Dr.Reddy's spooked by US FDA

Not surprisingly, Dr.Reddy’s Labs is the top loser on the BSE currently. Intra day the stock was down almost 14% at Rs.3664.05 and even now, it is down almost 13.5% at Rs.3686 levels. Volumes have surged almost 5 times.

The stock is down, reacting to its announcement which came in today morning. The company has said that it has received a warning letter from US FDA. This warning letter pertains to its API manufacturing facilities at Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh.

The company has stated that this action follows the earlier inspection of these sites by agency in November 2014, January 2015 and February 2015, respectively. G V Prasad, CEO, Dr Reddy's Laboratories said, "We take quality and compliance matters seriously and stand by our commitment to fully comply with the cGMP quality standard across all of our facilities. We will respond with a comprehensive plan to address these observation within the stipulated time-frame of 15 days."

Obviously the market is spooked as any US FDA warning letter or even a cursory inspection sets off alarm bells ringing. After the experience of Wockhardt, the market is extremely wary when there is even a mere mention of FDA.