MOSL: DR REDDY’ S LABS (Neutral)-Bachupalli 483 observations–no data integrity issue, but approvals may get delayed
​Dr Reddy’ s Labs: Bachupalli 483 observations – no data integrity issue, but approvals may get delayed
(DRRD IN, Mkt Cap USD6.8b, CMP INR2602, TP INR2625, 1% Upside, Neutral)
- ​The USFDA inspected Dr. Reddy’s (DRRD) Bachupalli plant in April 2017, issuing 11 observations. The observation letter reveals no data integrity issues, with most observations being related to lab control, QC, assurance of back-up data, etc. Notably, there were two repeat observations.
- Revamp in quality control & compliance system may delay approvals: Bachupalli is the company’s largest formulations facility supplying to the US, and accounts for 60-65% of US revenue. Although the warning letter does not pose any major risk, we believe the changes required in the quality control & compliance system can delay product approvals by six months from this facility.
- Srikakulam clearance provides visibility of Copaxone launch: The company’s Srikakulam facility was re-inspected in March 2017 and issued two 483 observations. As the observations were routine in nature, we believe the facility should soon come back on track. Copaxone API has been filed from this facility (formulations are filed from Gland Pharma), and resolution of the warning letter will open doors for approval of this product. Copaxone 20mg and 40mg sales in the US stand at ~USD3.5b (~84% coming from 40mg, rest from 20mg). Six generic players (Synthon, DRRD, Mylan, Amneal, Biocon/Apotex and Sandoz) have filed for this product, with Sandoz already launching the 20mg generic. We believe DRRD could be the third/fourth player to launch generic Copaxone 20mg/40mg by 2HFY18.
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