Dr Reddy’s laboratories plunged nearly 29.77%. It hit an intra-day low of Rs. 1872.95 on 15th February 2019. The company also hit 52 weeks low today on NSE and BSE. The stock plummets the most since October 2001. It was due to the form 483 issued by the US Food and Drug Administration (USFDA) to its Plant-3 in Bachupally, Hyderabad. The company received 11 observations which include 4 repeated observations of 2017. Further out the 4 observation 2 of them were issued in the year 2015 inspection done by USFDA.
The Plant-3 in Bachupally, Hyderabad is the key plant that caters to the US markets. This plant generates 45% of its US revenues.
Along with this, in Q3FY19 Dr Reddy’s received 3 observations to their Marfeild plant. The Pedadevulapali, Telangana plant and the CTO-6 in Pydibhimavaram facility, has 2 observations currently under inspection. Moreover, The FTO SEZ PO – 02 plants of the company received an Establishment Inspection Report (EIR). During this quarter the company received 8 observations in Duvvada injectible facility.
So, there will be an increase in the delay of the potential launches due impact of key facilities receiving warning letters. These letters have been issued by the USFDA in 2015.
The concern here is that the repeat observations and the number of investigations issued by the USFDA. The corrective measures for the same will take longer time. Also, the plant will be re-inspected the USFDA.
The 11 observations on Dr Reddy’s Laboratories are:
- The procedure for describing and handling of written and oral complaints related to the drug products are not written or followed
- Quality control unit fails to assure that there have been no errors have occurred and investigation of errors that have occurred. This is the repeated observation for inspection in 2017.
- The quality control unit doesn’t have the authority and the responsibility to reject all the drug products.
- The controls regarding computers and related systems to guarantee that any changes in master production and control records or other records are instituted only by the authorized person.
- The quality control unit fails to maintain in writing all the responsibilities and procedure applicable. Even this observation is repeated by the USFDA during the inspection conducted in 2017.
- The sampling and testing procedures are missing from master production and control records.
- Laboratory controls don’t include a determination of conformity for the written specification for in-process materials. This is a repeat observation by the USFDA during the inspection conducted in both the years 2015 and 2017.
- The product samples of reserve drug are not representative of each lot or batch of drug product.
- The quality control unit doesn’t have adequate lab facilities for testing and approval or rejection of in-process materials also the drug products.
- The bachupally plant fails to have adequate space for placement of equipment and materials orderly so as to prevent mix up of drug products. Further to prevent contamination.
- The bachupally facility’s drains don’t are with air breaks or another mechanical device so as to prevent back-siphonage where connected directly with a sewer.
So, observation 2, 4 and 5 are repeated from the inspection conducted in the year 2017. Whereas the USFDA repeated the 7th observation from an inspection conducted in 2015 as well as in 2017.
Dr Reddy’s Laboratories closed at Rs. 2,555.95 on 15th February down by 4.17%. The stock recovered most of its losses after the stock plunged 29.77% in intra-day.