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Published: November 24, 2023
Updated: November 24, 2023

Cipla Faces Setback as USFDA Issues Warning Letter

In a surprising turn of events, Cipla Ltd., the renowned Mumbai-based drugmaker, witnessed a significant downturn as its shares emerged as the top losers on the Nifty 50 index. This downfall follows the revelation of a warning letter by the United States Food & Drug Administration (USFDA) to Cipla's Pithampur unit on November 20.

Unveiling Regulatory Concerns:

CNBC-TV18 obtained exclusive access to the warning letter, shedding light on data integrity issues flagged by the USFDA, accompanied by concerns related to product complaints and microbial contamination. Notably, the letter also references similar and recurring observations at Cipla's Goa site, which is already under a USFDA warning letter.

Urgent Call for Remediation:

The USFDA has urged Cipla to enlist the assistance of third-party consultants to address the highlighted issues. The scrutiny arose from the inspection of Cipla's Pithampur facility between February 6 and February 17, 2023. Following this inspection, the USFDA issued a form 483 with eight observations. Subsequently, in August, the facility was classified as "Official Action Indicated" (OAI), indicating objectionable conditions that prompt regulatory actions.

Implications and Market Response:

The OAI classification implies a halt in new approvals from the Pithampur site. Despite the market anticipating the warning letter post the form 483 issuance, Cipla's inhaler gAdvair faces delays, impacting consensus estimates and the stock price. Cipla's Umang Vohra, earlier in the month, expressed optimism about completing the Indore facility remediation by July 2024, with a resinspection expected by July-August next year.

Outlook and Projections

Alongside gAdvair, the launch of gAbraxane is now postponed to the financial year 2025. Umang Vohra remains optimistic about the Advair generic, emphasizing that although the opportunity's timeline has shifted, the market perspective remains unchanged. He anticipates no significant influx of new players into the Advair generic market.

Market Response and Future Prospects

Currently, Cipla's shares are trading 4% lower at 1,220, marking a 14% increase for the year 2023. As the industry awaits Cipla's response and remediation efforts, the unfolding situation poses challenges and underscores the importance of regulatory compliance in the pharmaceutical sector. Investors and stakeholders will be closely monitoring the company's strategic moves in the coming months.