Strides stock plunges 14% on US FDA notice

Investors apprehensive that $1.8 billion deal with Mylan may be delayed

The Strides Arcolab stock on Wednesday took a 14.4 per cent knock on the National Stock Exchange, closing at Rs 580.05, on information the US Food & Drug Administration (USFDA) had raised observations over a key line at the company’s manufacturing plant in Bangalore.

This has led to apprehension among a few investors that Strides’ $1.8-billion transaction with global pharmaceutical company Mylan, expected by September-end, may be delayed. Earlier this year, Strides had signed a deal to sell its specialty injectables business for $1.8 billion. It is learnt FDA had made observations on a production line that would be part of this transaction. After a recent inspection of Strides’ unit,  FDA issued a Form 483 to the company. The company’s management said it had addressed the issue.

An FDA Form 483 is issued to a company after an inspection, in case it is felt any condition at the unit may violate the Food, Drug and Cosmetic Act, as well as related Acts. The form indicates any food, drug, device or cosmetic has been adulterated or is being prepared, packed, or held under conditions in which it may be adulterated or rendered injurious to health. After the receipt of a Form 483, a company has to respond to the concerns within 15 days. If FDA is unsatisfied withe response, the issue might lead to a warning letter and subsequently, snowball into an import alert.

Arun Kumar, vice-chairman & managing director, said the company had a strong track record of FDA approvals — so far, it had 15 inspections and seven of these didn’t record Form 483s. The rest had observations that were addressed to the satisfaction of the agencies. “With our past experience, we are confident these Form 483s would be addressed in a diligent manner,” Kumar told investors.

He was, however, categorical on the Mylan deal time frame. He said the company was awaiting the Foreign Investment Promotion Board’s approval and a Form 483 wouldn’t affect the transaction.