Aurobindo Pharma's Eugia Unit-3 gets warning letter from USFDA, shares fall

Aurobindo Pharma on Friday informed stock exchanges that its injectable facility Eugia Unit-3 manufacturing site at Pashamylaram near Hyderabad has received warning letter from the USFDA.

The Unit-3 site under USFDA scanner belongs to the Eugia Pharma Specialities - that houses company's injectable business. Eugia's Unit-3 is a critical to the Hyderabad-based drugmaker's future growth. Out of the 54 abbreviated new drug applications (ANDAs) filed by Eugia under review before USFDA, 29 are filed from the Unit-3.

New approvals are key for business growth and overcome price erosion for generic manufacturers like Aurobindo in a highly competitive US market.


Shares of Aurobindo dropped 2.58% and were trading at Rs 1480 on BSE at 11.40.am, while the benchmark Sensex rose 0.73% to 79,683.25 points on BSE on Friday.

USFDA inspected Eugia's unit-3 in January-February this year, the agency cited 9 observations, and has later classified the inspection for Official Action Indicated (OAI). An OAI is issued when the age finds significant regulatory violations.

The warning letter issued latest is an escalation to the OAI issued in May. Aurobindo will have to respond to the warning in 15 days. While warning letter will not restrict existing supplies from the site, but blocks new approvals until the company addresses the regulatory shortcomings to the agency's satisfaction.

Aurobindo said the warning letter has no impact on the existing supplies to the US markets.

"The company remains committed to work closely with the US FDA and continues to enhance its compliance on an ongoing basis," Aurobindo said.

According to IIFL, Unit-3 contributes 40% to Eugia's revenue, implying US sales contribution of $140-150m (9-10% of overall US sales).
Eugia ended FY24 with revenues of $541 million (Rs 4480 crore) with a growth of 35% year-on-year, making it the largest Indian injectable drugmaker in the US market.

The US alone contributed about 73% of the revenue from injectable and specialty sales. Aurobindo's overall revenue stood at Rs 29,000 crore in FY24. Eugia is aiming for $600 million revenue by the end of FY25.

ET on Thursday reported that Aurobindo Pharma has initiated talks with bankers to revive its strategic stake sale in its injectable unit Eugia Pharma Specialities, including a possible initial public offering (IPO).

The report also said the bankers are weighing Eugia's business including potential impact of USFDA's regulatory inspections at the unit's facilities before advising the best possible way forward.

The regulatory challenges at Eugia has caused disruption of operations resulting in revenue loss of around $35-40 million and another $9 million on the remediation efforts, which involved engaging third-party consultants, enhancing processes, procedures, and quality controls. The company said the supplies from Unit-3 have been normalised.