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Drug maker Strides Arcolab’s injectible manufacturing arm Agila Specialities has received a warning letter from the US Food and Drug Administration (FDA) for violation of manufacturing norms at its sterile making facility 2 (SFF) at Bangalore.
The development assumes significance because Pennsylvania-based generic drug major Mylan Inc recently received clearances from the Indian government to acquire Agila Specialities for a whopping $1.8 billion.
So far, shares of the Strides Arcolab have slipped by 6.8% on the Bombay Stock Exchnage to hit a low of Rs 839 after the company announced that it has received a warning letter from US regulatory authorities. At around 11:10 am, shares of the company were trading at Rs 865.50, down 3.85% from their previous close on Friday.
According to the Strides, US regulatory authorities inspected the SFF unit in June this year and the inspection resulted in issuance of Form FDA 483 with observations. Following this, the company responded to the 483 observations by implementing corrective actions, it said.
“The company is committed to work collaboratively and expeditiously with the US FDA to resolve concerns cited in the warning letter in the shortest possible time,” Strides said.
Remarkably, Strides Arcolab and Mylan entered into a deal for Agila Specialities in February this year, around four months before the US FDA’s inspection which highlighted problems in Agila’s sterile manufacturing facility.
Analysts say the future of the proposed deal between Strides and Mylan depends on clauses of the agreement and also whether Mylan chooses to opt out of the deal because of the development.
Strides, in its statement, clarified that Agila’s other oncology facility, also located in Bangalore, was also inspected recently by the US FDA. However, this facility has cleared the inspection with "Zero 483 status". The company has eight US FDA approved sterile manufacturing facilities.
Under the terms of the agreement between Strides and Mylan, the domestic drug maker and its subsidiary will receive an aggregate sum of $1.6 billion in cash on closing of the deal and a potential additional consideration of up to $250 million subject to the satisfaction of certain conditions by Strides. Industry sources say that the deal is scheduled to be close by end of this year.
The deal, which was stuck for approval by foreign investment promotion board (FIPB) for several months, was finally cleared by the Cabinet earlier this month after intervention by the Prime Minister.
Following successful closing of the transaction, Strides proposes to utilise proceeds towards, inter alia, retiring debt, providing a pre-tax return of approximately $700 million to $800 million to shareholders, and costs related to the satisfaction of contingent conditions.
Agila is a global speciality injectables business focused on key domains including oncolytics, penems, penicillin, cephalosporins and ophthalmics in India and overseas. Agila operates from nine global manufacturing facilities, including one of the largest sterile capacities in India and amongst the largest lyophilisation capacities in the world.
