Shilpa Medicare slips 12% on USFDA warning letter for Telangana facility

The company believes that the warning letter will have minimum impact of disruption of supplies and the existing revenues from operations of this facility

Shares of Shilpa Medicare tumbled 12 per cent to Rs 480 on the BSE on Monday after the US health regulator issued a warning letter to the company’s Jadcherla formulations facility in Telangana.

“The company has received a warning letter on 9th October 2020 through email from the United States Food and Drug Administration (USFDA) for its Jadcherla facility, Telangana,” Shilpa Medicare said in exchange filing on Saturday, October 10, 2020.

However, the Company said it believes that the warning letter will have minimum impact of disruption of supplies and the existing revenues from operations of this facility.

“The company will be engaging with the agency and are fully committed in resolving this issue at the earliest. The Company is also committed in maintaining the highest standards of compliances and quality manufacturing across all its facilities”, it said.

Shilpa Medicare currently has three manufacturing facilities approved by USFDA – One formulation facility and two API facilities. None of these facilities except Jadcherla has any outstanding issues with the USFDA at this point of time.

“Oncology formulations (including the US and Europe) account for around 20 per cent of overall sales. There could be some impact on future US launches besides incursion of remedial costs. Hence, sentimentally, there would be negative implications,” ICICI Securities said in a note.

That said, the fact that the other two USFDA approved API facilities have no pending queries should cushion the damage. Similarly, the company has diversified into Indian oncology markets with four launches. This also could mitigate possible damage, the brokerage firm said.

At 09:45 am, the stock was trading 8 per cent lower at Rs 503 on the BSE, as compared to 0.8 per cent decline in the benchmark S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 860,000 equity shares changing hands on the NSE and BSE, so far.