Cipla down 8% in 5 days, nears 52-week low on warning letter for Goa plant

Shares of Cipla were trading lower for the fifth straight day, down 3 per cent at Rs 409 on the BSE on Thursday. The company on Wednesday said it received a warning letter from United States Food and Drug Administration (USFDA) for its Goa manufacturing facility.

The stock of the pharmaceutical company was trading close to its 52-week low of Rs 390 touched on October 11, 2019. In the past five trading days, Cipla slipped 8.5 per cent, as compared to a 4 per cent decline in the benchmark S&P BSE Sensex and 3 per cent fall in the S&P BSE Healthcare index.

“The Goa manufacturing facility inspection conducted from 16-27 September 2019 by the USFDA, the Company has received a Warning Letter from USFDA,” Cipla said in an exchange filing.

The Company remains committed to maintain the highest standards of compliance and will work closely with the agency to comprehensively address all the observations, it added.

The Goa facility has received 12 Form 483s across its 10 units. Further, in January, the US FDA classified the facility as official action indicated (OAI).

The stock has underperformed in the last three months by falling 10 per cent against the broader market, given weak nine months results, negative newsflow on gVolatren and FDA issues at its Goa plant.

“Given none of the observations are related to data integrity and are procedural in nature, the warning letter announcement is negative, in our view. However, normalcy in the domestic formulations business adds comfort”, analysts at Elara Capital said in an event update.

After several quarters of muted performance in India, analysts at JP Morgan believe the sustainability of recent DD growth momentum over the next year will be key for stock. The US-business-driven earnings growth and risk from regulatory action to India margins keep us Neutral on the stock, the brokerage firm said in a recent report.

At 11:48 am, Cipla was trading 2.2 per cent lower at Rs 413 on the BSE, against 0.95 per cent decline in the S&P BSE Sensex. A combined 2.3 million shares changed hands on the counter on the NSE and BSE, till the time of writing of this report.