The company also said it will seek more time to respond to the observations - given the serious nature of those observations.
Divis Laboratories on Friday said it has hired a third party consultant to seek advice on corrective measures to be implemented after the company’s Vizag facility got adverse observations from USFDA on December 8, 2016.
According to CNBC-TV18, the company also said it will seek more time to respond to the observations given the serious nature of those observations.
The US drug regulator typically conveys its concerns on manufacturing practices through Form 483. Companies that receive US FDA observations must respond in writing with a corrective action plan and implement it quickly. If the company fails to meet the regulator’s expectations, a warning letter or in some cases an import alert may be issued.
USFDA inspected the Unit-2 plant from November 29 to December 6 and issued a Form 483 with five observations pertaining to breaches in data integrity, improper controls and violations of current good manufacturing practices (cGMP).
The company in a response to the clarification sought by the stock exchanges said it is in the process of replying to the observations raised by USFDA and added that the observations have not impacted operations at the plan.
Analysts who tracked the company said that the nature of observations are negative and may have the potential to escalate into further regulatory action if not resolved over time.
With details and the nature of the USFDA observations coming out in open the company has lost over a fourth of its market value.
Divi’s Unit-II plant in Visakhapatnam is located at Chippada village, about 35 km north of the port city Unit-II plant accounts for two-thirds of the company’s overall business and more than 75 percent of its overall capacity. United States accounts for 32 percent of overall sales and most of these came from Unit-II.
“This is a critical plant for the company, accounting for 60-65 percent of total sales. US accounted for 32 percent of Divis’ total sales in FY16. We estimate that US sales from the Unit 2 account for 15-20 percent of total sales,” said Motilal Oswal in its recent report.
“We expect the stock to remain range-bound in the near term until more clarity emerges on these 483 observations,” the report added.
Divi’s is engaged in the manufacturing of generic active pharmaceutical ingredients or the key raw materials that go into the manufacture of formulation drugs, custom synthesis of active ingredients for innovator companies, other speciality chemicals and nutraceuticals.
Shares of Divis dropped 3 percent today and was trading at Rs 741.10 on BSE at 2.24 pm; the benchmark Sensex declined 0.02 percent to 26,872.50 points.