Dr. Reddy’s Laboratories Ltd. said today that its plant in Duvvada, Andhra Pradesh, was audited by the U.S. Food and Drug Administration following which it received eight observations.

The audit of the plant, the company said in an exchange notification, started on Oct. 23, culminating in the American drug regulator issuing a Form 483 with the observations. Dr. Reddy’s said that it is addressing these observations.

Is The News Negative?
This is the second time the plant has received a warning letter, and the Form 483 indicates that resolution is some time away.

Duvvada Plant’s FDA Timeline

  • November 2015: Regulator issues warning letter with three observations.
  • February 2017: FDA inspects plant again.
  • March 2017: Issues Form 483 with 13 observations.
  • October 2018: Reinspects plant and issues Form 483 with eight observations.

Has Dr. Reddy’s Disclosed The Contents Of The Form 483?
No. The company has only said the audit is complete, and that they have received a Form 483 with eight observations.

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When Will The Form 483 Be Made Public?
The U.S. FDA will upload the Form 483 on its website in the next few weeks.

Are The Observations Serious?
That’s difficult to say without the official form, but a high number of observations will lead to delays in getting approvals. Any repeat observations from the earlier Form 483 will be a serious setback.

Does This Plant Still Have A Pending Warning Letter?
Yes. A warning letter was issued to this plant in November 2015 along with those at Srikakulam, Andhra Pradesh, and Miryalguda in Telangana. However, the Miryalguda plant later got clearance from the warning letter.

A warning letter means that products can be sold from the plant, but future approvals won’t be given till it’s cleared by the FDA.

What’s The Financial Impact?
The financial impact will be limited as the plant’s contribution to the company’s sales isn’t much. Dr. Reddy’s, during interviews at the time of the warning letter being issued, said the contribution is less than 10 percent. That may have later reduced as the plant didn’t receive subsequent approvals.

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Why Worry If There’s No Financial Impact?
The company has made key drug filings from this plant, and that can have implications for its future pipeline of products. If the plant doesn’t receive the regulator’s clearance, Dr. Reddy’s won’t be able to launch those products.

Which Are The Key Products Manufactured At This Plant?
The facility is a formulations plant for oncology and injectable products.

Dr. Reddy’s manufactures the generics of Dacogen and Vidaza at this site. Around 20 percent of the company’s future pipeline is filed from this plant. The management in earlier interactions had indicated that some of the products already have alternative site arrangements.

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Are There Any Important Near-Term Launches From Duvvada?
No. Filings for Suboxone, Copaxone and Nuvaring from this plant have not yet been made to the U.S. FDA by Dr. Reddy’s.

Why’s It So Difficult To Clear This Plant?
Plants making injectables require sterile environment and the U.S. FDA’s rules governing the inspections of such plants are strict.

Will This Lead To A Drop In EPS Estimates?
No. The plant isn’t contributing much to the Dr. Reddy’s financials, so it’s unlikely that earnings per share estimates will be cut.

What Lies Ahead For Dr. Reddy’s?
The company will have to respond with its remediation plan to the U.S. regulator within 15 days.

Are There Any Concerns?
The Form 483 issued in 2017 had repeat observations from the warning letter. If the repeat observations or signs of data integrity persist, it could then escalate to an import alert. #KhabarLive