IGI Logo

Classification of Goa inspection remains key Comprehensive measures required to resolve regulatory issues ? We assessed Form 483 issued by USFDA after inspection at Cipla’s Goa site. ? Form 483 highlights issues largely related to testing methods, monitoring environmental conditions, cleaning/disinfections and root cause analysis. ? Considering the observations, we await classification of the inspection to incorporate potential business from key products like g-Abraxane. ? Nonetheless, Cipla remains on track to file complex products in respiratory, peptides and differentiated product category. ? We estimate a 12% earnings CAGR backed by 12%/7% sales CAGRs in DF/US generics and a 120bp margin expansion over FY24-26. ? Considering a healthy pipeline of niche products and superior execution in the branded generics segment, we value Cipla on SOTP basis (24x 12M forward earnings and NPV of INR30 for g-Revlimid) to arrive at our TP of INR1,700. We maintain BUY rating on the stock. Goa Form 483 snapshot ? USFDA issued Form 483 with six observations after inspection during 10-21st Jun’24. The first observation is related to test methods, including in-house and compendial, being not validated, verified or transferred appropriately. These testing methods refer to commercial as well as approved but not commercialized products. This observation was extended to certain APIs as well. Our interaction with an industry expert indicates that it will take three to six months to resolve this issue. ? Another observation is related to deficiencies regarding system for monitoring environmental conditions. Specifically, the issue is related to viable surface monitoring. ? Another observation is pertaining to cleaning and disinfecting room and equipment to produce aseptic conditions. One of the aspects highlighted under this observation is repeated from Form 483 issued in Aug’22. There is an observation related to inadequate root cause analysis as well. ? Form 483 also points out observations pertaining to appropriate controls on computer systems and responsibilities/procedures related to quality control. Two out of 11 sites catering US generics facing regulatory hurdles ? To date, USFDA conducted 59 inspections at the sites of Cipla and Invagen. Notably, the Goa site has received two OAI classifications till date. ? The regulatory history of Cipla had been sound until Sep’19, when it received the first adverse outcome (OAI) from USFDA for the Goa site. Subsequently, a warning letter was also issued for the site. It was reinspected in Aug’22 and the classification was maintained as OAI. ? Cipla has also received a warning letter for its Pithampur site in Nov’23. ? While these sites are critical for niche approvals in injectables/respiratory aspects, Cipla is trying to reduce the regulatory risk by filing for potential products through alternate sites. ? Recently, Cipla received VAI classification for the Patalganga site, which was inspected in Jun’24.