Aurobindo Pharma plunges 8% as USFDA classifies oral solids plant as OAI

USFDA, that had conducted a Current Good Manufacturing Practice (cGMP) inspection at the company's Unit 7 an oral solids formulation manufacturing facility from Sept 19-27, 2019, issued 7 observations

Shares of Aurobindo Pharma slipped 8 per cent to Rs 467 on the BSE on Thursday after that the US drug regulator classified the inspection of the company’s oral solids formulation manufacturing facility of Unit VII as Official Action Indicated (OAI).

The drug company in exchange filing said it has received a letter from the US Food and Drug Administration (USFDA) classifying the inspection conducted at the aforesaid facility as OAI.

The USFDA, that had conducted a Current Good Manufacturing Practice (cGMP) inspection at the company’s Unit 7 an oral solids formulation manufacturing facility from September 19-27, 2019, issued 7 observations to the drug maker.

The Company believes that this OAI classification will not have any material impact on the existing revenues or the supplies to our US business at this juncture. The Company will work closely with the regulator to comprehensively address the issues, it added. READ FILING HERE

"These observations have no impact on the existing business with respect to the operations and revenues,” Aurobindo Pharma had said in regulatory filing on October 11, 2019.

During the month of January, the stock Aurobindo Pharma has outperformed the market by surging 11 per cent, as compared to a 0.13 per cent decline in the S&P BSE Sensex till Wednesday.

Analysts at JP Morgan believe the stock's performance will depend on three key factors outside of earnings, including Federal Trade Commission (FTC) approval of the Sandoz portfolio acquisition.

"If this were to happen before the earnings, the focus would be on Aurobindo’s strategy to improve growth/margins of the portfolio. Besides, status of Unit IV and VII post the USFDA inspection; and inspection outcome of the active pharmaceutical ingredients (API) facilities under warning letters (WL)/OAI would also affect performance," they said.

Meanwhile, the foreign brokerage expects Aurobindo Pharma to maintain its strong US performance with flattish revenue and EBITDA trends in October-December quarter (Q3FY20) on sequential basis. While net debt reduction is a metric tracked by the Street, it added.

At 10:32 am, the stock was trading 7 per cent lower at Rs 472 on the BSE, as against a 0.60 per cent decline in the Sensex. The trading volumes on the counter nearly doubled with a combined 6.06 million equity shares changing hands on the NSE and BSE so far.