Dr. Reddy's racks up more repeat violations at Bachupally formulations plant

Dr. Reddy’s, which has been struggling to bring a number of its key plants up to FDA standards, has been unable to learn from past mistakes, including at its formulations plant in Bachupally.

The drugmaker last week reported that a recent inspection by the FDA had resulted in 11 observations. It turns out that four of those are repeats, according to a report by a Jefferies analyst which has seen the Form 483.

The news gut-kicked the Indian drugmaker’s stock Friday, sending shares down as much as 23%—a 17-year-low—before they recovered down just 4%, according to India media.

Most of the observations center on inadequate investigations of both out-of-specification test results and of customer complaints, Jefferies analyst Piyush Nahar told investors in a note today. 

"The key negative in the Form 483 is four repeat observations from the 2017 inspections," Nahar said. "While the observations by themselves would have been procedural, given the high number of investigations cited and repeat observations, remediation will take time, in our view."

Dr. Reddy’s has racked up Form 483s at a number of key plants in its extensive manufacturing network and some of those inspections have included repeat violations. Last September, the agency issued eight observations to Dr. Reddy’s oncology formulation facility in Duvvada, India. It is one of three facilities cited in a scathing warning letter in 2015 that raised issues about the potential for contamination. A follow-up inspection of that facility two years later found more than a dozen issues, some of them repeats.

While the regulatory problems have created some drag on the company’s finances, it recently reported (PDF) that revenues for the quarter ending Dec. 31, 2018, were up slightly at $553 million. Sales in North America, where the entire generics market has been soft for several years, were down 8% to $208 million.

North American sales account for nearly 40% of Dr. Reddy’s revenues. Sales in emerging markets, which account for about 20% of its revenues, were up 31% to $108 million.

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