Ipca shares tank 10%, USFDA lists serious violations at Ratlam facility

The violations are related to the company's laboratory practices and staff training

The Mumbai-based IPCA Labs, which is under US Food and Drug Administration (FDA) scanner over violation of manufacturing practices, has seen a decline of 10% in its stock prices after US FDA has listed more deviations in operation of its Ratlam plant. With regards to the IPCA's Form 483 on the Ratlam API facility in Madhya Pradesh, the USFDA has listed six serious deviations on inspection done between July 14-18 of 2014.

Shares of Ipca Labs tanked over 10% intraday on Friday to touch Rs 650 from its previous closing of Rs 724.85 on BSE. The shares were closed at Rs 692.15, down by 5% on Friday. In July, IPCA had stopped the supply of ingredients to the US market from its Madhya Pradesh plant after FDA issued an import alert against it.

The observations are related to the company's laboratory practices and staff training, which may lead to more severe warnings or even an import ban if not addressed properly.

"Fast resolution of the issue is important, as Ratlam facility is very important for Ipca Labs because it supplies API both to Silvassa and Indore plant and they have voluntarily stopped shipments from that facility. but if these issues are not taken care of, there is a possibility of a warning letter or an import ban by USFDA," a report by Angel Broking said.

In worst case scenario, the company's net profit in FY2016, can result in a 12.6% dip in the net profit, the report added

As of FY2014, the US market has contributed sales of Rs 420 crore (12% of total sales) for IPCA Labs. Sales of the company are expected to be hit with a loss of Rs 150 crore in the next six months, according to company officials. The company expects to address the FDA concerns in about four to six months.

This voluntarily stoppage of API shipments from the Ratlam manufacturing facility will also have an impact on the company's formulations export business to the US market since IPCA Labs' formulations manufacturing units situated at Piparia (Silvassa) and SEZ, Indore (Pithampur) use the APls manufactured from the Ratlam facility for manufacturing formulations for the US market.