Warning letter seen as a huge negative for Lupin, stock skids to 52 week low

It could not have been more ill-timed for pharma major Lupin. Even as it was coping with decline in US sales and delays in pipeline of products for that market, the company informed the bourses that two of its facilities had received a warning letter by the US regulator - the US Food and Drug Administration. In a note posted on the Bombay Stock Exchange, it says: A combined warning letter has been issued by the USFDA for its formulations manufacturing facilities at Goa and Indore (Pithampur Unit II). The warning letter, it says, was issued by the US regulator on November 6.

Analysts see this as "quite a negative development for the company". In fact, just last month (in October) when Lupin announced an acquisition in the US in a niche therapy area, analysts -- while welcoming it -- pointed out that the company may have to wait for a couple of years more for benefits to accrue. It would need to first invest on sales infrastructure and promotion and these, given its weak earnings, would only put additional pressure on the company.

Not surprising, Lupin while explaining that it had earlier received three form 483 observations in Goa on April 7, 2017 and six form 483 observations in Pithampur (Unit II) on May 19, 2017 (to which it had responded), said, "We are deeply disappointed to have received the outcome. While there will be no disruption of existing product supplies from either of these locations, there will likely be a delay of new product approvals from these two facilities."

Sarabjit Kour Nangra, VP-Research- Pharma from Angel Broking, while retaining a buy on the stock says, "Both the plants together contribute more than half of the drug maker's US sales and approximately 20 per cent of its total sales." Apparently, the company now intends to shift 12 products to other sites and the impact of the warning letter is estimated to be felt over the next 12 to 18 months. The bourses reacted to the development and the share price of the company touched a 52 week low on Tuesday.