Dr. Reddy's restores FDA approval in Mexico, but a fraction of its business

The FDA has issued a closeout letter and lifted an import ban on the Cuernavaca, Mexico, plant of Dr. Reddy's Laboratories. But while it is back in the agency's good graces, it may not get back all of the business lost during the yearlong market shutout.

Alok Dalal, an analyst with BNP Paribas, tells investors that the plant before the ban was doing about $60 million a year in business, about 3% of Dr. Reddy's total sales, reports Daily News & Analysis. Dalal says it lost about half that business from the U.S. import ban, but also has lost other customers who looked elsewhere to source APIs when the plant closed for remediation. "We forecast a 50% recovery in fiscal 2014 ($15 million)," Dalal says.

Problems with the Mexican plant arose after an FDA inspection showed problems. In a June 2011 warning letter, the regulator chastised the plant for failing to validate API testing methods and failing to ensure that some of its manufacturing equipment was properly cleaned.

With an import ban hanging over the plant, Dr. Reddy's worked to correct the plant's inadequacies, satisfying the FDA with a successful follow-up inspection in March, according to a company release. By July 12, the FDA felt Dr. Reddy's had done its due diligence, lifted the ban and delivered a closeout letter.

- here's the initial warning letter
- here's the closeout letter
- read the Dr. Reddy's statement
- get more on the plant's financial impact from Daily News & Analysis