Sharekhan 's report on Ipca Laboratories
“The USFDA has issued import alerts on two of its manufacturing facilities located at Pithampur (Indore, Madhya Pradesh) and Piparia (Silvassa), which were earlier served adverse inspection report by the agency’s inspectors. The company’s Ratlam API facility is already under import alert. However, as the USFDA is yet to issue warning letters, the gravity of impact cannot be ascertained at this moment. Nonetheless, the latest import alerts are set to linger on the resolution process and thereby affecting resumption of sales in the US and Canadian markets.”
“The USFDA’s import alert on Ratlam API facility had exempted four products. The company was planning to launch these products shortly. However, the latest import alert allows to supply only two products namely hydroxychloroquine sulfate (anti-malarial drug) and propranolol hydrochloride (blood pressure drug) from its Silvassa plant to the US market. Therefore, the company will not be able to supply the other two products namely trimethoprim (anti-bacterial drug) and ondansetron (to prevent nausea) to the US market, hitherto exempted from the ban.”
“The company’s business in India, Australia, Europe and other emerging markets will not be affected due to USFDA’s concerns and remedial process on its key facilities. However, the company’s tender business will continue to see lower off-take in the next couple of quarters, as the WHO quality certification remains pending (only 20% of the tender business will continue in absence of WHO clearance). Besides, the UK health regulator (UKMHRA) is also likely to conduct inspection of its key facilities in the current calendar year, which keeps us cautious.”
“We have considered the impact of blockage of supplies of two products, hitherto exempted from the first round of import alert, delay in resolution of the USFDA issues (may take more than 12 months) and uncertainty over WHO-GMP clearance, which would help resume 80% of the tender business. Accordingly, we have reduced our earnings estimates by 16% and 8% for FY2016 and FY2017 respectively. We have downgraded our rating to Hold. However, we keep the price target under review until more details emerge from the USFDA’s warning letters to understand the gravity of the issues. Also, the management is likely to give annual growth guidance for FY2016 after the Q4FY2015 result, which will give more visibility”, says Sharekhan’s research report.
For all recommendations, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
