

However, the latest development is unlikely to have any major impact on Dr Reddy's as the company's generics sales form just around 5% of its total global generics sales.

In the first quarter ended June, 2017 the company's European sales, both in formulations and APIs stood at Rs 298 crore as against total revenue of Rs 3,315.9 crore for the quarter.