Divi’s Labs shares up 21% as USFDA set to lift import alert on Visakhapatnam unit

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Mumbai: Divi’s Laboratories Ltd on Thursday said the US Food and Drug Administration (FDA) will lift the import alert issued in March on unit-II of its Visakhapatnam plant, paving way for the company to fully resume exports to the US market.

“Divi’s Laboratories has been informed by the US FDA that it will be lifting the import alert 66-40 and moving to close out the warning letter issued to the company’s unit-II at Visakhapatnam,” the Hyderabad-based company said in a stock exchange filing.

Shares of the company jumped 21.3% on the news. At 9:20am, the stock was up 19.3% at Rs1,097.60 on the BSE, while benchmark Sensex index was up 0.1% at 33,631.61 points.

“This is positive for the company as it eliminates the downside risks on earnings,” brokerage firm Edelweiss Securities said in a note.

In March, the US drug regulator had issued an import alert under clauses 99-32 and 66-40 to the company’s unit following an inspection between 29 November and 6 December 2016.

Import alert under clause 99-32 was lifted by the USFDA in July.

According to details on the USFDA’s website, import alert 99-32 is issued when a firm refuses an FDA inspection of its facility, while import alert 66-40 is issued to companies that do not comply with good manufacturing practices.

When the import alert was issued in March, the US drug regulator had exempted 10 drugs from the ban to avoid any shortages in the market.

North America accounts for 30-33% of the revenue of the active pharmaceutical ingredients (APIs) and intermediates manufacturing company and the import ban had negatively impacted its earnings.

In the six months ended September, Divi’s Labs revenue fell to Rs1,711.40 crore from Rs2,022.62 crore a year ago, while net profit declined to Rs383.32 from Rs525.66 crore.