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After falling almost 20 per cent in the last two days, following the US drug regulator’s ban on its Indore and Silvassa facility , the stock of IPCA Labs remained weak for the third consecutive day. It lost almost a per cent in trade on Friday.
Import of drug formulations into the US from the company's Silvassa and Indore plant have been banned by the US Food and Drug Administration (FDA), citing non-compliance with good manufacturing practices.
While the ban on Indore and Silvassa plant is sentiment negative, the immediate earnings impact is unlikely to be material given that two key products HCQS used to treat Malaria and arthritis and propranolol has been exempted from the import alert.
However, should the import ban by the US drug regulator trigger similar regulatory action by the WHO or other regulators, that may hurt the company’s growth prospects over the medium term.
In January, the US FDA banned active pharma ingredient exports from the company’s facility at Ratlam (Maharashtra). Hence, in addition to fixing the issues at Indore and Silvassa facility, resolution of the regulatory issues at its Ratlam plant will be critical to the stock’s performance.
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