Dr. Reddy's has been investing in more automated plants in hopes of impressing the FDA and avoiding the kinds of regulatory actions that have sidelined competitors' plants. It didn't work out like the Indian drugmaker had hoped. Last week, the FDA sent the drugmaker a warning letter for three of its plants.
The drugmaker acknowledged last week that it had received a warning letter for its active ingredient plants in Srikakulam and Miryalaguda, as well as its Oncology Formulation manufacturing facility at Duvvada. The citation followed a three-step FDA inspection sweep in November 2014 and then January and February of this year, it said.
Dr. Reddy's ($RDY) didn't disclose the issues the FDA laid out in the document but said it took the matter seriously and would work quickly to resolve the concerns. "We will continue to actively engage with the agency to resolve these issues and we have also embarked on an initiative to revamp our quality systems and processes, as an organization-wide priority," CEO G. V. Prasad said in a statement.
|Dr. Reddy's CEO G.V. Prasad|
According to Livemint, CEO G.V. Prasad said in a conference call with analysts that the FDA wanted the company to use outside auditors to evaluate product quality and some of its processes. "Any corrective measure we take has to be implemented at all our sites. This is going to take significant effort and time," Prasad said.
Dr. Reddy's reported last year that it had invested in automation for some plants to take as much "human error" out of the drugmaking processes as possible in an effort to avoid the pitfalls of other Indian companies. Now it finds itself in essentially the same place as Sun Pharmaceutical and Ranbaxy Laboratories, which Sun now owns, as well as Wockhardt and others. All have had their earnings beaten down when work to fix problems has cut their production, and by extension, their sales in the U.S. Sun, Ranbaxy and Wockhardt have had products banned from being shipped to the U.S. from certain plants as well.
In fact, Sun reported over the weekend that last quarter's earnings were off 28% in the U.S., in part because of supply restraints at its Halol plant after the FDA cited it in a Form 483.
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