Cadila Healthcare Receives FDA Warning Letter, Shares Plunge

Cadila Healthcare said it received a warning from US health regulator for violating manufacturing standards at two production sites in India, sending its shares down 17 per cent to Rs 320.45 - its biggest single-day percentage fall. The letter from the US Food and Drug Administration (US FDA) cites issues at Cadila's plants in the Gujarat: the Moraiya drug production site and another in Ahmedabad city where it makes drug ingredients. The warning for Moraiya comes more than a year after the FDA inspected the plant in September 2014, and issued a report highlighting a series of problems. Cadila said in October its work to fix the issues was complete. But it has not received US approvals for drugs made at the plant for a year, causing it to miss the launch of a key drug, Asacol HD, in November. On Thursday, Cadila said in a statement that it was "committed to resolve all the issues and revamp our quality systems and processes as the top most priority." It was not immediately clear how much the Moraiya site contributes to Cadila's sales, but analysts have said getting the plant back on track is key for the company. Cadila said none of its products being sold in the United States used any raw materials made at the Ahmedabad plant. Cadila Healthcare, the flagship company of Zydus group, posted a standalone net profit of Rs 614 crore for the quarter ended September 30, 2015 as compared to Rs 365 crore in the year-ago period. The standalone total income of the company increased to Rs 1,976 crore during the quarter from Rs 1,396 crore for the year-ago quarter. During the quarter, on a consolidated basis, its US sales rose 25 per cent to Rs 1,004 crore. G Chokkalingam, founder of Equinomics Research & Advisory, advised investors not to panic. "Many Indian pharma companies have received warnings from the US regulator. The valuation of pharma companies have come down, anticipating this pain. In case of Cadila, the stock is down significantly from its year-high peak. There are many ways to minimize the risk like shifting production from one plant to another," he said. At 11:40 a.m., Cadila Healthcare shares were down 15 per cent to Rs 326 as compared to a flat broader market.

Cadila Healthcare Receives FDA Warning Letter, Shares Plunge

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