Wockhardt tanks on import alert; Macquarie, Citi cut target

Moneycontrol Bureau

Shares of pharma major Wockhardt plunged more than 18 percent on Friday, extending Thursday's slump as investors continued to dump the stock following an import alert issued by the US Food and Drugs Administration on one of its facilities at Aurangabad in Maharashtra. An import alert means detention of drugs without physical examination from firms, which have not complied with current good manufacturing practises, the drug regulator states. Also Read: Malvinder Singh denies Daiichi's charges of wrongdoing Habil Khorakiwala, chairman of the Mumbai-based company told reporters late on Thursday that the import alert would impact business by about USD 100 million on an annualised basis. The company won't be able to export products from the facility, which makes injectables and solid dosages. A major part of the production will be shifted to a nearby facility in the interim to minimise the impact, he added. "All products from this facility (both oral and injectable block) except Enalapril Maleate will be blocked from entry into the US market, till the manufacturing issues are resolved," according to Macquarie Equities Research. The Wockhardt news comes just days after another pharma company Ranbaxy pleaded guilty to felony charges in the US relating to manufacturing at its plants in Paonta Sahib, Himachal Pradesh and Dewas, Madhya Pradesh. In a conference call on Friday, Wockhardt said the FDA had visited the Aurangabad facility last in August 2012 and the facility will be again inspected by them in the next few months. Wockhardt said it is taking steps to address concerns raised by the FDA and will be appointing a US based consultant on a fast track basis. It is aiming to make the facility FDA compliant in 1-2 months. Macquarie cut its target price on Wockhardt to Rs 1,680 from Rs 2,700, but maintained its "outperform" rating on the stock, saying that while the US FDA action was a negative surprise, the stock correction was overdone. "We do see near-term volatility existing on the stock due to this import alert," it said. Don't Miss: Glenmark slips 4% as co recalls 3 'odd odour' drugs from US Citigroup Global Markets also cut its target price on Wockhardt to Rs 1,620 from Rs 2,500 and reduced earnings estimates for FY14 and FY15 by 26-28 percent, saying the import alert was a "meaningful setback." "We see revenues hit on two counts: 1) discontinuation of approved products viz Geodon, Comtan, Stalevo, Zithromax etc; 2) Delay in new approvals from the unit," Citi said, but maintained its "buy" rating on the stock. Wockhardt shares were at Rs 1,167.20, down over 11 percent on NSE. The stock has nearly halved from its high of Rs 2,168.80 it had hit on March 12, 2013. Nachiket Kelkar
nachiket.kelkar@network18online.com