Dr. Reddy Stock Drops by 14% Following Warning by FDA

Dr. Reddy the drug maker based in India received new warnings from regulators in the U.S. on its processes used in manufacturing at two factories in the southern part of India, said company officials on Friday. The announcement sent its shares of stock lower.

Dr. Reddy’s stock was down 14% at the end of trading Friday in Mumbai after the company said in a filing with the stock exchange that the United States Food and Drug Administration had been dissatisfied with the plans by the company to fix its problems that had been pointed out by inspectors at two plants.

The FDA has issued warnings about the manufacturing at Reddy’s factory in Miryalaguda in the state of Telangana, which makes active ingredients for pharmaceuticals along with a plant in Duvvada in Andhra Pradesh state, which makes drugs for oncology, said Dr. Reddy’s.

Dr. Reddy is the second largest maker of drugs in India by sales and is struggling already to overcome actions taken by the FDA in a third plant in Andhra Pradesh state, after the company announced that inspectors from the U.S. found data and quality integrity issues in November of 2014.

The company is going to respond by releasing a comprehensive plan that addresses these issues with the next 15 days said CEO of Dr. Reddy G.V. Prasad.

The increased scrutiny will create a slowdown in the approval of drugs and affect future growth in revenue warned analysts. The three plants represent more than 12% of the drug revenue for the company.

Companies in India represent close to 40% of the sales of generic drugs in the United States, but companies in the industry in the South Asian country have struggled under the U.S. watchful eye.

Investors said they had been troubled by the news of these warnings about the oncology facility in Duvvada. The analysts estimate that the company receives as much as $200 million in revenue from the market in the U.S. from its oncology injections by themselves.