Granules India dips 10% on 11 observations from Portugal authority

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Granules India's share price fell by 10 per cent on Monday reacting to the news reports about a set of critical observations issued by Portuguese drug regulator on its Gagillapur unit near Hyderabad that manufactures pharmaceutical formulation intermediates (PFIs) and finished dosages (FDs).

The scrip closed at 101.20 by the end of the trading session from the previous close of Rs 112.25 while touching a low of 97.80 during the day.

Infarmed (National Authority of Medicines and Health Products), Portugal, had conducted a renewal inspection at the Gagillapur facility on January 6, and the company received the inspection report with eleven observations.

The regulator had detected nonconformities in the good manufacturing practices (GMP) system of Granules India in the process of granulation and primary packaging of the medicines collected - Metformin (meant for supply to Mylan), Paracetamol (meant for supply to Bluepharma), Paracetamol (for supply to Sandoz) and Supofen tablets.

Infarmed suspended the commercialisation and immediate collection of these batches of medicines in Portugal. There are therapeutic alternatives for the drugs identified. Granules India's clients, namely Mylan, Sandoz and Blue Pharma cannot sell or dispense these batches of medicines and must return the stock.

Portuguese drug regulator advised patients using these medicines to consult their physician for alternative medicines prescribed. There were speculations that these observations may also see an import and GMP alert letter from European regulator, in which case there will be a bigger impact on Granule's customers in Europe.

Last month, the US Food and Drug Administration (FDA) had issued a form 483 with seven observations to Visakhapatnam facility, a joint venture of Granules India and Ajinomoto OmniChem of Japan. The management of the company said it has responded to the USFDA within the time permitted. They would also respond to the Portuguese regulator on the observations by January 17.

The company said that it has initiated necessary steps to address the observations of Infarmed and will submit its response with a corrective and preventive action plan within the stipulated time. It also requested the regulator to re-inspect the Gagillapur facility first week of February.

Speaking to CNBC-TV18, Granules India managing director C Krishna Prasad said the said observations contained no data integrity or falsification issues at Gagillapur facility. They have stopped manufacturing for supply to Portugal to which the company exports over Rs 1.5-crore worth medicinal products per year.

The company is more concerned about European sales as the observations of Portuguese drug regulator may influence other countries in the continent. Europe occupies 8 per cent of the overall revenues at Rs 28 crore per quarter and about Rs 113 crore per year.

Granules India's total income from operations stood at Rs 364 crore during the quarter ended on September 30, 2016. Gagillapur facility contributes almost 50 per cent of the entire revenues of the company.

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