The Future of API Manufacturing at Dr. Reddy's

The future of API manufacturing at Dr. Reddy’s

Almost immediately after our analysis on why “Dr. Reddy’s largest API facility maybe the next to get banned from exporting to the United States”, a stock analyst stated that there were “hopes of US FDA resolution of Srikakulam plant”.

What does the future hold for API manufacturing at Dr. Reddy’s, currently the third largest API seller in the world?

As part of the Reuters story, CLSA, a stock brokerage covering Dr. Reddy’s, based their assessment that Dr. Reddy’s troubles are behind them as “one of its customers has received approval for a product, referencing a drug master file from this facility”.

While the CLSA report is very positive for Dr. Reddy’s, it’s strange that other than CLSA nobody else has covered this important event.

In an attempt to verify CLSA’s statement, we compiled a list of all recent generic approvals (since March 15) which were cross referenced using the Dr. Reddy’s @ PharmaCompass database to determine the active ingredients produced at their Srikakulam facility.

Date	Product	Application Holder
March 26, 2015	Tolcapone	Par Pharma
March 23, 2015	Argatoban Injection	Fresenius Kabi USA
March 19, 2015	Zoledronic Acid	Hospira Inc
March 18, 2015	Tenofovir Disoproxil Fumarate	Teva Pharmaceutical USA
March 17, 2015	Lacosamide (Tentative Approval)	Aurobindo Pharma
March 16, 2015	Celecoxib	Lupin
March 16, 2015	Fluoxetine Hydrochloride	Sciegen Pharmaceuticals

While Dr. Reddy’s produces 4 out of these 7 recently approved products (Zoledronic Acid, Lacosamide, Celecoxib and Fluoxetine Hydrochloride), only Lacosamide is produced at the Srikakulam facility.

The assessment is based on the Written Confirmations granted by the Indian Drug Regulator which serve as a good guide to know which products are being manufactured in which facility. The issuance of the Written Confirmation requires physical verification of production at the site by the local authorities, which is not necessarily true in the case of DMFs and CEPs.

The possibility of Aurobindo Pharma’s generic approval of Lacosamide being dependent on Dr. Reddy’s active ingredient is low, as Aurobindo Pharma supports their own USDMF. However, Aurobindo doesn’t have a Written Confirmation for Lacosamide.

In their 2014 annual report, Dr. Reddy’s, defined their revenues from the Pharmaceutical Services and Active Ingredients (PSAI) division, which declined 21.9%, as a “low point” of their overall business. However, Dr. Reddy’s also acknowledges that PSAI is a strength, as it provides vertical integration to their global generics business.

While Dr. Reddy’s has announced plans to the Ministry of Environment, to triple the size of their manufacturing capacity across three different production facilities, the facility in question, Srikakulam, is not part of the announced expansion plan.

There still seems to be significant risk to Dr. Reddy’s North American business on account of the USFDA inspection of their Srikakulam API facility.

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“ The article is based on the information available in public and which the author believes to be true. The author is not disseminating any information, which the author believes or knows, is confidential or in conflict with the privacy of any person. The views expressed or information supplied through this article is mere opinion and observation of the author. The author does not intend to defame, insult or, cause loss or damage to anyone, in any manner, through this article.”

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