Dr Reddy's receives 3 USFDA observations for Miryalaguda plant

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Viswanath PillaMoneycontrol  Dr Reddy's Laboratories on Wednesday said it got three Form 483 observations from USFDA, for its Miryalaguda API plant in Telangana.The company didn’t explain the nature of these observations. Miryalaguda plant was one among the three plants for which the company received US drug regulator warning letter in November 2015.The company said it is addressing the observations raised by USFDA. Miryalaguda plant supplies active ingredients for company’s captive consumption as well as for its customers.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. If the company fails to meet the regulator’s expectations, a warning letter may be issued.​Dr Reddy’s on November 5, 2015 received a warning letter from US Food and Drug Administration (FDA) for alleged violations in manufacturing standards for its active pharmaceutical ingredient (API) plants at Srikakulam in Andhra Pradesh and Miryalaguda in Telangana, and an oncology formulations facility in Visakhapatnam (Andhra Pradesh).The three plants put together were contributing about 10-12 percent of total sales, in addition to several key generic and DMF filings in US.Since receiving the warning letter the company lost a third of its market value and never really recovered.The company has completed its remediation work at its plants and expects USFDA to complete reinspection by March end.Analysts tracking the company said the Miryalaguda plant has relatively less exposure to US; however, they sought more clarity from the company on the nature of these observations.“The Miryalaguda plant is one of Dr Reddy's seven API plants in India and largely supports the lower margin pharmaceutical services and active ingredient (PSAI) business which overall contributed 15 percent of company’s total sales in FY16 toplin, but lower percent of profits given the segments inferior profitability," said Goldman Sachs in its research note.Bank of America in its research note said successful resolution of warning letter is critical for company’s future growth.US contributes about half of company's sales and has been under pressure due lack of new approvals and erosion of base business.Shares of Dr Reddy's rose 0.77 percent and were trading at Rs 2921.35 on BSE at 11 am today. The benchmark Sensex gained 0.47 percent to 28897.90 points.