January 9, 2019 / 1:10 PM / a month ago

Akorn gets FDA warning letter for Illinois plant, shares drop

(Reuters) - Akorn Inc said on Wednesday it received a warning letter from the U.S. Food and Drug Administration following an inspection of the company’s Decatur, Illinois manufacturing plant last year.

Shares of the company fell 8.9 percent to $3.59 in afternoon trading.

The warning letter, dated Friday, lists violations related to the agency’s current good manufacturing practice regulations, which include poor aseptic behavior, as well as those related to environmental and personnel monitoring.

The Lake Forest, Illinois-based company also failed to follow “appropriate written procedures” to prevent microbiological contamination of the drugs being produced at the plant, the letter said.

The FDA said the company’s response to its Form 483, which lists observations from the inspection in April and May, was inadequate.

RBC Capital Markets analyst Randall Stanicky said the letter was not surprising given the company’s known quality issues.

The regulator also noted that foreign fibers and other contaminants were found on gloves that were supposed to be sterile.

“The incremental implication of the warning letter shouldn’t be overlooked as it may have a material impact to Akorn’s operation going forward, at least for the near term,” Raymond James analyst Elliot Wilbur wrote in a note.

Akorn has faced other setbacks over the past year.

In April, Germany’s Fresenius SE & Co KGaA abandoned its plan to acquire the generic drugmaker, citing misconduct in reporting drug development data to U.S. healthcare regulator.

Akorn said in December its Chief Executive Officer Raj Rai would retire, after the Delaware Supreme Court upheld a lower court’s decision to allow Fresenius to walk away from its over $4 billion acquisition.

The FDA has asked the company to provide a detailed plan with timelines on how it is going to resolve the violations and submit a list of all contamination hazards related to the plant’s aseptic processes and equipment.

Akorn said it would respond to the FDA letter within 15 working days and expects to continue production at the plant.

Failure to correct these violations may result in legal action, besides preventing other federal agencies from awarding contracts, the agency said.

The FDA may withhold approval of pending drug applications that list the facility and may re-inspect the plant to verify that Akorn has completed its corrective actions.

“Resolving issues completely could easily take 18-36 months, which will hold the vast majority of Akorn’s injectable pipeline hostage,” Raymond James’ Wilbur said.

Reporting by Aakash Jagadeesh Babu and Saumya Sibi Joseph in Bengaluru; Editing by James Emmanuel

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