Aurobindo Pharma slips 17% as USFDA revokes VAI status for Unit-IV

Aurobindo Pharma
Shares of Aurobindo Pharma slipped 17 per cent at Rs 498 on the BSE on Monday after in a surprise development, the US drug regulator FDA revoked the ‘Voluntary Action Initiated’ status issued to company’s plant in Hyderabad, days after indicating it might not pursue further regulatory action.

Aurobindo Pharma has received further communication from the US Food and Drug Administration USFDA on its Unit IV injectable plant stating that the inspection is still open and under review. The letter issued on February 19, mentions that the establishment inspection report (EIR) with voluntary action indicated (VAI) classification for the facility was erroneously sent to the company and is being retracted.

Till 09:48 am, a combined 2.7 million shares on the NSE and BSE, the exchanges data shows. In comparison, the S&P BSE Sensex was down 1 per cent or 425 points at 40,745.

On Friday, February 21, 2020, Aurobindo Pharma in an exchange filing said it has received a communication that the inspection conducted by the USFDA at its Unit IV, from November 4, 2019 to November 13, 2019, is still open and under review, by way of rescindment of 90-day VAl letter that was issued by them on February 18, 2020.

The company on Wednesday had said the Unit IV received Establishment Inspection Report (EIR) with VAl status from the USFDA. The stock had rallied 20 per cent on the BSE on Wednesday. On Friday, the stock market was closed on account of Mahashivratri.

On November 13, 2019, Aurobindo Pharma had informed the stock exchanges that at the end of the inspection, the company had issued a 'Form 483' with 14 observations. The company added that it believed none of the observations were related to data integrity issues. 

Currently, Unit 4 has 15 abbreviated new drug applications (ANDA) approvals pending over the next one year.

News of the Unit IV EIR retraction will likely erase the positive investor sentiment that saw the stock gain around 20 per cent on February 19, sparked by hopes of a possible rerating. We note that while the exchange notification and our management interactions (on FDA document content received) clearly point to a slipup on the part of the USFDA, this rare misstep by the regulators is unlikely to shake investors’ faith in the future EIR communications to companies,” analysts at BOBCAPS said in a flash note.

The USFDA will start inspections at Unit 10 (oral solids) from February 24 and at the Eugia oncology unit sometime in April. Together both house 62 pending ANDAs, accounting for 40 per cent of pending approvals. These units will be key growth drivers over the next 2-3 years. Sandoz regulatory approval is another key monitorable, it added.

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