Cipla shares fall 7% on USFDA observations for Pithampur unit

Shares of Cipla made a weak opening on domestic bourses on Monday, tumbling nearly 7% in an otherwise positive broader market after the U.S. drug regulator issued observations against the pharma major’s Pithampur manufacturing facilities. The United States Food and Drug Administration (USFDA) has issued Form 483 with 8 observations after the inspection of its Pithampur manufacturing facilities, which is involved in the manufacturing of respiratory and oral products.

As per the exchange filing, the USFDA conducted a current Good Manufacturing Practices (cGMP) inspection at its Pithampur manufacturing facility from February 6-17. On conclusion of the inspection, the company received 8 inspectional observations in Form 483.

“The company will work closely with the USFDA and is committed to address these comprehensively within stipulated time,” Cipla said in a BSE filing on February 18.

Weighed down by the development, share price of Cipla opened 2.6% lower at ₹999 against the previous closing price of ₹1,025.80 on the BSE. Extending opening losses, the stock declined as much as 6.8% to hit a low of ₹956.20 in the first hour of the trade so far. The market capitalisation of the pharma heavyweight slipped to ₹77,901 crore. In comparison, the BSE benchmark Sensex was trading 254 points higher at 61,256 levels at the time of reporting.

Cipla shares currently trades 19% lower than its 52-week high of ₹1,185.20 touched on November 1, 2022, while it hit a 52-week low of ₹880 on February 22, 2022.    

Cipla has outperformed the BSE healthcare index in terms of one year returns. The sector heavyweight has gained 7% in the last 12 months as compared to 7% fall in the healthcare index. The stock has given a negative return of 6% in a six month period, while it has fallen 11% in three-month period. In the last one month, the stock has shed 8.5% as compared to nearly 4% fall in the BSE benchmark Sensex.

In August last year, the USFDA had issued six observations for Cipla’s Goa plant, which underwent inspection from August 16-26, 2022. The facility continues to be as Official Action Indicated (OAI) as the company is yet to resolve the observations.

For the three month period ended December 31, 2022, Cipla reported 9.93% growth in consolidated net profit to ₹800.96 crore as compared to ₹728.60 crore in the corresponding quarter last fiscal. The revenue from operations climbed 5.2% to ₹5,730.08 as against ₹5,442.86 in the same quarter last fiscal. The earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 14.3% to ₹1,407.56 crore, versus ₹1,231 crore in the year ago period, while the margins expanded by 170 bps to 24.2%. The total debt as on December 31, stood at ₹1,042 crore, compared with ₹1,068 crore a quarter ago.