Aurobindo Pharma gets 14 observations from US Food and Drug Administration

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Hyderabad | Published: November 15, 2019 2:14:38 AM

Aurobindo Pharma has received Form 483 with 14 observations from the US Food and Drug Administration (USFDA) for its Unit IV, a general injectable formulation manufacturing facility, in Pashamylaram, Hyderabad.

The company, in its conference call on November 13, said currently it has a warning letter for Unit 11 and the official action indicated (OAI) status for Unit 1 and Unit 9.

Aurobindo Pharma has received Form 483 with 14 observations from the US Food and Drug Administration (USFDA) for its Unit IV, a general injectable formulation manufacturing facility, in Pashamylaram, Hyderabad. While the company believes none of these observations is related to data integrity issues, analysts say the Unit IV is critical as it accounts for more than one-third of the pending abbreviated new drug application (ANDA) filings, and so the clean status is crucial for this facility.

The USFDA inspected the Unit IV manufacturing facility during November 4-13, 2019. “At the end of the inspection, we have been issued a ‘Form 483’ with 14 observations,” Aurobindo said in a BSE filing.

“We will respond to the USFDA within the stipulated timeline,” it said without disclosing the nature of observations. Analysts say the company can continue to sell existing drugs from this plant. The scrip fell 9% to end at Rs. 395.

The company, in its conference call on November 13, said currently it has a warning letter for Unit 11 and the official action indicated (OAI) status for Unit 1 and Unit 9. “We expect reinspection of three units to take place over January-March 2020. The Unit 7 observations were not related to data integrity. Any plant that has more filings can expect more inspections. Hence, we could see more inspections and more inspectors due to more filings,” the company said.

The Unit IV significantly contributes to revenue and the operating profit. Besides, this unit has around 47 pending filings and about 30% of overall filings, according to Emkay Global Financial Services. Hence, if these overhangs persist, fresh new filings in the US could be hampered. “According to our assessment, Unit IV accounted for around 9-10% of US sales and 8-9% of overall Ebitda in FY19.

It accounts for around 50-60% of total injectable sales in FY19, with the rest being from Unit XII, Eugia and Auronext facilities,” Emkay Global said.

Analysts at SBICAP Securities believe the impact of warning letter/OAI would be limited as only 5-6 ANDAs are subject to non-approval in the next six months, and around 15 ANDAs if the issue drags on for two years. “Aurobindo has also received seven observations for its Unit 7 SEZ. Around 12% of pending ANDAs and 35% of approved ANDAs are from Unit 7. The company is working on resolving these issues and believes none of the observations is regarding data integrity,” the brokerage firm said in Q2FY20 result review.

Meanwhile, the Aurobindo management had indicated Sandoz transaction would be completed by December-January even as it targets the net debt-free status on existing business in the next three years.

“Substantial queries related to the Sandoz deal have been addressed. Approval from FTC is likely in the next few weeks. The company would shortly submit the correction action/ preventative action (CAPA) report on three units and subsequently expects FDA reinspection by March 2020; in a scenario of persistent FDA overhang on the API units, management already has the cushion of a newly approved API unit,” analysts at YES Securities said in the company update.

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