Informist, Monday, Oct 9, 2023
By Apoorva Choubey
MUMBAI – The US Food and Drug Administration has found that Indoco Remedies Ltd's Plant II in Goa failed to comply with established norms for maintaining sterile conditions and quality of drugs, documents sourced from the drug regulator showed.
The agency had issued four observations to Indoco Remedies' Plant II in Verna, Goa, after inspecting it between Feb 20 and Feb 28. The facility produces sterile ophthalmics and injectables.
Later, in June, the US regulator assigned an "official action indicated" status to the unit, as it believed the observations were serious enough to warrant another audit and administrative actions. However, details pertaining to the observations were not disclosed in public, as is the standard practise in the industry.
After an inspection, the US agency's first step is to issue a Form 483 to the company detailing the results of the audit. Based on the observations made by the auditors, drug-makers typically submit a reply to the US regulator and then the agency classifies the said unit as official action indicated or voluntary action indicated.
In cases the US agency feels the company can resolve the deficiency and the issue is not serious enough to warrant another inspection, it assigns a voluntary action indicated tag. Else, it issues an official action indicated tag, which leads to another inspection. In cases of no observations, the unit is tagged no action indicated.
Documents sourced by Informist show that the most serious observations listed by the US regulator were that Indoco Remedies' facility failed to maintain sterile conditions for production and the protocols followed by the company for drug quality were inconsistent with current good manufacturing practices.
During an inspectional walkthrough of Plant II in Goa, the US agency's auditors found that studies conducted by the facility to observe the fill and finish operations did not accurately simulate aseptic manufacturing conditions, which imply conditions free of micro-organisms. Discrepancies were also seen in the commercial batch of drugs, documents sourced from the agency showed.
Quality control protocols were improper as personnel were touching samples and vials which compromised molecules, the auditors said. Moreover, a review of studies conducted by Indoco Remedies' unit on air flow protocols suggested that the air flow was not assessed while the filling machine for sterile products was running, they said. Airflow is crucial to maintaining sterile conditions for producing complex drugs, and improper airflow can mean contaminated samples.
The second observation was that laboratory controls were not sound as procedures for maintaining good standards of identity, strength, quality, and purity were not even established, let alone followed.
The agency also found that the protocols for personnel monitoring and access were not consistent with requirements for aseptic filling operations, while aseptic processing areas were deficient in norms needed for maintaining any equipment.
The US agency did not disclose to Informist information specific to the drugs and samples inspected.
Indoco Remedies declined to comment on Informist's queries regarding these observations and remediation measures.
GOAN PLANTS' WOES
Indoco Remedies has three facilities in Goa, which are important for its business as the company makes key products for the export market at these units. The international formulations business makes up 40-45% of the company's sales, but may have a higher contribution in operating profit because of higher drug prices in advanced markets such as the US.
Indoco Remedies' revenues from the international formulation business fell 10% on year to 1.6 bln rupees for the June quarter. US operations, which form a big chunk of this revenue, witnessed the sharpest decline of 21%.
During the quarter ended June, the formulation and bulk drugmaker's US revenues fell as supplies to some clients were hit as a result of the official action indicated status for Plant II and Plant III in Goa.
While an official action indicated status doesn't mean that the plants will stop exporting drugs to the US, it is seen as a serious problem for future approvals. Moreover, some large pharmaceutical clients prefer to conduct an audit themselves, especially after a regulatory agency finds deficiencies.
The company has said some regulatory impact will spill over to the Jul-Sep earnings as well, even as prices improve in certain product categories in the US.
Indoco Remedies did not receive some milestone payments that it was supposed to in Apr-Jun, the company's senior management had informed analysts and investors at its last conference call. However, it is not clear whether the payment delay is related to the US Food and Drug Administration's inspection and finding.
For Apr-Jun, the drugmaker's profit after tax had fallen 31.5% from a year ago to 257 mln rupees despite a 5% increase in total sales to 4.1 bln rupees.
The company's shares currently trade at roughly the same levels as they did when it reported this weak set of earnings in late July. At 1000 IST, the shares were down 1% at 328.95 rupees on the National Stock Exchange, having lost close to 3% in the last seven days. In comparison, the Nifty Smallcap 250 index is up nearly 13% since July.
As of June-end, domestic mutual funds held a 16.9% stake in the company while foreign institutional investors owned 1.6% of the firm.
The drugmaker has six manufacturing units, of which three are in Goa, two in Baddi, Himachal Pradesh, and one in Waluj, Maharashtra. Only the complex drugs facilities in Goa, Plant II and Plant III are currently under official action indicated. The company makes aqueous, non-aqueous and photo-sensitive products at Plant III. The company has managed to get its Plant I in Goa cleared by the US agency, after receiving nine observations in January.
The company, at its last conference call with analysts, said it spent 40 mln rupees on remediation of facilities in the June quarter and is expecting to shell out similar amounts every quarter in the current financial year. That would make a total of 160 mln rupees of spend on making its manufacturing operations complaint.
This remediation amount for the full year would be equivalent to 15% of the company's annual net profit, based on projections from analysts.
At a conference hosted by Nirmal Bang Institutional Equities in September, Indoco Remedies said it is still working on remedial measures and has not decided when to invite the US agency for the re-inspection.
The company is continuing to consult with the Quantic group for a remedial action plan for the plants and will also hire a third party consultant to do the audit in November, the brokerage quoted the company as saying. End
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