Ongoing regulatory issues helps downgrade Wockhardt’s ratings

By Dan Stanton

- Last updated on GMT

India Ratings has downgraded Wockhardt partly on the back of ongoing remediation at seven manufacturing facilities.

The Company’s ratings for short-term bank facilities/commercial Paper has been downgraded to ‘IND A1’ from ‘IND A1+’ and for long-term loan facilities rating to ‘IND A/ Outlook: Negative’ from ‘IND AA-/Outlook: Negative.’

While India Ratings and Research downgraded Wockhardt on reflection of a deterioration in the firm’s recent operating profitability and credit metrics. The firm’s 9.8% revenue decline in fiscal year 2017 was due to the “genericisation of products”​ along with weak growth in Europe due to the UK’s impending departure from the European Union.

However, the ratings agency also highlighted Wockhardt’s “regulatory overhang,”​ stating seven of its facilities were under US Food and Drug Administration (FDA) restrictions at the end of last year.

“One of its two flagship formulation facilities in Waluj​ and one in Chikalthana​ (both in Aurangabad) continue to be under import alerts since 2013. The other facility in Waluj received a warning letter in 2013.

“The facilities under the subsidiaries CP Pharmaceuticals (UK)​ and Morton Grove Pharmaceuticals​, Inc (US) were issued warning letters in FY17.”

According to the ratings agency, Morton Grove Pharmaceuticals and the facilities in Waluj contribute around 80% to the sales to US markets and any escalation to an import alert would affect overall operations and delay recovery.

While management is undertaking remediation measures across its network, the resolution is likely to cause significant delays in the approval and supply of new products.

“Wockhardt has 78 ANDAs (at end-September 2017) awaiting approval from USFDA which upon commercialisation may support modest growth in US revenues amid competition.”

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