Glenmark stock tumbles to 52-week low on USFDA warning letter to Baddi unit

Plant accounts for 7 per cent of company's US sales; firm says no major pending approvals from unit in the next 12 months

In a setback to Glenmark Pharmaceuticals, its dermatology facility at Baddi, Himachal, received a warning letter from the US drug regulator, which set the stock tumbling to a 52-week low in morning trade. The plant accounts for seven per cent of the company's US sales.

The stock is down 9.6 per cent to Rs 285.15 in morning trade.

The Baddi facility which makes dermatological formulations was inspected between April 15-20 this year and was subsequently classified as 'official action indicated' by the US Food and Drug Administration (USFDA).

Glenmark said that the existing manufacturing and sale of products from this facility will not be impacted. "Baddi facility is expected to contribute $30 mn in total sales for this fiscal year which is approximately 7 per cent of total US sales," Glenmark said.

Exports from a facility stop if it is placed under an import alert. A warning letter is an escalation of a form 483 (which notes adverse observations around quality and compliance of a facility that needs to be addressed by the manufacturer) by the USFDA.

Edelweiss noted that while the Baddi facility was classified as OAI, there were no data integrity issues and Glenmark had cleared the latest inspection without observations. "But, the USFDA still issued a warning letter as the agency believed the problem was recurring. Glenmark is in the process of preparing a detailed response to the USFDA over the next 15 days," the brokerage said.

The company noted that it is committed to work along with the drug regulator to implement all necessary corrective actions required to address the concerns raised in the letter.

Glenmark clarified that there are no major pending approvals from this facility in the next 12 months. "There will be no financial impact on the organisation on account of this development," the company claimed.

Glenmark currently has eight manufacturing facilities approved by the USFDA – five formulations facilities and three API facilities under Glenmark Life Sciences Limited. None of these facilities except Baddi has any outstanding issues with the USFDA at this point in time.

A few days back the company had indicated in its annual general meeting that it will start rewarding its shareholders after it monetises its innovation and bulk drug business units, which is expected to take about a year. This came in after the company's stock has taken a beating in recent months even as it trying to reduce its net debt levels.  

Apart from the US,  it is planning to launch more respiratory products in the European market where it is clocking a robust growth. Its revenue from Europe grew over 23 per cent in FY19.

Glenmark's chairman and managing director Glenn Saldanha had said sometime back,"We expect our European business to grow at 10 to 15 per cent in this financial year. Our revenue in the Rest of the World (RoW) markets increased by 16 per cent to Rs 1275.9 crore. RoW markets such as Russia and Africa remain a good opportunity and we expect them to continue to grow at 15 to 20 per cent in the forseeable future."