Cipla's Goa plant classified as 'Official Action Indicated' by USFDA; stock falls

Drug maker Cipla on Thursday said that the United States Food & Drug Administration (USFDA) continues to classify its Goa plant as 'Official Action Indicated (OAI).

The OAI classification by the US drug regulator means that regulatory or administrative actions will be recommended.

USFDA may continue to withhold product approvals from this facility till the outstanding observations are resolved, the pharma major says in a stock exchange filing.

The USFDA inspected the company's Goa plant in August this year.

Cipla further says it has an ongoing de-risking plan in place for new product approvals. The company will work closely with the USFDA and is committed to address these within the stipulated time, it adds.

Following the news, shares of Cipla fell over 1% to ₹1,095 apiece on the National Stock Exchange (NSE).

In the second quarter, the drug maker reported a 10.9% year-on-year jump in its consolidated net profit at ₹788.9 crore while its total revenue from operations increased 5.57% to ₹5,828.54 crore.

The company's EBITDA stood at ₹1,303 crore during the quarter. Its consolidated margins came in at 22.3%. On a yearly basis, the margin improved by 10 basis points from 22.2% in the year-ago quarter.

According to rating agency ICRA, continued pricing pressures in the US and European markets and cost inflation are likely to result in 120-150 basis points contraction in operating profit margin for Indian pharmaceutical companies.

Indian pharma firms registered revenue growth of 4.9% year-on-year in Q1 FY23. This was supported by 4.2% growth in the US market and 10.2% in the emerging markets, even as revenues from the domestic and European markets contracted, given the high base of the previous year.

The rating agency has maintained pharma companies' growth estimates at 6-7% to ₹2 lakh crore in FY23, marginally lower than the growth of around 7.7% in FY22.

"While no material demand contraction has been witnessed thus far, the industry remains cautious, given the inflationary pressures and an uncertain macro-economic environment in the European market. The ongoing inflationary pressures in Europe are expected to impact the cost of imports of key starting materials (KSMs)/ active pharmaceutical ingredients (APIs), including excipients, especially for acute therapies," said Deepak Jotwani, assistant vice president & sector head, ICRA.

"The rising energy cost is likely to have an adverse impact on Indian pharmaceutical companies with manufacturing operations in Europe. Going forward, market conditions in Europe are expected to remain challenging even as the same are expected to be mitigated selectively to a certain extent by expansion in product offerings, market share gains in existing products, and entry into new geographies in Europe," Jotwani added.