Divi’s Labs trips

The stock of Divi’s Laboratories plummeted more than 9 per cent last Wednesday on news that the US Food and Drug Administration (USFDA) issued six observations against the unit-2 facility of its Visakhapatnam plant after a nine-day re-inspection.

The stock had rallied 40 per cent in the month prior to the fresh observations on hopes that unit-2 would get clearance.

Investors appeared disappointed with the USFDA’s response last week, which suggest that some of the issues could be serious and lead to further delay in getting clearance for the facility.

In December 2016, the USFDA had inspected unit-2 and made five observations in Form 483.

Later in March 2017, the regulator had issued an import alert and a warning letter in May 2017. The company’s earnings took a knock as units under the FDA’s import alert were not allowed to export drugs to the US. Unit-2 accounted for about two-thirds of Divi’s Labs’ revenue.

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