Published on 8/10/2019 10:35:13 AM | Source: Prabhudas Lilladher Ltd

Reduce Lupin Ltd For The Target Rs.730 - Prabhudas Lilladher

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WL: Long list of laundry basket for resolution

The USFDA’s warning letter (WL) on Mandideep plant identified a long list of activities to address the operational deficiencies. Besides, LPC has to replicate the similar process in multiple plants across geographies as repeat failures were observed too in other plants. This implies that LPC would require multiple consultants to execute the corrective measures simultaneously across plants to ensure faster resolution. We found required actions from LPC is similar to IPCA and may require at least 24 months to compile large amount of data (across plants and geographies) in suggested format of FDA. Clearly, the pending work will increase overhead in FY20E and 21E and result in cut in our earnings estimates. We will review our assumptions with management guidance post Q2FY20 result. We maintain ‘Reduce’ and retain TP at Rs730.

USFDA published WL (issued in September CY19) post classifying the plant in ’OAI’ status in December CY18. The status meant that the plant is considered to be in an unacceptable state of compliance with regard to current good manufacturing practice (cGMP). The plant status and WL were part of the FDA’s facility classification letter post 90-day of its visit of the plant. LPC also received OAI status on its Somerset (New Jersey) facility in December CY18 and has to address deficiencies.


There are three key areas observed by USFDA for specific violations:

*  Failure to thoroughly investigate unexplained discrepancy in OOS (Out Of Specification) assay result. Failure to implement CAPA (corrective actions and preventive actions)

*  Failure to establish adequate validation procedure for uniform production and process control

*  Failure to ensure cleaning process (sanitization and sterilization) of manufacturing instruments to prevent malfunction and contamination


To address the deficiencies, USFDA suggested long process of multiple steps:

* An independent and retrospection audit review of all invalidated OOS results since July CY16

*  Further investigation and identification of the root causes that led to excessive variation in testing and manufacturing

* A comprehensive third party assessment of CAPA system currently deployed for addressing complaints, deviations and OOS

*  A comprehensive third party assessment of current validation procedure for manufacturing process and control mechanisms in the plant

* Establish a data-driven scientific program in the organisation to ensure processes meet appropriate manufacturing standards and parameters 


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