IPCA Labs - USFDA update: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - Pharma, Angel Broking):

"IPCA Labs got a jolt from USFDA both for its API and Formulations facilities. USFDA stated that all the drugs manufactured from the company's manufacturing formulations units situated at SEZ Indore (Pithampur) and Piparia (Silvassa) be henceforth refused admission into the United States (without any exception) until the Company can demonstrate that the drugs manufactured from these manufacturing sites and intended for the US market are in compliance with cGMP.

Also, the company has received a communication from USFDA stating that all the drugs manufactured at the Ratlam (Madhya Pradesh) will be refused admission into United States (except API' Chloroquine Phosphate, which exception will be reconsidered if, shortage and/or medical necessity implications change) until the company can demonstrate that the drugs manufactured at this manufacturing site and intended for the US market are in compliance with cGMP.

This is a significant blow to the company's effort to get its facilities out of the USFDA import alerts. With this we believe that the timelines for IPCA labs to revive its USFDA business have prolonged. According to the FY2016 Annual Report, USA constituted sales of around INR260cr, constituting around 19% of overall exports of the company and around 9% overall sales. While we would be working on new estimates, we believe that development will have an impact on the FY2018 and FY2019 estimates to the extent of 8-9% reduction in the net profit numbers. Also, in near term, given the development, the company's financial performance will be more driven by its performance in the domestic markets. We think in the current scenario, the fair value of the stock should be around INR 620."

Shares of IPCA LABORATORIES LTD. was last trading in BSE at Rs.471.7 as compared to the previous close of Rs. 513.15. The total number of shares traded during the day was 860992 in over 24099 trades.

The stock hit an intraday high of Rs. 484.4 and intraday low of 437. The net turnover during the day was Rs. 397198907.

Source : Equity Bulls

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