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MUMBAI (Reuters) - Cadila Healthcare Ltd has received a U.S. Food and Drug Administration (FDA) warning letter for violating manufacturing standards at two of its production facilities, the latest in a series of Indian companies to face such action.
Cadila shares plunged as much as 17 percent to their lowest intraday level since March in Mumbai on Thursday and closed down about 15 percent.
The warning letter cites issues with Cadila's plants in Gujarat, including at the Moraiya facility, which makes up about 60 percent of the company's total sales in the United States, its largest market.
Dozens of Indian drug plants have faced warnings and bans in recent years, as the FDA improved inspections of foreign facilities. More than 40 percent of the generic and over the counter medicines available in the United States comes from Indian facilities such as Cadila's Moraiya plant.
Cadila Managing Director Pankaj Patel told analysts on a conference call the FDA, during an inspection of the Moraiya plant in September 2014, found deficiencies with the way the company investigated market complaints about a medicine made there.
A batch of that medicine repeatedly failed a manufacturing-related test, after which the company stopped producing it, Patel said on Thursday, without naming the product.
At the other plant cited in the letter, where Cadila makes raw materials for finished drugs, Patel said the company had already identified problems and was working on fixing them before the FDA came to inspect.
"We took action including against management at the plant and then we started remediation action, and suspended all activity there," Patel said. "While the remediation was going on, the FDA inspection occurred, and obviously those things which were there were found."
He gave no specific details of the problems but said Cadila had never supplied any products from this plant to the United States. The company is working on a response to the warning letter and will then ask the FDA to reinspect both facilities, Patel added.
It has 15 days to respond to the FDA, as per standard procedures, after which the FDA will decide its response including whether to impose an import ban.
The warning at Moraiya suggests the FDA is not satisfied with remediation work Cadila has done so far at the plant, said Siddhant Khandekar, an analyst who tracks the company at ICICI Direct Ltd.
"The company's future sales are definitely going to take a hit," Khandekar said, adding he would reduce his 2017 and 2018 earnings estimates for the company, without saying by how much.
India's largest drugmaker, Sun Pharmaceutical Industries Ltd, received a similar FDA warning earlier this month over issues at a plant.
Cadila has not received U.S. approvals for products made at the plant for a year, causing it to miss the launch of its Asacol HD drug in November. It has said it has been working on transferring production from the plant to other sites.
Additional reporting by Karen Rebelo in Mumbai; Editing by Anand Basu and Stephen Coates