Cipla (NSE: CIPLA) shares are down 8% today. The background to this is that the US Food and Drug Administration has made public a letter critiquing - and therefore limiting the production of - one of Cipla’s manufacturing facilities. This could come as a surprise to some but the FDA does not just regulate what may be sold on the US market. It also regulates the factories which make the things sold on the US market.That regulation of factories is just as rule based, pettifogging and important as all the other FDA regulation as well.
So, this is not good news: “ In an exchange filing on November 18, the pharma company said it received a warning letter from the USFDA for routine good manufacturing practices (GMP) inspection at its Pithampur facility between February 6 and 7, 2023.” The FDA has also suggested that Cipla might require outside help to resolve matters: “The United States Food and Drug Administration has recommended that drugmaker Cipla engage a consultant to assist in meeting the current Good Manufacturing Practices ( cGMP) requirements.”
Now, at this stage, this doesn’t limit imports into the US. But it could well lead to that if not solved.
Cipla share price from Google Finance
It’s not just the one factory though: “Shares of Cipla Ltd. fell over 7% on Thursday after the U.S. drug regulator revealed details of a warning letter to it Pithampur facility in Madhya Pradesh. The warning letter summarises violations of current good manufacturing practices regulations for finished pharmaceuticals and product quality defect complaints. The U.S. FDA also pointed out similar issues with the Goa facilities of the company, which is under 'Official Action Indicated' status. "FDA has cited similar CGMP observations at other facilities in your company’s network," the warning letter said.” That worries rather more, the idea that it might be systemic to the whole company.
That can be solved though. What cannot be is this part: “This warning letter has delayed launch timelines for its generic Advair in the US. The product is the generic version of GSK’s Advair Diskus.” The profits not made by not launching a product cannot be recovered.
We’ve talked before of Cipla, and of CIPLA stock. Those mentions were about the rumours of a Blackstone takeover, an entirely different issue to this one of manufacturing control.