Aurobindo confident of FDA OK for banned API plant by year end

21-Oct-2012 - Last updated on 22-Oct-2012 at 11:04 GMT

Aurobindo Pharma is still waiting for US FDA re-approval for its Indian cephalosporin plant, but is confident of a decision by the end of the year.

The facility in Chitkul Village, Andhra Pradesh, India – which is known as Unit 6 – was one of two for which Aurobindo received warning letters from the US Food and Drug Administration (FDA) in February last year.

Since then unit 6 has been subject of a US export ban that saw sales of the antibiotic active pharmaceutical ingredient (API) slump and prompted customers like Pfizer to rely on other suppliers.

Aurobindo has been working to correct the problems in a process that involved investing in new technologies and calling in a consultant to assess the plant according to company managing director Narayanan Govindarajan.

He told investors at the contract manufacturing organisation’s (CMO) most recent results presentation in August that: “We have concluded what improvement we need to make and our consultant has also validated.”

But while these efforts and a subsequent request to the regulator resulted in a second FDA inspection of the cephalosporin facility in late September, Aurobindo is still not allowed to ship products made there to the US.

However, according to Edelweiss Securities analyst Manoj Garg, the US inspection team discovered no major problems and Aurobindo is confident it will be re-approved by the FDA in the next three to four months.

Such a decision would be a significant development for the CMO Garg continued, adding that: “Post approval, we expect Aurobindo to launch 3-4 injectables products in the US market, which will aid both growth and profitability going forward.”

“With new launches, higher capacity utilisation and FDA resolution margins are likely to return to 16-18% by FY14E. Moreover, margin in Q1FY13 were also impacted by higher inventory build-up in the US, which will be liquidated over the next 2-3 quarters.”