Fagron FIRST LOOK: Deep-dive into Fagron's warning letter

Following a conference call with management and a readthrough of the warning letter regarding Fagron's Wichita site, our assessment confirms that the issues highlighted in the letter refer mainly to observations that were already known to and being addressed by Fagron since last summer. While the language used by the FDA in the letter is strong, we interpret this in a broader context of the regulator raising the bar on quality standards in the pharmaceutical compounding industry. Three topics were highlighted in the conf call related to product labelling, environmental monitoring and Fagron's construction practices. Fagron's management indicated they will work together with FDA to implement the requested steps as soon as possible, aiming at completion by May 2025. We have not seen a clear reason why the FDA moved to escalate to a warning letter at this specific point in time. While it is an unpleasant surprise, visible to Fagron's clients, shareholders and other stakeholders, the letter does not appear to have an immediate operational or financial impact on the business. We reiterate our € 24 TP and Buy rating.