Dr. Reddy's Shares Decline After Chinese Authorities Halt Atomoxetine Hydrochloride Capsule Imports

Dr Reddy's Laboratories faced a sharp decline in its stock price after China's National Medical Products Administration (NMPA) suspended the import, sale, and use of its Atomoxetine Hydrochloride capsules. The suspension, effective from August 30, 2024, was prompted by a remote inspection that concluded the company's manufacturing practices did not align with China's "Good Manufacturing Practice for Drugs" standards, revised in 2010.

By 10:30 am, Dr Reddy's shares had dropped by 1.4% to Rs 6,937 on the National Stock Exchange (NSE). The Indian pharmaceutical giant disclosed that the NMPA's decision followed a recent evaluation of the production facility where Atomoxetine Hydrochloride capsules, a medication used for treating Attention Deficit Hyperactivity Disorder (ADHD) in both children and adults, are manufactured.

Additionally, the National Drug Joint Procurement Office of China responded to the NMPA's decision by cancelling the "won" status of Dr. Reddy's Atomoxetine Hydrochloride capsules, effectively blacklisting the company. This action prevents Dr Reddy from participating in China's national centralized drug procurement activities from August 30, 2024, to February 28, 2026.

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Compounding the company's woes, Dr Reddy's Laboratories received an order from the Indian GST Authority on August 30, demanding Rs 13.54 crore in taxes for the financial years 2019-20 and 2020-21. The tax authority claims that the company had excessively availed Input Tax Credit (ITC). Dr. Reddy stated that it is evaluating its legal options and may appeal the order with the appropriate appellate authority.

The suspension by Chinese authorities represents a significant setback for Dr Reddy's, as it curtails its access to one of the world's largest pharmaceutical markets. The listing on China's "Violation List" could impact the company's revenue and market strategy, given that it will not be able to participate in China's centralized drug procurement process for nearly two years.

Analysts and investors will be closely monitoring the developments as Dr Reddy navigates regulatory challenges both in China and in India. The company's response to these regulatory hurdles will be crucial in determining its future market position and financial performance.