Wockhardt's main drug factory faces FDA ban after lapses
(c) 2013, Bloomberg News.
MUMBAI — Wockhardt was banned from selling some medicines to the U.S. from a second factory in India after regulators added it to a list of restricted facilities. The stock slumped as much as 14 percent.
Wockhardt's Chikalthana plant in Aurangabad, its biggest by revenue, was added to the U.S. Food and Drug Administration's "red list," which means the Mumbai-based company's products may be detained without physical examination, the FDA said in a statement Tuesday.
The Chikalthana factory, about 350 kilometers (218 miles) east of Mumbai, generated $230 million in sales to the U.S., or about a quarter of Wockhardt's revenue, in the year ended March. The plant makes copies of Toprol-XL, a popular heart pill that accounts for about 14 percent of sales. Generic Toprol-XL wasn't among five products excluded from the FDA's ban.
"There's going to be a big impact from this," Prakash Agarwal, an equities analyst at CIMB Securities India Pvt. in Mumbai, said in a telephone interview. "There could be a 25 to 30 percent shave-off on earnings per share."
Wockhardt fell 8.3 percent to 430.75 rupees at the close in Mumbai trading, the lowest level since Aug. 22. The stock was the worst performer on the 17-company S&P BSE India Healthcare Index Wednesday.
Wockhardt has "already initiated several steps to address the observations made by the U.S. FDA and shall put all efforts to resolve the matter at the earliest," it said in a statement to the BSE Ltd. Wednesday.
The factory is Wockhardt's second in Aurangabad to get put on an alert list by the FDA. In May, the U.S. regulator said it would curb imports from the drugmaker's Waluj plant, and the company at the time said that it would transfer production to three other sites, including Chikalthana.
The import alert prevents Wockhardt from generating revenue in the U.S. from important products, such as Toprol-XL copies, said CIMB's Agarwal, who said he is reassessing his rating on the stock.
"FDA resolution costs will increase and new product approvals will be very much delayed," he said. "Product transfers to other plants will take a very long time."
When FDA inspectors visited the plant in July, they found inconsistencies in drug-test results, urine spilling over open drains, soiled uniforms and mold growing in a raw-material storage area. The findings, reported by Bloomberg News two months ago, were detailed in an official document obtained by Bloomberg via a Freedom of Information Act request.