Shares of Divi's Laboratories lost more than 3 percent on Thursday as the company informed exchanges that US drug regulator has made five observations after inspecting its manufacturing plant at Visakhapatnam in Andhra Pradesh.
At 12.39 pm, the company's shares were trading 3.06 percent down at Rs 1,125.25 at National Stock Exchange (NSE) owing to selling pressure.
In a filing to Bombay Stock Exchange (BSE), the pharma firm said, "Company's unit-II at Visakhapatnam has had an inspection by the US Food and Drug Administration (USFDA) from November 29 to December 6, 2016. We have been issued a form 483 with five observations and these shall be responded within the time permitted."
An FDA Form 483 is issued to a drug maker when investigators observe any conditions which may constitute violations of the existing US drug regulations.
Usually, after inspection of a drug manufacturing facility by US Food and Drug Administration (USFDA) officials, observations are issued to the drug maker for taking remedial measures. Though compliance to observations made by the regulator is not mandatory, repeated non-compliance leads to issuance of warning letter and may lead to closure of the facility in extreme situations.
Unit-II of Divi's Labs, which includes its export-oriented facility and pharma SEZ, accounts for around 70 percent of Divi's overall business and more than 75 percent of its capacity.
Reacting to USFDA observations, brokerage firm Religare said Divi's follows strong manufacturing practices and has never pulled up by the regulator for non-compliance.
During last financial year, US business contributed around 32 percent of pharma firm's total business with most of its coming from the unit-II facility at Visakhapatnam.
The company had reported a net profit of Rs 223.85 crore in the second quarter ending September, down 24 percent from the corresponding quarter of previous financial year. Its revenue stood at Rs 1,005.43 crore, 4 percent higher than the same period last fiscal.