US FDA warning to Lupin; stock falls 17%

Lupin’s plans to revive its US business face da setback, with the US drug regulator (USFDA) issuing warning letters to its Goa and Pithampur plants. This will result in delayed product approval sand increased remediation costs, imp acting its profit margin. Lu pin’ s US sales have been hit due to price erosion. Re acting to the news, Lupin’s stock fell 16.9 percent to close at ~860.10, a four-year low, on the NS E on Tuesday. InQ2 FY 18, Lu pin earned 35 percent of its revenue from the US market (~1,361 cr ore ).

Lupin’s plans to revive its US business faced a setback, with the Food and Drug Administration (US FDA) issuing warning letters to its Goa and Pithampur plants.

This will result in delayed product approvals and increased remediation costs, impacting its profit margin. Lupin’s US sales have been hit due to price erosion. Also warning letter resolution can take 12-18 months. Lupin’s stock plunged 16.9 per cent to close at ~860.10 on the NSE, a four-year low, on Tuesday.

In Q2 FY18, Lupin earned 35 per cent of its revenue from the US market (~1,361 crore).

Around 50 products filed from the two plants are awaiting approval in the US. Lupin has important plants in Goa and Pithampur. It now plans to shift around a dozen products to other manufacturing sites following the regulatory whip.

While the management did not share plant-wise contribution, analysts estimate the Goa plant alone contributes to around 40 per cent of its US sales.

The US FDA had issued 483 observations to the two plants in April and May for deficiencies in good manufacturing practices. The observations pertained to inadequacies in audits of failed drug batches and deficiencies in studies that determine the strength and quality of drugs.

The warning letter was issued as the company did not carry out retrospective evaluation of the two observations.

Lupin said in a stock exchange notification: “We are deeply disappointed to have received this. While there will be no disruption of existing product supplies from either of the two locations, there will likely be a delay of new product approvals from the facilities. We uphold quality and compliance issues with utmost seriousness and remain fully committed to be compliant with the current good manufacturing practices quality standards across all our facilities. We plan to address the concerns raised by the US FDA expeditiously and will work with the US FDA to resolve these issues at the earliest.”