The Indian drug firm announced it was no longer a Global Fund supplier in a Bombay Stock Exchange (BSE) filing last week, telling investors recent US Food and Drug Administration (FDA) criticism of its operations had lost it the contract.
“In the light of the warning letter issued to the Company by the US FDA on January 29, 2016, they [the Global Fund] have re-assessed the situation and following a risk consideration exercise, will not allocate any volume of Artemisinin based Combination Therapy (ACTs) to the Company.”
The warning letter detailed manufacturing violations at IPCA's facilities in Ratlam, Indore and Piparia in India. None of the sites have supplied medicines to the US since the quality problems were identified during an FDA inspection in 2014.
Only the facility in Piparia in the Union Territory of Dadra & Nagar Haveli is directly involved in manufacturing anti-malaria drugs for the Global Fund according to the Geneva, Switzerland-based organisation’s suppliers list.
News the Global Fund will not buy medicines from IPCA saw the firm's share price plunge 10% last week. The loss of the Global Fund allocation does not fit with what management told investors in a month ago.
During an earnings call on February 6, managing director AK Jain discussed IPCA’s efforts to address the US FDA’s observations. He also predicted the new warning letter not impact the firm’s interaction with the Global Fund.
“As far as Global Fund is concerned, we have the written confirmation from them that the allocations would be there from Global Fund, and I think they have postponed the allocations to the February end or March first week.
“So, once they give allocation to everybody, we will also be getting allocation, so that confirmation is already there. We expect that by either February end or March beginning, when the allocations are done for all the companies, we will also be getting allocation.”
According to Edelweiss Research the Global Fund 70% of IPCA’s total business in Africa.