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Cadila Healthcare (CADI.BO) Rs948.70
Negative News Equity Research
Warning letter for Zyfine facility creates overhang; maintain Neutral
News
Cadila Healthcare has received a Warning Letter (dated June 21, 2011) from
the US FDA for its Zyfine division’s facility, located at Moraiya in
Ahmedabad. Zyfine provides CRAMS for NCEs, fine chemicals and
intermediates. As per the warning letter, during the January 17-February 3,
2011, inspection of the facility, the FDA inspectors identified violations of
Current Good Manufacturing Practice (cGMP) regulations for Finished
Pharmaceuticals. In the warning letter, the FDA has detailed its
observations and has asked for submission of a detailed action plan for
correction of violations. The FDA has given Cadila 15 working days to
respond to the letter.
Analysis
As per the warning letter, specific violations include: (1) laboratory records
failed to include complete data derived from all tests necessary to ensure
compliance with established standards, and (2) firm had not established or
followed appropriate written procedures to prevent microbiological
contamination of drug products expected to be sterile.
We note the issues are related to non-adherence to cGMP standards
(prevention of contamination, stringent data recording) and personnel
monitoring. Hence we think manufacturing could continue and may not be
at risk until the FDA analyzes Cadila’s response. The deadline to submit the
response to the letter ends on July 13, 2011 (15 working days from June
21). The management plans to respond to the letter quickly and does not
expect an impact on the current business, as per CNBC.
Implications
We maintain Neutral and our 12-month target price. We believe that the
warning letter may create a near-term overhang on the stock till the
resolution of the issue. We await further details on the facility and its
contribution to the group’s business. Any potential escalation of the issue
following Cadila’s response may pose risk to our estimates.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare (CADI.BO) Rs948.70
Negative News Equity Research
Warning letter for Zyfine facility creates overhang; maintain Neutral
News
Cadila Healthcare has received a Warning Letter (dated June 21, 2011) from
the US FDA for its Zyfine division’s facility, located at Moraiya in
Ahmedabad. Zyfine provides CRAMS for NCEs, fine chemicals and
intermediates. As per the warning letter, during the January 17-February 3,
2011, inspection of the facility, the FDA inspectors identified violations of
Current Good Manufacturing Practice (cGMP) regulations for Finished
Pharmaceuticals. In the warning letter, the FDA has detailed its
observations and has asked for submission of a detailed action plan for
correction of violations. The FDA has given Cadila 15 working days to
respond to the letter.
Analysis
As per the warning letter, specific violations include: (1) laboratory records
failed to include complete data derived from all tests necessary to ensure
compliance with established standards, and (2) firm had not established or
followed appropriate written procedures to prevent microbiological
contamination of drug products expected to be sterile.
We note the issues are related to non-adherence to cGMP standards
(prevention of contamination, stringent data recording) and personnel
monitoring. Hence we think manufacturing could continue and may not be
at risk until the FDA analyzes Cadila’s response. The deadline to submit the
response to the letter ends on July 13, 2011 (15 working days from June
21). The management plans to respond to the letter quickly and does not
expect an impact on the current business, as per CNBC.
Implications
We maintain Neutral and our 12-month target price. We believe that the
warning letter may create a near-term overhang on the stock till the
resolution of the issue. We await further details on the facility and its
contribution to the group’s business. Any potential escalation of the issue
following Cadila’s response may pose risk to our estimates.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
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