US troubles far from over for Dr Reddy’s

Investors in Dr Reddy’s Laboratories (DRLL) got a shock when the drug firm received an establishment inspection report from the US Food and Drug Administration (FDA) that maintained OAI (official action initiated) status for its API (active pharmaceutical ingredient) facility at Srikakulam in Andhra Pradesh.

The Hyderabad-based company failed to resolve the facility issues one year after re-inspection, when just two observations were raised.

The company faced a series of FDA inspections between November 2014 and February 2015 at its three plants, including the API plants at Srikakulam, Miryalguda, and an oncology formulation unit at Duvada. The US drug regulator raised the issue of significant deviations from the current good manufacturing practice (CGMP) in three of DRLL’s plants in a letter issued in November 2015.

In its re-inspection of these plants (after remediation) in Q4 FY17, the US FDA raised two more observations at the Srikakulam plant.

“These observations were about maintaining inadequate records of data generated in the course of laboratory tests, including all chromatograms and those were repeat observations,” said Surya Patra, analyst with foreign brokerage Phillip Capital.

“Considering the business challenges in a leading market such as the US, we remain negatively biased,” said Patra. The US business contributed around 45 per cent of the company’s total ~106.68 billion revenue in nine months of 2017-18.

The regulatory challenge has come at a time when pricing pressure on generic drugs is increasing in the US.