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Sunday, August 18, 2013

Wockhardt tanks after FDA, downgrades hit

This story first appeared in DNA Money edition on Thursday, Jul 25, 2013.

Pharma major Wockhardt’s shares tanked 20% to Rs 660.90 on BSE on Wednesday as some brokerages downgraded the stock in response to manufacturing quality concerns expressed by foreign regulators.

Wednesday’s nosedive marks an extension of the recent downtrend in Wockhardt’s shares. Over the last three months, the stock underwent a massive correction of 65.44% from the high of Rs 1,912.3 on April 25.

The hammering on the bourses has eroded investors’ wealth by a whopping Rs 13,767 crore: from Rs 21,038 crore on April 25, it is now down to Rs 7,271 crore.

Trouble came from a series of import alerts and warnings from overseas regulators such as the US Food and Drug Administration (FDA) and the UK Medicines and Healthcare Products Regulatory Agency (MHRA) about Wockhardt’s Waluj manufacturing facility in Aurangabad, Maharashtra.

Last week, the FDA followed up its May import alert to the Waluj unit with a warning. Wockhardt said the warning is merely a formal communication, and kept its earlier estimate of $100 million impact on sales this fiscal unchanged.

But the road ahead is likely to get tougher for the Habil Khorakiwala-promoted drug-maker, market observers said.

A  review of the FDA warning of July 18 suggests that Wockhardt’s Waluj unit has been charged with six grave violations of current good manufacturing practices (CGMP) for finished pharmaceuticals.

The FDA alleged that Wockhardt officials not only withheld truthful information but delayed and limited its inspection. Worse, Wockhardt’s response to clarifications sought were not satisfactory, the FDA said.

Wockhardt has time till the first week of August to notify the FDA of the specific steps taken to correct and prevent recurrence of CGMP violations.

Murtaza Khorakiwala, MD of Wockhardt, said the company has already initiated the process of taking corrective measures, including appointment of a leading US-based consultant for its Waluj facility. “The consultant has extensive experience and expertise in CGMP and will work with the Wockhardt team to address issues raised by the FDA,” he said.

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