Cadila Gets Negative US FDA Observations For Matoda SEZ Unit

In yet another regulatory blow to Ahmedabad-based drugmaker Cadila Healthcare, the US Food and Drug Administration has made negative observations on the manufacturing quality compliance at its recently approved production plants housed in its Matoda special economic zone.

The SEZ plant has got 3 observations or the so-called form-483s after a recent inspection by the US drug regulator. Form 483 notice is a kind of caution to a drug manufacturing units those export products to the US to alert them about the units' non-compliance to manufacturing quality standards laid out by the US regulator. Once it is issued, the FDA is not likely to approve any new drugs from these units until the issues are satisfactorily resolved.

The negative observation will halt any new market approval process for products from the concerned manufacturing unit until the compliance issues are resolved to the satisfaction of the regulator. According to a letter from the FDA, the form-483 observations suggest that the non-compliance at these units are also similar to the company's other unit at Moraiya, which was found non-compliant to the FDA's current good manufacturing practices in January this year, and thus the issue is a company wide problem.

According to a sector analysis report by brokerage Equirus Securities, the latest observation by the FDA at the Cadila' SEZ units indicates towards probable delay in resolution at the Moraiya plant as well. The FDA had in January issued similar notice to the company's Moraiya manufacturing unit.

During a January conference call in connection with the Moraiya non-compliance issue, Cadila management had conceded that the issues related to incomplete analysis of out of specification issues are still pending and they have discontinued manufacturing Warfarin tablets due to which issues were raised by the US FDA.

"As the same issue has repeated in the new facility too, we see it as a threat to Moraiya resolution and it might delay the complete Moraiya resolution. Management is expecting 15 products to be approved from Baddi and this SEZ facility in financial year 201617. Although it is unclear whether this facility will get a warning letter or not, however, we see high risk of delay in Moraiya resolution to mid financial year 2017-18," an Equirus report said.

Cadila shares, however, closed at Rs 317.55 a unit, up 0.14 per cent on Tuesday on BSE after a marginal drop in the morning trade.