Dr Reddy's gets FDA warning on three drug plants

By Zeba Siddiqui

MUMBAI (Reuters) - Dr Reddy's Laboratories Ltd, India's second-largest drugmaker by sales, said on Friday it has received a "warning letter" from the U.S. Food and Drug Administration over what the regulator has deemed inadequate quality control procedures at three manufacturing plants in southern India.

The warning letter means Dr Reddy's will not receive FDA approvals to sell drugs manufactured at the plants for now, a blow for business at a company which relies on the United States for a majority of its sales. The plants make a significant contribution to company sales, with one alone accounting for 10-12 percent, Dr Reddy's said.

While Dr Reddy's said a full production halt at the plants might not be required, shares tumbled to their lowest level since July, down 13.4 percent at 11:58 a.m.

"There is no indication in the warning letter that we need to stop manufacturing, but we will be examining the contents and deciding our strategy," Dr Reddy's Chief Finance Officer Saumen Chakraborty told the ET Now Indian television news channel. He said Dr Reddy's was in the process of "assessing the situation".

The FDA issues what it calls a warning letter when it finds that a manufacturer has "significantly violated" the agency's regulations. The agency's concerns with the Dr Reddy's plants related to quality control procedures and "how data was recorded" at the plants, Chakraborty said, without providing details.

Dr Reddy's Chief Executive GV Prasad said in a statement that the company was in discussions with the agency to resolve the problems. "We have also embarked on an initiative to revamp our quality systems and processes as an organisation-wide priority," the CEO said.

A number of Indian drugmakers have faced FDA bans on their plants due to data integrity issues over the past year. Analysts believe such issues are considered the most serious by the FDA, and typically require some time to be remedied to the agency's satisfaction.

The FDA letter was issued to the company on Thursday, and followed inspections of the three sites by the agency in November 2014 and January and February this year, Dr Reddy's said. The company is required to respond to the agency within 15 days.

The three Dr Reddy's plants are at Srikakulam, Miryalaguda and Duvvada. The firm makes drug ingredients at the Srikakulam and Miryalaguda plants, and cancer medicines at the Duvvada plant.

The Srikakulam plant alone contributes about 10 percent to 12 percent to the company's total sales as of now, according to Dr Reddy's.

(Reporting by Zeba Siddiqui in Mumbai; Editing by Anand Basu and Kenneth Maxwell)