Dr Reddy's gets US FDA warning for 3 plants

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Hyderabad,November 7: Dr Reddy’s receives a warning letter from US FDA relating to its facilities in Andhra Pradesh and Telangana.

Rattled investors punished the stock of Dr Reddy’s Laboratories Ltd on Friday after India’s second largest drug maker by sales received a warning from the US Food and Drug Administration (FDA) on possible violations of manufacturing standards at three pharmaceutical plants.

Shares of the Hyderabad-based company dropped 14.65%—the most in 11 years—to Rs.3,629.55 on BSE at the close of trading on a day the benchmark Sensex fell 0.15% to 26,265.24 points.

The FDA warning dated Thursday followed a quarter in which Dr Reddy's posted a record profit of Rs.722 crore on the back of strong demand in North America, which contributes about 60% of total generic drug sales for the company.

The warning was over its active pharmaceutical ingredient (API) manufacturing plants at Srikakulam in Andhra Pradesh and Miryalaguda in Telangana, and an oncology formulations facility in Visakhapatnam (Andhra Pradesh).

The warning followed inspection of these sites by FDA in November 2014, January 2015 and February 2015, respectively, the company said in a statement to stock exchanges.

FDA issues a warning letter if it finds violations of good manufacturing practices by manufacturers. The US drug regulator had during the inspections pointed to inadequate quality control procedures and data recording.

"We have responded to the observations made by USFDA, but it's evident from the warning letter that the response wasn"t adequate," said a spokesperson for Dr Reddy's.

The warning means Dr Reddy's would not receive approvals for new drugs made at these plants until it fixes the problems—a blow for the company that derives half its sales from the US.

“We take quality and compliance matters seriously and stand by our commitment to fully comply with the current good manufacturing practices quality standards across all our facilities," said G.V. Prasad, co-chairman and chief executive officer of Dr Reddy's.

Dr Reddy's ended the last fiscal year with revenue of Rs.14,819 crore, making it the second largest Indian pharmaceutical company by sales with 22 manufacturing facilities across four countries that include India, the US, the UK and Mexico. The drug maker has 17 manufacturing plants in India.

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