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Dr. Reddy ends 4% lower in volatile trade as Jefferies raises concerns over USFDA observations

Reacting to the news, shares of the pharma major declined as much as 22 per cent amid heavy volume to touch an intra-day low of Rs 2,065.30 apiece on the BSE, after opening lower at Rs 2650.10 against previous closing price of 2669.30.

Dr. Reddy's Laboratories shares closed 4 per cent lower on Friday in a session that saw the stock declining as much as 22 per cent in intra-day as investors turned jittery after media reported that Jefferies raised concerns over USFDA observation issued at the company's formulation plant.

Reacting to the news, shares of the pharma major declined as much as 22 per cent amid heavy volume to touch an intra-day low of Rs 2,065.30 apiece on the BSE, after opening lower at Rs 2650.10 against previous closing price of 2669.30. Recovering from its early morning low, the large cap stocks settled at Rs 2,556.90, down 4.21 per cent.

According to data available with exchange, as much as 4.94 lakh shares changed hand on the counter as compared to two-week average of 0.57 lakh shares on the BSE.

In a similar trend, shares of the company ended at Rs 2,555.95, down 4.17 per cent, on the National Stock Exchange, bouncing back from its intra-day low of Rs 1,872.95.

On February 8, 2019, Dr Reddy's Laboratories said that the US Food and Drug Administration (USFDA) had issued form 483 with 11 observations for its manufacturing-3 facility at Bachupally in Hyderabad." We will address them comprehensively within the stipulated timeline," the company said in a filing to the Bombay Stock Exchange.

Jefferies, in its research report, said that the observations are related to lack of thorough investigations, lack of details in written records, untrained staff and lack of infrastructure, according to a CNBC-TV18 report. "While the observations by themselves would have been procedural given the high number of investigations cited and repeat observations, remediation will take time," said the brokerage.

Analysts at the firm reported as saying that two of the observations are related to facility structure. One of them highlights inadequate lab temperature for certain products and the need for new labs. The other one pointed out lack of valves in drains to prevent back-siphonage. "We believe this is negative, as these are basic facility structure observations," Jefferies said.

Going forward, the company's response to the US FDA letter will hold the key, it added.

Earlier this week, the company has launched Tadalafil Tablets USP, a therapeutic equivalent generic version of Adcirca (tadalafil) Tablets in the United States market. The Adcirca brand and generic had US sales of approximately USD 490 million MAT for the most recent twelve months ending in November 2018 according to IMS Health.

Edited by Chitranjan Kumar