NEW DELHI :
Shares of Dr Reddy’s Lab fell as much as 30% in intra-day trade before recovering to close 4% lower at ₹2,556. Investors turned wary after Jefferies in a research note said the US drug regulator reiterated some concerns about the drugmaker’s Bachupally, Hyderabad, plant. At the day’s low, Dr Reddy’s Lab fell as much as 29.77% to ₹1,872. This was the biggest intra-day fall in Dr Reddy’s shares in over 17 years.
The Bachupally plant is a major contributor to the drugmaker’s US sales, say analysts.
Dr Reddy’s Lab in a stock exchange filing on Friday had informed that the Food and Drug Administration, the US drug regulator, had completed an audit of its formulations manufacturing plant-3 at Bachupally, Hyderabad, and the regulator had issued Form 483 with 11 observations.
“We will address them comprehensively within the stipulated timeline," Dr Reddy’s said in its filing.
The US regulator issues Form 483 if its investigators spot any conditions that in could constitute violations of the US Food Drug and Cosmetic (FD&C) Act and related laws.
Jefferies in its note said the 11 FDA observations included four repeat observations, including one repeated from 2015 and 2017.
The observations are around lack of thorough investigations, written records lacking detail, and lack of infrastructure, Jefferies added.
Jefferies cut its target price for the Dr Reddy’s stock to ₹2,180 from ₹2,667, retaining an "underperform" rating.
The selling pressure in Dr Reddy’s shares also hit other pharmaceutical stocks. The Nifty pharma index fell over 3%.
“The FDA whipped Dr Reddy’s compliances for the second time at the Bachupally plant, which contributes 30-40% of (the company’s) US sales. Dr Reddy’s was the star performer in the pharma pack recently," said Umesh Mehta, head of research of Samco Securities.
(With inputs from Reuters)