Lupin Falls After U.S. FDA Classifies Pithampur Unit For Official Action

Lupin Ltd. said today one of its units in Pithampur was classified as “official action indicated” after an inspection by the U.S. drug regulator, necessitating regulatory and administrative action.

The classification also means that the unit—which was inspected by the U.S. Food and Drug Administration in January and is under a warning letter—may not get new approvals until remediation is taken, the drugmaker said in an exchange filing. Unit-2 in Pithampur, near Indore, is Lupin's third plant to be classified as official action indicated in the last two months following similar actions at its Mandideep and Gavis units in March.

The company said this won't affect its supplies, current sales and revenue from this facility as products made here can still be exported to the U.S.—its largest market. It said that it's in the process of sending further updates of its corrective actions to the U.S. FDA and is hopeful of a positive outcome. The U.S. FDA said in a letter it may withhold approval of pending applications or supplements in which this facility is listed.

Lupin's Goa and Indore Unit 2 plants are under warning letter since November 2017. The company, in an earnings call for the December quarter, said that it expected these letters to be revoked in early FY20.

While the company doesn't give a breakup of its sales per plant, Morgan Stanley estimates the two units to contribute roughly half of its sales in U.S. Investec pegged the contribution at 30-40 percent.

The Unit 2 facility in Indore is important for Lupin, said Amey Chalke, pharma analyst at HDFC Securities. The company, which intends to sell certain oral products in the U.S., are made at this facility, Chalke said. “We don't expect any incremental impact on the company's estimates as they weren't expecting the warning letter to lift so soon after it had received several 483 observations during January re-inspection.”

The move implies a likely delay in the resolution of pending warning letter, which may take a few quarters, Sameer Baisiwala, pharma analyst at Morgan Stanley, wrote in a recent report. He said the delay will extend to nearly 50 abbreviated new drug applications made at the two sites that are seeking FDA approval.

All eyes will now be on the classification of the Goa plant in May, Anshuman Gupta, pharma analyst at Investec, wrote in a recent report. Lupin has mitigated all risk by moving critical products to alternate sites, Gupta wrote, while expressing concern over the company's future pipeline and “slower ramp up” in its key drug Solosec.

Nearly 20 out of the 45 analysts tracking Lupin have a ‘Sell' rating on the company with 11 recommending ‘Buy' and 14 suggesting ‘Hold'. The Bloomberg consensus target highlights a 4 percent downside to the stock price.

Shares of the drugmaker fell 3.8 percent intraday, its biggest slide in over a month, to Rs 835 apiece.