On Monday, shares of Aurobindo Pharma fell over 16 percent to an intraday low of Rs 489.40 after the US FDA rescinded the 'Voluntary Action Indicated' (VAI) status on one of its plants on 21 February.
The Food and Drug Administration's (FDA) decision to rescind the VAI on the company's Unit-IV in Hyderabad comes within 3 days of issuance.
Earlier, on 18 February, Aurobindo said that it had received the Establishment Inspection Report with VAI status, which enables a pharma company to undertake corrective action. Shares of the company rose over 21 percent on the following day with a spurt in trading volume of the stock.
Considering the sudden surge in share price last week, it is possible that short-term traders may have withdrawn their position on the stock on Monday, disappointed by the development, causing the equally sharp fall in value.
In a report, Kotak Securities said that the rescind of VAI status could mean that there is now a high risk of an official action indicated (OAI) for the unit.
The company's Unit-IV in Hyderabad is a key sterile facility as its is expected to account for $170 million or 10 percent of its estimated sales for the financial year 2019-20, and has the largest number of filings pending approval for the firm at 47 ANDAs (of total 153 pending ANDAs, of which 15 are expected to be launched in FY2021), the brokerage further noted.
Kotak Securities also lowered the stock's fair value back to Rs 540 per share from Rs 620.