india, pharma companies, sun, divi, cipla, cadilla, us fda, warning to indian companies, share price
People walk past a chemist shop at a market in Mumbai, India, June 25, 2015 (representational image).Reuters file

Indian pharmaceutical companies have signed off 2016 on a positive note and can look forward to improving their performance in the coming year from a quality perspective.The number of warning letters issued by the US Foods and Drug Administration (FDA) declined in 2016 when compared to 2015, according to Nomura analysts Saion Mukherjee and Ayan Deb.

Sun Pharma shares slide over USFDA observations on Halol unit

India's $36 billion pharma market comprises firms such as Cipla, Lupin, Sun Pharma, Cadila Healthcare, Aurobindo Pharma, Dr Reddy's Labs, Divi's Labs, Glenmark, Alkem, Biocon, Alembic, Natco, Wockhardt, Ipca, Unichem, RPG Life Sciences, Lyka Labs and Claris Lifesciences.

"We believe 2016 has been a better year where the number of warning letters and import alerts for Indian sites declined compared to 2015. For instance, the number of sites receiving import alerts is down to three vs. 12 in 2015. Similarly, the number of Indian sites receiving warning letters is eight (15 percent of all warning letters) in 2016 vs. 12 (32 percent of all warning letters in 2015)," the analyst at Nomura Financial Advisory and Securities (India) Private Limited (NFASL) said in the note. 

"We remain hopeful of a resolution of warning letters for these companies in 2017," they added, referring to Dr Reddy's, Cadila Healthcare and Sun Pharma. 

The latest pharma company to be issued with notices under Form 483 was Divi's Laboratories for its Vizag API facility that was inspected between November 29, 2016, and December 6 this year by the FDA.

Earlier, Sun Pharma's Halol facility, which contributes about 50 percent of its US earnings, was issued an observation letter for deviations of GMPs. "A Form 483 observation letter was issued by the US FDA after the inspection. We are currently in the process of responding... within the stipulated timeline of 15 days," the company had said in a regulatory filing to the BSE on December 8 this year. 

"The 483 issued post the inspection recorded five observations. Some of the observations indicate possible data integrity issues, which can be considered quite serious. This can potentially escalate into a warning letter or import alert unless there is a satisfactory response from the company to the FDA," the analysts wrote.

Violation of Good Manufacturing Practices

The number of warning letters for violation of good manufacturing practices rose to 52 in 2016 in comparison to 37 in the previous calendar year. On the positive side, there is increasing awareness among Indian drug makers to improve standards, staff training and ensure uniform SOPs that are bound to result in lesser violations.

"We believe a reduction in intensity of regulatory issues is indicative of a trend and not an aberration. We, therefore, believe that investor concerns on regulatory issues should decline in coming years," analysts Saion Mukherjee and Ayan Deb said.

$55 billion market size in four years

The Indian pharma sector is poised to grow to $55 billion by 2020; an aggressive approach will take it to $70 billion by that year, according to an analysis by McKinsey & Company.

The BSE Healthcare index comprising some of the companies listed above was up 1.27 percent to 14,624 at about 11.25 am on Wednesday.