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Wockhardt – Latest Update

The Wockhardt stock has slipped faster than expected. After an import alert on the Waluj facility by the US FDA, things have gone worse for the company as its drug Proxyvon (dextropropoxyphene) was banned in India. The UK's drug regulator MHRA also issued an import alert on the troubled Waluj facility. One of the leading daily this week reported that Wockhardt's drugs are completely banned in the Europe. Since we have recommended this stock to our readers, we held a conference call with a Wockhardt's investor communications department and here are the updates.

The UK MHRA has issued an import alert on the Waluj facility but the total size of revenues from this facility to the UK is not even Rs 100 crore and hence the impact remains negligible. The company has said that it will be able to shift production to other sites which are approved by the UK MHRA and hence the lost sales could be quickly restored. The spokesperson has denied the ban on the drugs in Europe.

On the developments related to the Waluj facility, he said that the company has not received any letter from the UD FDA and hence the reason for the import alert is unknown. Also, the company was to write to the US FDA about the separation of different units i.e. injectables and solid dosages in the Waluj facility but there is no such development on this front. The company has also not received any communication from the US FDA.

Wockhardt is confident of its processes and said that the progress so far is satisfactory. It also has hired some consultants for guidance regarding corrective measures. The company, as per the earlier conference call, is also looking to shift its production from the Waluj facility to the nearby Chikhalthana facility which is approved by the US FDA. The shifting, however, would require prior approval by the US FDA. This facility is due for the routine US FDA inspection in August this year. The brand new Shendra facility (injectables) is also due for inspection in August.

On the products front, the spokesperson affirmed that the products under the import alert as well as approved fillings from the Waluj facility are being held by the US FDA. The overall impact remains around USD 100 million and may take nearly 9 months to restore it.

What should you do with the stock?

If you have bought the stock then it is better to hold it. If you want to benefit from the lower valuation, then probably this is not the right time considering the two facilities going in for inspection next month. We advise investors to hold back their plans to accumulate the stock at lower levels. We will revisit the stock in August 2013 when things are likely to be clearer.

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