In a fresh setback, Dr Reddy's gets warning letter for three plants

Hyderabad-based Dr. Reddy's Laboratories has received a warning letter from the US Food and Drug Administration wherein the drug regulator has sighted its observations for the company's three facilities, the pharma major informed the Bombay Stock Exchange on Friday.

The letter has sighted observations for not only the company's facilities at Srikakulam, Andhra Pradesh but also for its plant in Miryalaguda, Telangana and its Oncology Formulation manufacturing facility at Duvvada, Andhra Pradesh.

The action follows the earlier inspections of these sites by the agency in November 2014, January 2015 and February 2015 respectively. The company spokesperson is not yet in a position to quantify the impact, incase, this would lead to an import alert.

Meanwhile, in a statement put out by the company, Dr. Reddy's co-chairman and CEO, G V Prasad was quoted as saying: "We take quality and compliance matters seriously and stand by our commitment to fully comply with the cGMP quality standards across all of our facilities. We will respond with a comprehensive plan to address these observations within the stipulated time-frame of 15 days. We will continue to actively engage with the agency to resolve these issues and we have also embarked on an initiative to revamp our quality systems and processes, as an organization-wide priority."

The company has 15 working days time to revert to the US regulator on the measures it is planning to address the concerns raised.

However, analysts feel that much depends on the extent to which the company is able to use external manufacturing sites to sustain supplies to the US. Though, they too are not in a position to quantify the extent of actual impact.

The company has been trying to grow its business in the injectibles space in the US and the oncology products will come in this category. But then, at the moment, the company has arrangement with external players - companies like Cipla and Gland Pharma - for its injectibles and apparently bulk of the supplies are currently from external sources. Right now, apparently a part of the sourcing is done from external sources and in case there is an import alert imposed then the company may need to go back to the external sources.

Shares of Dr Reddy's opened higher at Rs 4,255 on Friday but started falling after the warning letter came and closed over 14 per cent lower at Rs. 3,635, on the BSE.