Wockhardt US business, stock under pressure over regulatory action

Share of US business revenue down to 17%

Continued non-compliance with quality norms at its manufacturing units has resulted in an over 66% fall in Wockhardt's US revenue over the last four years.

The drug maker is under the scanner of the US Food and Drug Administration, which has issued import alerts to three plants. The latest plant to come under the regulatory glare is at Ankleshwar, which was issued an import alert last August and a warning letter last month.

With three of its manufacturing units unable to supply to the US, the company's revenue has taken a hit. Wockhardt's stock too has come under pressure, falling 57% in 2016 and underperforming the health sector index, which fell 13% over the same period.

In 2012-13 US business accounted for 52% of Wockhardt's operating revenue. Since then, it has been on a downward spiral. In 2015-16 US business contributed 22% to operating revenue and this dropped further to 17% in the first half of 2016-17. While the overall revenue is down 17%, the share of US business has declined over 66% between FY 13-16.

Wockhardt did not respond to a query from Business Standard. The Ankleshwar plant was issued an import alert last August and the warning letter issued last month was a part of the same process initiated by the FDA, the company said in a stock exchange notification today.

“The company has already initiated the required steps to address concerns raised by the FDA and is putting all its efforts to resolve the same,” Wockhardt said.

“Warning letters fall into two major categories – those pertaining to good manufacturing practices and those pertaining to data integrity. Warning letters pertaining to data integrity issues take time because the FDA basically questions the correctness of the data provided, its authenticity and, most importantly, any wilful attempts to alter, manipulate or amend data,” said Jagdish Dore, managing director of Sidvim Lifesciences, a consultancy firm that prepares Indian companies for FDA inspections.

"Remediation is as much a management challenge as a technical challenge and regulators are seeking systemic improvements across facilities from companies rather than quick fixes. This process can take 12-24 months," said Vikas Bhadoria, senior partner of Mckinsey & Company. 

Wockhardt's woes began in 2013 when the FDA issued import alerts against the company's Chikalthana and Waluj plants. In the same year, the UK drug regulator, too, issued an import alert but the company later secured clearance from it.

Securing a clearance from the FDA has proved to be an uphill task. In July, it received an Establishment Inspection Report from the FDA for the Chikalthana and Waluj plants. The report indicates there are no adverse observations in the inspection. However, the plants continue to remain under import alert.

At present, the company is able to export only two products from Chikalthana to the US. Wockhardt also serves the US market from its manufacturing plant in Chicago.

Last January, the FDA issued adverse observations, known as Form 483, following an inspection of Wockhardt’s Shendra plant. The company had sought approval from the FDA for the Shendra plant in order to commence exports to the US. The company plans to use the facility at Shendra to export oral solids and injectables.