Dr. Reddys Labs tanks, USFDA issues 11 observations

Dr. Reddy's Laboratories dipped more than 5 per cent as the company's Hyderabad-based facility was issued 11 observations by the US drug regulatory on Friday. The stock reacted to this news during Monday's trade.

The company's formulations manufacturing Plant - 3 at Bachupally, Hyderabad was being inspected by the USFDA, recently. The drug regulator completed the inspection on Friday and issued Form 483 with 11 observations. The company believes that they will be able to comprehensively address the issues raised by USFDA within the stipulated timeline. The unit is the most important facility for the company's US market sales.

Also in the past week, the United Healthcare Services, which is a US insurance firm has filed a complaint against Dr. Reddy's Laboratories, Inc, a wholly-owned subsidiary of Dr. Reddy's Laboratories and 42 other entities for conspiring to fix prices to rig bids for 30 generic drugs in the US market. In response to these allegations, Dr. Reddy's has denied any wrongdoing and plans to vigorously defend against these claims. 

Earlier, there were news reports that suggested that Dr. Reddy's plans to divest from its non-core businesses in the US market to focus on generic. The company plans to divest from its select US portfolio including proprietary product in the CNS and dermatology segment to fetch a sum of    US$300 to US$500 million. The company is also planning to acquire a firm in the US to sharpen its focus on the generic segment in the US market.

On Monday, the stock of Dr. Reddy Lab experienced huge volatility. The stock opened at Rs. 2,670.00 per share and hit an intraday high of  Rs. 2,704.70 and a low of Rs. 2,555.55 per share. It closed at Rs. 2,616.95 per share, down by 155.35 points or 5.60 per cent on BSE.