India’s Dr. Reddy’s shares fall on observations from US drug regulator

BENGALURU (Reuters) -Shares of Indian drugmaker Dr. Reddy’s Laboratories were down 5.8% on Monday after the U.S. Food and Drug Administration issued three observations for the company’s plant in Telangana state.

The stock’s decline is its steepest since mid-August, the only other time this year that it has fallen over 6%.

Dr. Reddy’s is also the top loser on the Nifty Pharma index, which is down 1.1%.

Since touching a three-month low following its second-quarter results in late October, the stock had regained nearly 8% of its value before the fall on Monday.

The average rating of 34 analysts on the stock is “hold”, with a median price target of 5,615.5 rupees, more than 3% higher than its current price.

Maintaining a “sell” rating on the stock, Antique Stock Broking believes that there is a high likelihood of the site getting a warning letter, given the severity of some observations that Dr. Reddy’s has received.

Some of the observations are regarding quality control, faulty equipment, and integrity of the company’s data, according to the brokerage.

Dr. Reddy’s Telangana facility contributes to around 30% of its revenue from the U.S., its largest market, the brokerage said in a note.

The North American segment comprised roughly half its generic drug revenue in the second quarter.

(Reporting by Varun Vyas in Bengaluru; Editing by Dhanya Ann Thoppil and Sonia Cheema)