Cadila Healthcare Moraiya plant could face FDA action

Moraiya Plant

Cadila Healthcare today said that the US FDA has classified its Moraiya factory near Ahmedabad as ‘official action indicated’ or OAI.

OAI is one of the three types of classification that a plant inspection report is put under after an FDA inspection.

The three classifications are ‘no action indicated’, ‘voluntary action indicated’ and ‘official action indicated’.

NAI or no action indicated refers to cases where no objectionable conditions or practices were found during the inspection.

VAI refers to cases where objectionable conditions or practices were found but the agency is not prepared to take or recommend any administrative or regulatory action.

OAI or official action indicated means the inspectors will recommend regulatory and/or administrative actions based on their findings during the inspection.

On May 3, it was revealed that inspectors from the US FDA had made 14 observations after an inspection at the plant that started on April 22.

The Moraiya facility is the company’s largest facility that makes tablets and injectables and is estimated to contribute about 40-50% of its U.S. exports.

Cadila Healthcare today said it believed that “this classification will not have any impact on the current supplies or revenues of this facility.”

“The Company is in the process of sending further updates of its corrective actions to the U.S. FDA and remains hopeful of a positive outcome,” it added.

Some of the observations noted by the inspectors include equipment and utensils are not cleaned and maintained at appropriate intervals to prevent contamination.

Soon after the inspections, CLSA downgraded the company’s stock to a sell and cut the target price to Rs 250 from Rs 430, arguing that the observations could lead to delays in product approval.

“We cut US sales forecasts by 12-17 per cent over FY20-21 assuming delays in approvals and disruption in existing supplies due to remedial action,” the broker said at the time.

Shares of Cadila Healthcare have fallen from around Rs 345 four months ago to about Rs 226 today. They were down 0.9% in today’s trading.