Mumbai: Brokers Macquarie downgraded on Wednesday shares in Indian drug maker Wockhardt on concerns that an import ban imposed by the United States over quality issues would last longer than expected, sending the stock down 20 percent.
Wockhardt shares have fallen 25.8 percent so far this week, wiping 25.1 billion rupees from its market value, after a warning from the U.S. Food and Drug Administration (FDA) about manufacturing practices at its Waluj plant.
Wockhardt has already been banned from shipping drugs to the United States and Britain from the factory in western India after their drug regulators identified deficiencies at the plant.
We think this will entail additional cost and time to get the Waluj facility fully FDA complaint," Macquarie said in a statement. The brokerage almost halved its target price for Wockhardt's shares and downgraded its rating to neutral from outperform.
Citigroup, in its own research note, said it could take Wockhardt about two years to fully address the FDA's concerns. The bank retained its buy rating on the company, however, citing attractive valuations.
In its warning letter dated July 18, the FDA said it may withhold approvals for any new launches Wockhardt was planning for the United States until the company addressed its concerns about the Waluj plant.
The FDA also recommended Wockhardt hire independent auditors to review its operations at Waluj, and asked the company to detail its plan for an upgrade.
The FDA also said Wockhardt had "repeatedly delayed, denied, limited inspections" or refused to permit FDA inspections.
Wockhardt did not immediately comment about the downgrade. In a statement to the stock exchange on Saturday, the company said it had initiated "several corrective actions" to resolve the concerns raised by the FDA.
Wockhardt has previously said the U.S. ban would cost the company about $100 million in sales a year.
Shares in Wockhardt were trading down 20 percent at 659.20 rupees at 15:17 p.m., their lowest level in more than a year. The stock has lost more than half its value this year.
Several Indian generic drugmakers like Ranbaxy Laboratories , Jubilant Life Sciences and Sun Pharmaceuticals Industries have faced compliance issues over the past three to four years, mainly after FDA investigations.
India exports pharmaceutical products worth about $12 billion every year and is seen as a key source for generic drugs by regulated markets such as the United States, Europe and Japan.
Updated Date: Jul 24, 2013 16:11 PM