Divi's Labs in serious trouble?

It was exactly a week ago the Divi’s Labs was in the limelight after it has announced that its its Unit-2 after being inspected by US-FDA, received a Form 483 citing six observations which are procedural and the company will be responding to these within the stipulated time.

And today, the stock is the top loser on the BSE, going down from yesterday’s close of Rs.961.70 to Rs.874.70.

There is a very damaging report from Bloomberg which took the effort of accessing the Form 483 and scrutinizing the report.

What it has come up with is shocking – it has stated that contrary to the company stating last week that its six observation were “procedural in nature,” they are actually pretty serious ones.

Two out of these six were a repeat of the earlier observations, which means the company had really corrected itself.

There is one serious observation about data integrity and irregular recording of data. There was another new observation - inadequate cleaning procedure leading to concerns of microbial bio-burden in the finished API (active pharmaceutical ingredient).

Another very serious lapse – the company was not testing all batches/lots of API before their release for distribution. As these observations were made on batches manufactured in 2017, one has to wait and see whether the FDA will take this as a huge lapse and continue to sit on top of the earlier issued import alert.

These observations have been made on batches manufactured as late as 2017 and this particular deficiency will likely be a crucial consideration while deciding whether to provide relief to the company by lifting the import alert.

If one may recollect, the FDA had issued an import alert in March, followed by a warning letter in May for Unit II.