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Dr. Reddy's (RDY) Receives FDA Warning Letter; Shares Fall

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Dr. Reddy's Laboratories Ltd. 's RDY shares tanked 18% after the company acknowledged that it has received a warning letter from the FDA regarding its API manufacturing facilities at Srikakulam, Andhra Pradesh and Miryalaguda, Telangana in India, in addition to its Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The FDA had issued these warning letters after the inspection of the sites in Nov 2014, Jan 2015 and Feb 2015.

The company stated that it will respond with a comprehensive plan addressing the observations in the FDA warning letter within the stipulated time frame of 15 days. The company also said that it will remain actively engaged with the FDA to resolve these issues.

Meanwhile, Dr. Reddy's is working on revamping its quality systems and processes on a priority basis.

We remind investors that in Oct 2015, two of the company's API customers had received the abbreviated New Drug Application (ANDA) approval rescission letters from the FDA. The ANDAs were approved in Jan 2015 and Feb 2015 after the FDA's inspection of the company's API facilities. Each rescission letter cited the classification of Dr. Reddy's API facilities as Potential 'Official Action Indicated' (OAI) on the date of approval. Dr. Reddy's is currently working with the FDA in connection with the pending Form 483 observations, and expects to receive further advice from the FDA on this matter.

The warning letter is expected to remain an overhang on the stock until the matter is resolved.

Currently, Dr. Reddy's carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Anika Therapeutics Inc. ANIK , Actelion Ltd. ALIOF and Baxalta Incorporated BXLT . All three carry a Zacks Rank #1 (Strong Buy).

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DOCTOR REDDYS (RDY): Free Stock Analysis Report

ACTELION LTD (ALIOF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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