UK regulatory curbs to cost Wockhardt £9 million in sales
Oct 27 2013
Profit drops 69 per cent during July-September quarter
Earlier this month, MHRA had withdrawn its previously issued good manufacturing practice (GMP) certificate on the Chikalthana facility and issued a restricted GMP certificate to allow manufacture of 10 critical products. The said facility contributes around £12 million from the UK and the EU markets to the consolidated annualrevenues of the company.
“The net impact of UK MHRA actions on the revenues is estimated to be approximately £9 million on an annualised basis. Further MHRA has also issued a drug alert for recall of certain (and not all) non-critical products that were manufactured at Chikal-thana. However, it has reiterated that there is no evidence of risk to patient safetyfrom the products being recalled,” Murtaza Khorakiwala, managing director, Wockhardt said during an analyst conference call. The company had also said earlier that the one-time impact due to product recall would be £1 million.
Khorakiwala also said the company has already responded to the 483 observations given by US Food and Drug Administration (FDA) and there has been no further update on the same.
The pharma major, received a warning letter in May, followed by an import alert from the FDA on the Waluj facility. At that time, the company had identified the impact at $100 million in sales a year. In July, the UK regulator also imposed an import alert on Wockhardt’s export-oriented plant at Waluj in Maharashtra.
MHRA has also withdrawn the GMP certification on the Kadaiya facilityat Nani Daman and would be issuing a restricted GMP certificate for thesaid facility. “The net impact of the same shall be known once MHRA issues the restricted GMP certificate,” Khorakiwala said.
Wockhardt has reported a consolidated net profit of Rs 138 crore in the September quarter compared with Rs 453 crore in the same period of the previous year. Net sales also fell to Rs 1,197 crore from Rs 1,347 crore in Q2FY13.
Khorakiwala said there were some additional factors for the drop in profit. While the recall of products in the UK market impacted the topline by $10 million, the company also made additional expenses of Rs 40 crore in terms of remedial corrections in GMPs and appointing consultants for its Waluj and Chikalthana units.
“There is a stock write-off inventory and some additional expenses are due to air trade and some other legal issues,” Khorakiwala said.
The company has, however, increased its research spend, which is 8.9 per cent of its total sales at Rs 106 crore. Wockhardtcapital expenditure during the first half of the current fiscal was Rs 208 crore and the company is likely to opt for an additional capex of about Rs 150 crore in the second half, Khorakiwala said.
Wockhardt filed seven new product applications with USFDA during the first half year and launched 13 new products in India in Q2FY14. In the UK, it received three approvals and launched one product during the quarter.
According to a pharma analyst with a private bank, for Wockhardt, one unit after the another has come under foreign regulatory scanner, as foreign regulators usually work in tandem. So if the FDA comes out with a similar or a more negative decision on its Chikalthana unit, the company would be in deep trouble. It is a washout situation at the moment and it may take at least two years for the company to turn around.
On Friday, the shares of the company on BSE closed at Rs 455.35 apiece, down by 0.98 per cent from the previous close.