Indoco Remedies- OAI Classification At Goa Plant II Jeopardises Future Growth In The U.S. Business: Systematix

Systematix Research Report

On June 03, 2023, Indoco Remedies Ltd. announced that its Goa Plant II sterile facility has been classified with an Official Action Indicated status by the U.S. Food and Drug Administration. The OAI status will preclude Indoco Remedies from launching new products to the U.S. market from this facility.

The U.S. FDA inspected the facility from February 20, 2023 to Feb 28, 2023. Post inspection, Indoco Remedies was issued four observations by the U.S. FDA. The OAI status on Goa Plant II facility was an unexpected event.

As per our analysis of the observations and discussion with a regulatory consultant, an OAI status was not anticipated. The four U.S. FDA observations do not seem to be complex in nature and we expect Indoco Remedies to take around one year to resolve the compliance issues.

Our U.S. growth estimates are already conservative and we do not see significant downside risk. We had earlier built only 10% growth in the U.S. as against company guidance of 30% in FY24.

The 10% growth estimate assumed successful commercialisation of oral products from Goa Unit I, which recently received Voluntary Action Indicated status from the U.S. FDA.

We have cut Indoco Remedies' FY24 U.S. revenue growth estimate from 10% to 0% to account for remediation led supply constraints at the Goa Plant II sterile facility.

In FY23, the U.S. business recorded revenue of Rs 2,658 million (~16% of sales).

We estimate the impacted sterile facility (ophthalmic and injectables) to contribute ~70% of U.S. sales. The OAI status implies that the existing products will continue to be shipped but new approvals should stall.

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