Lupin dips 5% on USFDA warning letter for Somerset manufacturing unit

Shares of Lupin dipped 5 per cent to Rs 1,173 on the BSE in intra-day trade on Monday after the pharmaceutical company said it has received a Warning Letter (WL) for its manufacturing plant at Somerset, New Jersey. This is the only manufacturing plant of Lupin located in the US.

However, Lupin said the company does not believe that the warning letter will have an impact on disruption of supplies or the existing revenues from operations of this facility.

At 09:57 am, Lupin was trading 3 per cent lower at Rs 1,194, as compared to 0.37 per cent decline in the S&P BSE Sensex. A combined 1.4 million shares have changed hands on the counter on the NSE and BSE, so far.

“The Company has received a warning letter from the United States Food and Drug Administration (USFDA) for the Company’s Somerset, New Jersey facility. The USFDA had inspected the Lupin Somerset site from September 10, 2020 to November 5, 2020,” Lupin said in exchange filing.

The company further said it is committed to addressing the concerns raised by the USFDA and will work with the FDA and the New Jersey District to resolve these issues at the earliest. We uphold quality and compliance issues with utmost importance and are committed to be compliant with Good Manufacturing Practice standards across all our facilities, Lupin said.

While the revenue impact from the issuance of the WL is minimal, it has prolonged the process for future approvals from this site. With this, LPC has five sites under WL / Official Action Indicated (OAI) from the USFDA.

The near-to-medium term earnings trajectory remains unperturbed as critical inhaler products are manufactured at the site that is USFDA-compliant. However, the extended period to resolve regulatory issues at the five sites (partly due to the pandemic) is impacting the overall utilization of assets for the US market, Motilal Oswal Securities said.

Although regulatory issues persist at select sites, we expect a 35 per cent earnings CAGR over FY21–23E, led by a 19 per cent/14 per cent sales CAGR in the US / Domestic Formulation (DF) market, supported by 400bp margin expansion. This is attributable to potential inhaler launches, increased traction in existing commercialized niche products, and a better outlook for the DF segment, the brokerage firm said.