Cipla sales may be hit hard: Drugmaker may lose this much revenue in resolving USFDA quality worries

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Updated: October 12, 2019 2:55:46 PM

Cipla Ltd may lose hundreds of crores of rupees in sales, hitting a significant portion of its income, as it resolves the latest concerns raised by the USFDA over compliance and quality issues at Indian drugmaker's Goa facility.

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11 October 2019: Cipla Ltd may lose hundreds of crores of rupees in sales, hitting a significant portion of its income, as it resolves the latest concerns raised by the USFDA over compliance and quality issues at Indian drugmaker’s Goa facility. The impact on Cipla’s sales from the USFDA observations may be to the tune of up to $50 million (over Rs 350 crore), Reliance Securities said in a note, in line with the management commentary on the issue. That amount is as big as over 2% of Cipla’s annual revenue of Rs 16,362 crore for the full fiscal year 2018-19.

“We expect there will be limited financial impact (sales of about $40-50 million) due to lack of new approvals from the facility,” Krishnanath Munde, Sr Analyst (Pharma), Reliance Securities, said in the note. The US food and drug regulator has released detailed Form 483 which contains 12 observations on Cipla’s Goa plant after conducting a detailed investigation during 16-27 September 2019. The resolution is expected to take about 8-10 months, unlike Cipla’s previous issues with USFDA which were resolved within 2-3 months, the note said.

Out of the 12 observations made by USFDA, some are serious in nature. USFDA has red flagged “cleaning validations, batch failures, quality of drugs, the design of the equipment, aseptic processing areas, size and construction of the building, prevention of microbial contamination of the drugs and material specifications,” Reliance Securities said. However, the company “is very confident of submitting a robust response and resolving the issue,” Kedar Upadhye, Jt President and Global CFO, Cipla, told CNBC TV-18 in an interview. “We have a very active compliance program,” he added.

Cipla’s Goa facility is an important plant as it generates 20-25% of US sales for the drug maker. However, the company can do site transfers for large products to other facilities as Cipla has multiple USFDA approved plants, Reliance Securities said. It added that Cipla’s most of the new filings are made from Indore facility.

Cipla has handled US FDA concerns in the past as well for its various plants including Kurkumbh plant (API-Formulation) with total 18 observations in Mar 2019, 7 cGMPs observations at Virgonangar, Bengaluru API plant in July 2019 and 8 observations in Jan 2019 for Goa plant.

Meanwhile, Cipla shares slipped by at least 7% intraday in Friday’s trading session after a brokerage firm said that Cipla will have to incorporate extensive changes to meet USFDA guidelines. However, after hitting the day’s low at Rs 395.70, Cipla stock gained and closed at the day’s high of Rs 442.05.

  • First published on Friday, 11 October 2019, on www.financialexpress.com.

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