One-third of Divi's scrip value melts down in two sessions

Possible import alert after USFDA remarks about firm's Vizag unit drags stock down to two-year low

Shares of Divi’s Laboratories fell 11.64 per cent on Monday, hitting a two-year low at Rs 765.3 a share from its previous close of Rs 866.1 on speculation of a possible import alert following the US drug regulator’s critical remarks regarding the company’s Visakhapatnam unit.
 
On Friday, the share price fell close to 22 per cent as a brokerage report revealed the observations made by the US Food and Drug Administration (FDA) following inspection of its unit at Chippada Village in Visakhapatnam, Andhra Pradesh from November 29 to December 6.
 
According to the FDA, the Visakhapatnam unit has not exercised proper controls over computerised systems used for analytical testing to ensure drug products to meet their specified quality attributes. The facilities and equipment are not maintained to ensure the purity, quality, strength and identity of active pharmaceutical ingredients (APIs). The company failed to conduct a thorough investigation on complaints received over deviations in product batches.
 
The documentation and records were either not maintained or falsified.
 
The FDA issues Form 483 at the end of an inspection when it finds any thing that violate the Food Drug and Cosmetic Act and other related laws. The Visakhapatnam unit manufactures APIs and other intermediates for generic drugs. It holds 50 per cent of the company’s overall sales.
 
According to an analyst of a Hyderabad-based stock-broking firm, the de-rating of Divi’s Laboratories has started as the FDA might soon issue a warning letter or an import alert. The company could not give proper explanation when the stock exchanges have sought clarification about FDA’s observations.
 
If Divi’s Laboratories had given a clear reply to the stock exchanges, it would have boosted the confidence of share holders and clients, said the analyst asking not to be identified.
 
“Majority of drug-manufacturing units that supply medicines to the US are from our country. The US FDA had become more proactive on Indian pharma companies. These drug makers need to spend huge money on regulatory concerns in the coming years,” the analyst added.