Alkem Lab drops on reports of substandard quality of anti-diabetic drug

Alkem Laboratories was off 1.5% at Rs 1,379.55 at 14:50 IST on BSE on media reports that the Central Drugs Standard Control Organisation has found Alkem's anti-diabetic drug Glimekem to be of substandard quality.

Meanwhile, the S&P BSE Sensex was off 273.28 points or 1.01% at 26,747.38.

On BSE, so far 12,653 shares were traded in the counter as against average daily volume of 14,057 shares in the past one quarter. The stock hit a high of Rs 1,435 and a low of Rs 1,350 so far during the day. The stock had hit a record high of Rs 1,589 on 5 January 2016. The stock had hit all-time low of Rs 1,175 on 2 May 2016. The stock had outperformed the market over the past one month till 8 June 2016, surging 12.52% compared with Sensex's 7.1% rise. The scrip had, however, underperformed the market in past one quarter, gaining 4.44% as against Sensex's 9.58% rise.

The large cap company has equity capital of Rs 23.91 crore. Face value per share is Rs 2.

Glimekem is an anti-diabetic drug used to treat type-2 diabetes. According to reports, the drug has been failing the dissolution test. It is used to identify rate of dissolution of the medicine in the blood stream in a standardised format. This is the third time in the past one year that the Central Drugs Standard Control Organisation (CDSCO) has issued an alert for this drug. The regulator had issued alerts in June and July of 2015. The company was then asked by the regulator to recall the specific batches from the market. This time, however, the company has not been asked to recall the batches.

The company has reportedly clarified that there was no issue with the new formulation and the issues were specifically related to old formulation. Reports also suggested that this drug constitutes a minuscule portion of Alkem's annual sales. This means that the current slide in the stock price is more due to sentimental impact rather than a fundamental impact on the company's financials.

Alkem Laboratories' consolidated net profit fell 56.9% to Rs 56.72 crore on 24.4% growth in net sales to Rs 1110.97 crore in Q4 March 2016 over Q4 March 2014.

Alkem Laboratories is one of the leading pharmaceutical companies in India. The company has substantial presence in the United States. Alkem makes branded generics, generic drugs, active pharmaceutical ingredients (APIs) and neutraceuticals.

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