Just three days after issuing a voluntary-action-indicated (VAI) status for Aurobindo Pharma's Unit IV, the US Food and Drug Administration on Friday told the company that the inspection remains open and is being reviewed.
The stock, which had risen almost 20 percent following the VAI status, dived. The BSE Healthcare Index was down 1.5 percent.
Vishal Manchanda, pharma analyst at Nirmal Bang Institutional Equities, and Cyndrella Carvalho, pharma analyst at Centrum Broking Equities, have shared their views on the stock and the sector.
“The FDA move on Aurobindo Pharma is shocking. It was surprising to see the VAI, so the status getting reversed was completely shocking for everybody. The scrip has given up all the gains. But if you look at the valuations, they seem to be discounting issues more than it is required. So if you look at FY21, a large part of the earnings growth that everybody is building in is on account of Sandoz integration. So that is more crucial for Aurobindo’s earnings growth than the unit-IV injectable facility. It is certainly important as it is part of the organic growth that is going to come,” Manchanda said.
According to Carvalho, the decision is the prerogative of the US regulator. "One cannot comment on exactly what has happened there but if you refer to certain incidents in the past, there were one or two incidents where they had done it based on some abbreviated new drug applications approvals,” said Carvalho.
On Biocon’s Malaysian facility receiving three observations from USFDA, Carvalho noted, “To an extent, the press release is clearly stating that these observations are procedural in nature and to our understanding and experience generally the Pre-Approval Inspection (PAI) observation should not impact the approval. It is a step ahead in the process. Now that they have inspected the plant and we should await the approval in the due course.”