Dr Reddy's slips 3.5% on 13 USFDA observations for Duvvuda unit

Shares of Dr Reddy’s Laboratories plummeted 3.5 percent intraday on Thursday as investors turned cautious on its plant getting 13 observations from the US drug regulator. The US Food and Drug Administration (FDA) issued these observations for its Duvvuda oncology formulation facility. The facility, called Unit-7, is located in Visakhapatnam Special Economic Zone (VSEZ). The site manufactures cytotoxic and hormonal injectables and is an important plant given Dr Reddy’s focus on complex generic filings. The Unit-7 had received a warning letter in November 2015 for batch failures, a probable microbial contamination and certain lapses quality control procedures. Typically, the US drug regulator conveys its concerns on manufacturing practices through Form 483. Companies that receive its observations must respond in writing with a corrective action plan and implement it quickly. Two other major facilities including the API plant (CTO-6) and SEZ formulation facility at Srikakulam will also be coming up for inspection in the second week of April. Srikakulam API facility is also under USFDA warning letter.“This action follows receipt of Form 483 with 3 observations for its API manufacturing plant at Miryalaguda in Feb’17. We expect this development to be a sentimental negative. Although impact on exisiting sales to the US is expected to be limited, longer than anticipated timelines for a final resolution and return of Dr. Reddy’s manufacturing infrastructure to full compliance will continue to be an overhang on the stock,” JM Financial said in a report. The stock has fallen over 8 percent in the past one month. At 09:18 hrs, the stock was quoting at Rs 2,777.00, down Rs 74.40, or 2.61 percent. It touched a 52-week low of Rs 2,751.00.