Hold Dr Reddy's Labs; target of Rs 5105: Edelweiss Securities

Edelweiss Securities' report on Dr Reddy's Labs

We analysed the Form 483 with eight observations that Dr. Reddy’s (DRRD) Duvvada FTO-7 and FTO-9 received after USFDA’s October inspection. Takeaways: i) There are no data integrity issues. ii) No repeat observations from Aug-19 inspection. iii) Most observations relate to deficient SOPs, potential microbial contamination and quality control. iv) We classify Observation #3 and #7 w.r.t. equipment qualification process, controls for aseptic filling and inadequate investigation as ‘Serious’ that could potentially lead to Official Action Indicated (OAI) classification resulting in a re-inspection and 9–12 months of remediation timeline.

Outlook

We maintain the ‘HOLD’ rating with an unchanged TP of INR5,105

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