US FDA Warning Letter Puts Pressure on Granules India’s Gagillapur Facility

Regulatory Setback May Delay Product Approvals but Operations Remain Unaffected

Granules India Ltd has received a Warning Letter from the US Food and Drug Administration (FDA) for its Gagillapur facility, following an inspection in August 2024. The pharmaceutical company disclosed the development in a regulatory filing on February 27, stating that while the facility remains classified as “Official Action Indicated” (OAI), the FDA has not signaled further escalation.

Although this regulatory action may lead to a temporary delay in pending product approvals, the company assured that its current manufacturing and distribution operations remain unaffected.

FDA Concerns and Granules India’s Response

The Warning Letter focuses on four key concerns from the initial six observations noted in the FDA’s Form 483. Granules India stated that it has made significant progress in addressing these concerns, with most corrective actions completed and the remaining ones on track.

The company has been:

• Providing monthly updates to the FDA.
• Voluntarily pausing production and dispatches in September 2024 to conduct a risk assessment.
• Implementing a comprehensive remediation plan, including Corrective and Preventive Actions (CAPAs).
• Engaging independent consulting firms for compliance oversight.
• Continuously testing products to ensure regulatory adherence.

Granules India has committed to responding to the FDA within the stipulated timeframe and has sought a meeting to demonstrate its compliance efforts.

Impact on Business and Market Performance

Despite this regulatory hurdle, Granules India remains optimistic about long-term growth, citing:

1. New product launches from its GPI facility in the US.
2. Capacity expansion at Genome Valley.
3. Increased production in Europe.
4. An expanding oncology pipeline from Unit V.

However, the company’s financial performance has been under pressure:

• Net profit declined by 6.4% YoY to ₹118 crore in Q3 FY25.
• Revenue fell 1.5% YoY to ₹1,137.6 crore.
• EBITDA dropped 8% YoY to ₹230.2 crore, while margins slipped from 22% in Q3 FY24 to 20.2% in Q3 FY25.

Following the news, Granules India’s stock closed at ₹507 on the NSE, down 1.52% from the previous close. The company’s shares have already declined 14% since the beginning of 2025, reflecting investor concerns over regulatory risks and earnings pressure.

Conclusion: Regulatory Uncertainty Looms, but Long-Term Growth Prospects Remain

While the US FDA Warning Letter presents a short-term challenge for Granules India, the company’s corrective measures and ongoing compliance efforts could mitigate long-term risks. Investors will closely watch:

• Granules’ engagement with the FDA and remediation progress.
• The timeline for resolving compliance issues at the Gagillapur facility.
• The impact on future product approvals and revenue growth.

Despite regulatory headwinds, Granules India is banking on geographical expansion, new product launches, and increased production capacity to drive future growth. However, investor sentiment may remain cautious until the FDA concerns are fully resolved.