Indoco Remedies slumps 5% as US FDA slaps OAI status on Goa plant

Shares of Indoco Remedies tanked 5 percent in early trade on June 5 after the US Food and Drug Administration tagged the company’s Goa facility under the ‘Official Action Indicated’ (OAI) classification. The OAI status is the most stringent among the three classifications used by the US drug regulator. It is assigned when the regulatory body is dissatisfied with the company’s response to the observations issued during the facility inspection.

Following an assessment of the situation, the drug regulator determines appropriate measures for the plant. Typically, facilities that receive an OAI status are required to undergo a reinspection to ensure compliance with regulations and standards.

Fails to meet standards

At 10.28 am, shares of Indoco Remedies were trading with a cut of 5.15 percent at Rs 334 on the National Stock Exchange. Volumes in the counter were also high as two lakh shares changed hands on the exchanges, as against the one-month daily traded average of one lakh shares.

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Indoco’s sterile facility (Plant II), situated in Goa, underwent an inspection by the US FDA from February 20-28, 2023. Following the inspection, the facility received four observations under Form 483. This form is issued when a manufacturing facility fails to meet the good manufacturing practices (GMP) standard set by the US drug regulator.

Since an OAI status causes a delay in the supply of products from the facility in question, Indoco’s clarified that it believes the inspection classification will not have an impact on its existing supplies or revenues from the Goa unit.

However, analysts at ICICI Securities believe that if the OAI classification turns into a warning letter which is the likely possibility, it could have two adverse implications.

Firstly, it will cause the postponement of three to four key injectable and ophthal product launches, and secondly, it will lead to higher remediation costs, the firm noted.

Just when the company received respite via clearance of Plant 1 from the warning letter, a fresh overhang on Plant 2 made its way which is also likely to weigh on sentiments, the firm highlighted in its note.

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