Indoco Remedies shares gain even as USFDA inspection ends with 9 observations

Indoco believes that this will not have an impact on the supplies and the existing revenues from this facility

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The share price of Indoco Remedies jumped after the company said its Goa-based plant was inspected by the United States Food and Drug Administration (USFDA) and it issued some observations.

“The USFDA has conducted a GMP (good manufacturing practices) inspection of the Solid Oral Formulation Facility (Plant 1) at Goa. The inspection was conducted from January 16 to January 20,” Indoco said in an exchange filing.

The company added that the USFDA issued Form 483 with nine observations, which will be addressed within the stipulated time.

The update sent the stock zooming 3 percent as of 1.20pm to Rs 403 on Monday.

An FDA Form 483 is issued to firm management at the conclusion of an inspection when investigators observe any conditions that in their judgement may constitute violations of the US’ Food Drug and Cosmetic (FD&C) Act and related Acts.

The FDA says companies are encouraged to respond to the FDA Form 483 in writing with their corrective action plan and then implement that corrective action plan expeditiously.

Some observations can be negative for the company and others just procedural, which can be resolved without much difficulty. The company, however, did not reveal the nature of observations.

“We believe that this will not have an impact on the supplies and the existing revenues from this facility,” the company added.

Prabhudas Lilladher, which has a ‘buy’ rating on the stock with a target price of Rs 430, said it expects the company’s margins to recover, led by softening of input prices and scale up of revenues.

“Domestic market continues to grow. We remain structurally positive on Indoco Remedies’ growth prospects given (1) MR productivity enhancement and higher penetration in North and East markets, (2) new launches in the US, and (3) higher tender business in EU market,” it said.

ICICIdirect has a target price of Rs 465 with a ‘buy’ rating. The broker said steady domestic business visibility, strong exports guidance and expected improvement in margins are key likely drivers for the stock

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