Moneycontrol
Jan 09, 2017 10:53 AM IST | Source: CNBC-TV18

See Rs 28 cr sales hit on Gagillapur unit observations: Granules

Infarmed, Portuguese drug regulator, has issued 11 observations after it conducted a renewal inspection on Granules India Limited's Gagillapur facility in Telangana.

Portuguese drug regulator Infarmed, has issued 11 observations after it conducted a renewal inspection on Granules India Limited's Gagillapur facility in Telangana.

In an interview to CNBC-TV18 C Krishna Prasad, MD, Granules India said there are no data integrity or falsification issues and that they expect to send a report to the Portuguese authority by January 17.

Prasad said quality remains the focus of the company and they were certainly not expecting 11 observations. The observations could result into an import alert which can have revenue impact. In a worse case scenario, the sales hit from this plant could be around Rs 28 crore per quarter, he says, adding, less than 8 percent of the company's total revenues from Europe comes from this plant.

Below is the verbatim transcript of C Krishna Prasad’s interview to Latha Venkatesh, Anuj Singhal and Sonia Shenoy on CNBC-TV18.

Sonia: If you can just start by telling us whether any of these observations, these 11 observations, are they repeat observations, are they technical or procedural in nature, or should we worry about any data integrity issues?

A: I am very happy to state there is absolutely no data integrity falsification issues and again no repetition. These are fresh issues which are normally not taken up by agencies. So, very interesting observations they are and we have started remediation measures. Most of them in the last two days have been completed and in the next five days we expect to complete the entire thing and January 17 we expect to send the report to the Portuguese authority.

Latha: When will the INFARMED get back to you on it, will there be a revisit, until then what are the sales from the plant that may be affected?

A: We have a feeling they are going to come for a quick re-visit, first week of February and meanwhile, they are not clear about our GMP licence. However, we have taken a call and stopped manufacturing for that area and the sales that could possibly affected depending on the worse case could be -- Portugal we sell about Rs 1.5 crore but Europe we sell about Rs 113 crore which is about Rs 28 crore per quarter and which is less than 8 percent of our total revenues.

Anuj: This is your second plant, we heard from Vizag as well, so, this news comes very close to that development. What is the company doing to sort of initiate any remedial measures?

A: We have four plants which are constantly being audited by different authorities, so, very frequently we have audits. Observations are a very common thing in any audit. 483 which we get many times, I always used to say it doesn’t mean anything. So observations and correction and non repetition of these observations, these are the important things. This is the way of life; of course, 11 is a little too much, we never got so many, but we are sure we can remedy and lots of efforts are there. Quality is the focus for Granules. It is on the foundation of quality that we built up this organisation and we are very paranoid about quality.

Sonia: So, these 11 observations are quite high, should we be or should the shareholders be worried about the possibility of these observations translating into an import alert?

A: I am not sure about that but I am confident it may not be. I don’t think so.

Latha: Any update on the Vizag unit, is the remediation over there complete after those seven observations and what will be the impact on sales quarterly?

A: First of all the Vizag unit is a joint venture between us and Ajinomoto OmniChem of Japan and we have seven observations. Everything was responded to on time and sales can continue. We also produce only intermediates in that plant so there is no effect on sales and there is no impact on revenues. In fact next quarter is going to be, this current quarter is going to be a bright quarter for our JV.

Anuj: For this quarter then do you think the overall numbers would be worse than the last quarter?

A: This quarter there could be a small drop in European exports based on how long it takes for the Portuguese to come back again. However, overall I think we may be able to make up by exports to the United States. Today we have a small consent on capacity so that we can use for United States and we may not really have a big impact on this.

Sonia: Just to confirm the number, you said from this plant itself 8 percent of your revenues comes from this plant that goes to Europe?

A: 8 percent of the revenues to Europe from this plant.

Sonia: Overall how much does this plant contribute?

A: It contributes about 50 percent of our total revenues.

Latha: I think you drilled it down to Rs 28 crore per quarter from this plant, the sales that you have suspended?

A: That is right.

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