Dr. Reddy’s facing more legal battles in U.S. over FDA inspections, warning letters

Indian drugmaker Dr. Reddy’s said it has been named in a securities class-action lawsuit in the U.S. for alleged violation of federal securities laws.

The company said in a notification (PDF) to the Bombay Stock Exchange Wednesday that it was served with the lawsuit. The case has been filed in U.S. District Court for New Jersey and seeks damages as compensation for a class of investors who claim the decline in the price of the company’s shares was due to misstatements or omissions related to FDA inspections of Dr. Reddy’s manufacturing plants that resulted in warning letters.

Dr. Reddy’s shares have slipped this year from a high of $46.65 in early February to a low of $30.75 in mid-August. It was trading at a five-year high of just over $65 a share in August 2015.

Earlier this year, Korea’s Mezzion filed a lawsuit against Dr. Reddy’s in New Jersey state court alleging the company repeatedly represented to Mezzion that it was compliant with FDA regulations while it was not. Mezzion also claimed that Dr. Reddy's misconduct “was the sole reason given by the FDA” to deny approval of Mezzion's NDA for udenafil for the treatment of erectile dysfunction. That lawsuit cites a warning letter that Dr. Reddy’s received in 2015 for three plants in India.

In the most recent legal action against Dr. Reddy’s, the company is alleged to have made “materially false and/or misleading statements or omissions in connection with its corporate quality system,” according to a notification from the company to the BSE dated Aug. 25. The suit specifically cites a connection with a warning letter sent by the regulatory agency in 2015. 

The class-action lawsuit seeks damages and compensation for investors who purchased Dr. Reddy’s shares traded on the NYSE from June 17, 2015, through Aug. 10 of this year.

The warning letter that Dr. Reddy’s received highlighted a host of problems, but several centered on a lab that the agency said the drugmaker had hidden from it for years. In it, inspectors found records indicating the company had repeatedly tested APIs for impurities, never recording failed tests and only showing the FDA those in which the batches had passed.