Jubilant Pharma's ratings unaffected by USFDA warning, Fitch says

COIMBATORE: Jubilant Pharma’s credit profile remains unaffected by the US Food and Drug Administration's (USFDA) recent regulatory action at its Roorkee facility in India, Fitch Ratings has said. “The plant makes generic solid-dosage products and has limited contribution to JPL's revenue and earnings due to the Singapore-based company's greater focus on speciality-pharmaceutical segments,” the agency said.
The USFDA issued a warning letter for the Roorkee facility on March 6 after having classified it under ‘Official Action Indicated (OAI)’ status in December 2018. The warning letter suggests that the USFDA may withhold approval of any new products until the company addresses compliance-related issues raised by the agency on manufacturing practices.
JPL believes that the manufacturing and sale of existing products from the facility, which contributed less than 5% in sales, will not be affected. Fitch said that it expects JPL management to take the necessary remediation steps required to address the USFDA's concerns in a timely manner.
JPL has limited dependence on generic formulations as its speciality-pharma segments such as nuclear imaging, contract manufacturing of sterile products and allergy therapy contributed more than 85% of pharma EBITDA (earnings before interest, taxes, depreciation and amortisation) in the financial year ended March 2018 (FY18).
“In our view, JPL's speciality focus helps Areduce its exposure to ongoing pricing pressure in the US generic-pharmaceutical market and supports its credit profile in comparison with larger and more diversified generic-pharmaceutical companies,” Fitch stated.
“The USFDA action underscores Fitch's view of an above-average level of regulatory risk in JPL's business due to its small size and smaller number of production facilities,” it said. “We believe the company's proactive approach in resolving past regulatory issues and a largely satisfactory compliance record since 2014-2015 helps mitigate the risk to an extent. Nonetheless, any further adverse USFDA actions, especially in production facilities catering to speciality segments, may have a greater impact on JPL's credit profile,” the agency said.