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Last Updated : Jun 21, 2017 03:08 PM IST | Source: Moneycontrol.com

Wockhardt awaits cure for its never-ending regulatory pain

The US regulator's warning letter to the drug maker is nothing new. Over the past four years, regulatory woes have been a recurring theme.

 
 
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After the US drug regulator shot off a warning letter to Wockhardt over its Illinois facility, shares of the Mumbai-headquartered drug maker fell 4.95 percent at the BSE on Thursday to end at Rs 713.90.

Regulatory woes at the company's Morton Grove plant are nothing new. Wockhardt received eleven Form 483 observations from the US Food and Drug Admnistration in early 2016 highlighting deviations in control procedures and record-keeping practices among others.

Last November, the management told CNBC-TV18 that it had responded to the observations and expressed confidence about addressing the concerns.

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The drug maker had acquired the facility for USD 38 million in 2007 from Morton Grove Pharmeceuticals - a US-based liquid generic and speciality dermatology company.

The latest warning letter bars Wockhardt from filing any new approvals from the plant until it addresses the regulator's concerns, failing which it could be subject to an import ban.

Another worry aspect of the warning letter is that resolutons is taking longer than ever before.

"Warning letter resolutions have become longer and rarer - only 9 out of 108 warning letters have been sorted taking an average of  around 500 days," read a recent research report from Edelweiss. "Data for India and China is even bleaker with just one resolution out of the 64 warning letters issued in past 52 months."

Over the past four years, Wockhardt's regulatory woes have been a recurring theme. Three of its Indian plants are already under a USFDA-imposed import ban.

The company’s formulations units at Chikalthana and Waluj in Maharashtra have been under the USFDA’s import alert since 2013, while its bulk drug plant at Ankleshwar in Gujarat was issued an import alert in August.

Its UK plant is facing a warning letter and Shendra plant in Maharashtra is addressing observations raised by USFDA.

Wockhardt's regulatory woes began midway through 2013, just when it appeared to be cruising after tiding over a debt crisis that had nearly sunk the company just a year before.

In the FY13, Wockhardt posted revenues Rs. 5,610 crore, registering a net profit of Rs 1,594 crore, with the US alone contributing close to three-fourths of the sales.

The numbers for the FY16 tell a different story.

The company's revenues stood at Rs 4461.4 crore with a net profit of Rs 326 crore. The US contributed just about a fifth to this figure, indicating the decline of sales and profitablity as regulatory troubles took their toll.

For its part, Wockhardt has been proactively trying to weather the storm. It has enlisted external consultants to aid its extensive remediation exercise. And there have been some encouraging signs.

Last July, the company said it had received an establishment inspection report (EIR) with the US regulator's observations on three of its facilities in Maharashtra, including two units in Chikalthana one in Waluj, with just three observations.

The company also successfully passed an inspection by the UK drug regulator for its Chikalthana plant and regained its unrestricted good manufacturing practices certificate.

Wockhardt has 12 plants, of which nine are located in India, with one each in the US, UK and Ireland.

Analysts felt that while the latest warning letter may not impact its earnings estimates, it is certainly a setback to the company's ongoing remediation programmes.

"While we remain bullish on the long-term fundamentals of the company, multiples could be under pressure in the near term, driven by uncertainty around remediation timelines,” Macquarie said in its research note on Thursday. “Shift in timelines has significant sensitivity to earnings as fixed costs still remain and Wockhardt continues to invest aggressively in R&D to build the US pipeline."

An external consultant who assists companies with remediation said Wockhardt's troubles with the FDA can be put down to oa trust deficit.

“Wockhardt plants were caught with data manipulation, which the agency considers serious offence,” said the consultant on condition of anonymity.

“The company did make a lot of progress, but it still needs to give comfort so it can prevent such deviations happening in future,” the consultant added.

Wockhardt plants under USFDA scanner

Waluj plant, Maharashtra - Import alert, May 2013
Chikalthana plant, Maharashtra - Import alert, November, 2013
Ankleshwar API plant, Gujarat – Import alert, August, 2016
CP Pharma, UK - Warning letter, November 2016
Shendra plant, Maharashtra - Form 483 Observations, January, 2016Morton Grove, US - Warning letter, March, 2017

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First Published on Mar 2, 2017 09:03 pm
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