Jubilant Pharmova plunges 10% on dismal Q4 earnings, regulatory snags

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Shares of Jubilant Pharmova plunged 10 percent in early trade on May 30, a day after the drugmaker released a dismal set of quarterly earnings. The company's fourth-quarter results reflected a substantial net loss and weaker operating margins.

Adding to the concerns, the US Food and Drug Administration (US FDA) also classified Jubilant Pharmova's Montreal Contract Manufacturing Organization (CMO) facility as "Official Action Indicated" (OAI), further denting sentiment for the stock.

At 11.04 am, shares of Jubilant Pharmova were trading at Rs 331.84 on the NSE, down 7.43 percent from the previous close. Volumes were also high as seven lakh shares changed hands on the exchanges, as against the one-month daily traded average of three lakh shares.

The company reported a net loss of Rs 97.8 crore, a stark contrast to a net profit of Rs 59.5 crore in the same quarter last fiscal. The drugmaker attributed the net loss in the quarter to an impairment charge of Rs 171 crore related to certain intangible assets.

While revenue showed a modest increase of 9.7 percent to Rs 1,660.9 crore compared to Rs 1,514.4 crore the previous year, the EBITDA ( Earnings before interest, taxes, depreciation, and amortization) margin contracted to 12.2 percent from 15.5 percent in the year-ago period.

Adding to the challenges, the US FDA's classification of Jubilant Pharmova's Montreal CMO facility as "Official Action Indicated" has further dampened investor sentiment. The US FDA conducted an audit of the Montreal facility in February, leading to concerns about the facility's compliance with regulatory standards. The FDA's action may result in the withholding of approval for any pending applications in which the Montreal CMO facility is involved, potentially impacting the company's future revenue streams.

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Apart from this, the company's Roorkee formulations facility is also under an import alert that was also put by the US FDA. Another API (Active Pharmaceutical Ingredient) manufacturing facility in Nanjangud has also received Voluntary Action Indicated (VAI) classification from the US regulator.

The US regulator issues a VAI classification when inspectors have identified and recorded objectionable conditions during the inspection, but the US FDA still decides to not pursue any regulatory or enforcement measures. This decision is based on the determination that the objectionable conditions found do not exceed the threshold requiring immediate action.

Moreover, the company is also going through a phase of management rejig as Hari S Bhartia, the current Managing Director of Jubilant Pharmova, will be stepping down from his position effective May 31. However, Hari S Bhartia will continue to serve as the Co-Chairman and Non-Executive Director on the company's board. Effective from June 1, 2023, Priyavrat Bhartia will take on the role of Managing Director. Additionally, Arun K Sharma, the Chief Financial Officer (CFO), will take on the responsibility of Group Treasurer. Furthermore, Arvind Chokhany, the Group CFO, will also take on the additional role of CFO for the company.

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