Aurobindo Pharma hits 5-year low on USFDA observations for Hyderabad plant

The stock tumbled 9 per cent to Rs 393, its lowest level since September 2014.

Shares of Aurobindo Pharma hit an over five-year low of Rs 393, down 9 per cent on the BSE on Thursday after the company received a Form 483 from US Food and Drug Administration (USFDA) with 14 observations for its Hyderabad facility. The stock of drug company was trading at its lowest level since September 2014.

“The US FDA inspected Company's Unit IV, a general injectable formulation manufacturing facility situated at Pashamylaram, Hyderabad, from 4th to 13th November 2019. At the end of the inspection, we have been issued a 'Form 483' with 14 observations,” Aurobindo Pharma said in a regulatory filing on Wednesday after market hours.

The company believes that none of these observations are related to data integrity issues. The company will respond to the US FDA within the stipulated timeline, it added.

In the past six trading days, the stock has tanked 17 per cent from level of Rs 474 after the company said its Pashamylaram, Hyderabad and Unit VIII; API manufacturing facility at Gaddapotharam, Hyderabad had received 4 observations for each facility from the USFDA.

Analysts at SBICAP Securities believe the impact of warning letter/official action indicated (OAI) would be limited as only 5-6 ANDAs are subject to non-approval in the next 6 months, and around 15 ANDAs if the issue drags on for 2 years.

“Aurobindo has also received seven observations for its Unit 7 SEZ. Around 12 per cent of pending ANDAs and 35 per cent of approved ANDAs are from Unit 7. The company is working on resolving these issues and believes none of the observations is regarding data integrity,” the brokerage firm said in Q2FY20 result review.

“Aurobindo management indicated Sandoz transaction would be completed by Dec-Jan even as it targets net debt free status on existing business in 3 years. It would shortly submit the Correction Action/Preventative Action (CAPA) report on 3 units and subsequently expects FDA reinspection by March 2020; in a scenario of persistent FDA overhang on the API units, management already has the cushion of a newly approved API unit,” analysts at YES Securities said in company update.

The brokerage firm remains comforted by positive management commentary across all key segments, especially sustained momentum in injectables; notably Aurobindo remains one of the few large players with a US$1 billion plus portfolio to report consistent growth on a quarterly basis.