Divi’s Lab shares fall 20% after USFDA import alert for Visakhapatnam plant

Divi’s Lab shares fall after USFDA issued an import alert on company’s unit-II of the Visakhapatnam plant due to violation of good manufacturing practices


The import alert for Divi’s Lab means products manufactured in the unit will not be allowed to be marketed in the US. The US drug regulator has, however, exempted 10 drugs from the import ban.
The import alert for Divi’s Lab means products manufactured in the unit will not be allowed to be marketed in the US. The US drug regulator has, however, exempted 10 drugs from the import ban.

Mumbai: Shares of Divi’s Laboratories Ltd plunged 20% as the US Food and Drug Administration (USFDA) issued an import alert on the company’s unit-II of Visakhapatnam plant in Andhra Pradesh due to violation of good manufacturing practices.

At 11:05am, the stock was trading at Rs650 on the BSE, down 17.8% from the previous close, while the benchmark Sensex index was down 0.2% at 29,470.90 points.

The scrip closed down 19.77% at Rs634.35. The Divi’s Laboratories Ltd shares touched a high and a low of Rs711.65 and Rs628.45, respectively, on BSE.

The import alert means products manufactured in the unit will not be allowed to be marketed in the US. The US drug regulator has, however, exempted 10 drugs from the import ban, Divi’s Lab said in a stock exchange filing.

The company, along with third-party consultants, is currently working to address the concerns of the USFDA and making all efforts to fully meet the compliance requirements, Divi’s Lab said.

“It can take anywhere between two to three years to resolve import alert-related issues. So the company’s earnings will remain under pressure and their customer relationships will also be hurt,” Vishal Manchanda, analyst at Nirmal Bang Securities, said.

The US drug regulator inspected unit-II of the Visakhapatnam plant between 29 November and 6 December 2016 and issued a Form 483 to the unit with five observations relating to deviations from norms.

The five observations were: lack of proper controls over computer systems to ensure drug quality, improper maintenance of facility and equipment, R&D division allowing activities inconsistent with manufacturing norms, failure to investigate batches of products containing impurities and improper maintenance or falsification of records.

North America accounts for 30-32% of the revenue of the active pharmaceutical ingredients and intermediates manufacturing company. In the quarter ended December, Divi’s Lab’s sales were Rs973.44 crore, as against Rs858.65 crore a year ago

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