Aurobindo Pharma Limited saw a huge drop in their share price on Monday. On NSE the Auropharma’s share price fell down by 15.44% after the USFDA (the United States Food and Drug Administration) revoked the Voluntary Action Initiated (VIA) it had granted on Unit-4 Manufacturing Facility and reopened its investigations.
Analysts said that this is the company’s key general injectables unit and has 46 ANDAs (Abbreviated New Drug Application) pending for being approved which amounts to almost 25% of the company’s overall ANDAs.
As the development surfaced, the share price of Aurobindo Pharma Ltd on BSE fell by almost 18%.
Kotak Institutional Equities said, “The development is unprecedented, given that the rescindment was virtually within three days of the VAI grant, and we go back to our base assumption of an OAI status for Unit-IV. We expect the stock to react sharply, particularly, given the 20 per cent stock price rally on the back of the VAI announcement”.
An analyst, Surjit Pal, from Prabhudas Lilladher (PL), a brokerage firm said that this revocation of VIA seems like a warning to the company.
On the 19th February, Auropharma’s share price jumped by over 21%, the most in 10 years, and one day after the company claimed that VAI status has been granted to Aurobindo which will let the company take the necessary corrective actions.
Emkay Global Financial Services Limited said, “While we are not sure of the exact reasons for the rescindment, it can be a simple case of miscommunication/misinterpretation, among other reasons. At this point, it is unclear by when Unit IV will be reclassified, as the mandatory 90-day period already seems to be over (Inspection ended on November 13, 2019)” in a note.
The brokerage firm expects Auropharma’s stock to remain under pressure and lowered its PE (Price to Earnings) ratio for the stock due to the regulatory risks.
The traders and investors who purchased the company’s shares on the 19th of February, today’s news was a big disappointment as the grant of VAI by USFDA was the reason Auropharma’s shares swelled. Last week, Citi said, it expects anywhere between 10 to 12 approvals from this facility per year, in a note.