Cipla share price falls 5% after warning letter from US Food and Drug Administration

Kshitij Bhargava

Cipla share price sank 5 per cent on Wednesday morning after the drug manufacturer was handed a warning letter by the United States Food and Drug Administrator (USFDA) for its Goa facility. The USFDA had conducted an inspection at Cipla's Goa facility in September last year. Cipla share price was down at Rs 406 on market opening. While informing the market regulator about the development Cipla said, "The Company remains committed to maintain the highest standards of compliance and will work closely with the agency to comprehensively address all the observations."

Cipla shares closed at Rs 426 on Tuesday. The stock has failed to perform too well in the past few years, down 43 per cent in the last five years. The recent fall in pharma shares has also been nudged by Coronavirus which might impact the Indian pharma industry if the halt in manufacturing continues in China, say analysts at HDFC Securities. HDFC Securities put a 'buy' call on Cipla this week, with a target price of Rs 495. 

Analysts at Geojit Financial Services said that Indian pharmaceutical companies import both bulk drugs (API) and intermediates constituting around 68 per cent of total imports of the raw material. Thus any prolonged supply disruptions from China will impact the industry growth over the next 2 quarters. "Incidences like this are expected to spearhead steps on increasing API manufacturing within India by way of quick regulatory approval. India has enough capacity to manufacture API for many medicines," they added. Emkay Global Financial Services has market Cipla as one of those companies that will be significantly impacted by the virtual shutdown of the Chinese economy. 

Domestic indices were in the red today with S&P BSE Sensex 272 or 0.68 per cent down at 40,008 points. The 50 stock Nifty was just above the 11,700 mark, down by 84 points or 0.72 per cent. Nifty Pharma was down 0.52 per cent or 41.55 points, with 5 of its 10 components in the red.