Natco faces double whammy, falling profit and FDA plant violations

FDA Building 2
The FDA has issued a Form 483 with six observations to a Natco Pharma plant in the village of Mekaguda. (FDA)

India’s Natco Pharma, which has seen a substantial hit to its profits, says it is looking to China and emerging markets for future growth as headwinds in the U.S. slow revenues there. Those headwinds involve the deteriorating pricing market for generics, but as the drugmaker disclosed today, they also involve some issues raised by U.S. regulators. 

Natco in a filing (PDF) today said that an inspection of its API manufacturing facility near Hyderabad was completed Friday, and the FDA issued a Form 483 with six observations. The company said it is responding and believes it can deal with the issues promptly. 

While not giving specifics, the drugmaker pointed out none of the issues involved data integrity. It did say some involved lapses in the quality control lab, as well in the microbiology lab. There also were issues with supplier and service provider agreements, employee training and revalidation and approvals for alternate suppliers. 

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"The company believes that none of the observations are related to data integrity and that all the observations can be addressed within a short period of time,” Natco said in a public filing.

While it sees issues at the Mekaguda plant, it has been making investments in a plant in Kothur in anticipation of approval of its generic version of Celgene’s Revlimid. According to a transcript of a call with analysts, Natco CEO V C Nannapaneni said the FDA has inspected the plant, and the company also is answering questions on its ANDA.

“I think, in the next few months, we're expecting the approval," Nannapaneni, told analysts. 

That should be a boost to the company’s U.S. business, which is suffering. The company last week reported earnings in which revenues were off 10% and profit was down nearly 21%. Nannapaneni told The Economic Times that the company has been making investments to build its business in Asia and Australia to offset the declines in the U.S market. 

“As we continually balance our portfolio of products and growth in the U.S., we expect majority of revenue to be coming from non-U.S. markets," Nannapaneni told the publication.  

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