Lupin falls 3% after Jefferies remains underweight, sees 21% downside

Jefferies said OAI status for Indore unit-II can delay clearance by 6-9 months and it is the 3rd facility to receive OAI in past 2 months.

Lupin shares fell more than 3 percent in morning on April 24 after global research house Jefferies retained its underweight call on the stock due to OAI status to Indore unit.

The brokerage has set a price target for the stock at Rs 680 apiece, implying 21 percent downside from April 23 closing levels.

The stock was quoting at Rs 854.25, down Rs 10.05, or 1.16 percent on the BSE, at 1052 hours IST.

Company, on April 23, said it has received a letter from the USFDA classifying the inspection conducted at its Pithompur (Indore) Unit-2 facility in January 2019 as Official Action Indicated (OAI).

The US Food and Drug Administration has stated that this facility may be subject to regulatory or administrative action and that it may withhold approval of any pending applications or supplements in which this facility is listed," it added.

Jefferies said OAI status for Indore unit-II can delay clearance by 6-9 months and it is the 3rd facility to receive OAI in past 2 months. "It indicated that FDA requires more remediation and upgrades than teh company is undertaking," it added.

But the company does not believe that this classification will have an impact on disruption of supplies or the existing revenues from operations of this facility.

The company is in the process of sending further updates of its corrective actions to the US FDA and is hopeful of a positive outcome.

In March, Lupin's subsidiary Novel Laboratories Inc received a letter from the USFDA classifying the inspection conducted at its Somerset (New Jersey) facility in December 2018 as OAI. The US health regulator also facility also classified the inspection at Mandideep (Unit 1) as OAI.

On April 23, Lupin had rallied 4 percent after Morgan Stanley upgraded its rating on the stock to overweight from equal-weight earlier and also increased price target by 40 percent, citing reasonable valuations.

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