Wockhardt hit by new export ban from UK regulator, shares slide

MUMBAI Mon Oct 14, 2013 4:50pm IST

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MUMBAI (Reuters) - Britain's drug authorities have revoked their approval for one of Wockhardt Ltd's (WCKH.NS) key plants - a fresh regulatory rebuke that sent shares in the Indian drugmaker tumbling and underscores the long road it faces in restoring its reputation.

The withdrawal of the good manufacturing practice certificate means the generic drugmaker's Chikalthana plant - one of its main revenue generators - will no longer be able to supply many products to Britain.

The admonition comes on top of a ban on drug shipments to the United States and Britain from a separate Wockhardt factory after hygiene and other compliance deficiencies were found.

India's pharmaceutical industry has come under the spotlight for a string of compliance lapses over the past three years, that have resulted in more scrutiny as well as a record fine for Wockhardt rival Ranbaxy Laboratories Ltd (RANB.NS).

Wockhardt said the UK Medicines and Healthcare Products Regulatory Agency has withdrawn its good manufacturing practice certificate for the Chikalthana plant and will instead issue a restricted certificate, meaning the factory will only be able to supply "critical" products for which there are no feasible alternatives.

Wockhardt's shares slid by their daily limit of 5 percent and have fallen nearly 70 percent for the year to date.

The U.S. Food and Drug Administration has also warned that the Chikalthana plant, which makes a generic version of the high blood pressure drug Toprol, may be in violation of its standards.

Wockhardt this year appointed a new quality chief and hired outside consultants in a bid to improve compliance.

Macquarie analysts Abhishek Singhal and Kumar Saurabh said in a note to clients that the speed with which Wockhardt can resolve regulatory issues would be critical, adding that it may not be able to do this before fiscal 2016.

"Any potential adverse regulatory action on this facility from the U.S. FDA could have a significant impact on our earnings projection over the medium term as fixed costs would remain," they added.

Wockhardt has seven plants in India. But almost 70 percent of its estimated fiscal 2015 EBITDA (earnings before interest, taxes, depreciation, and amortisation) was dependent on the Chikalthana facility, the Macquarie analysts said.

Wockhardt said it earns about 12 million pounds in UK and European Union sales from the Chikalthana, Aurangabad, facility, in western India. That represents about 2 percent of its total annual sales in the last fiscal year.

Wockhardt has said previously that could lose at least $100 million in revenue due to the FDA ban on shipments from its Waluj plant.

(Editing by Edwina Gibbs)

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