The Indian pharmaceutical major Dr Reddy’s laboratories has received a warning letter from the US Food and Drug Administration(US FDA) over the quality control issues at three of its manufacturing facilities.

This comes even after the company said it has been addressing the initial observations made under Form 483 by the US FDA inspectors in respect of these facilities earlier this year.

Warning letters are issued only for violations of regulatory significance and those violations may lead to enforcement action such as import alerts if not promptly and adequately corrected in voluntary compliance with the US drug laws by the companies.

The US FDA cited two of the company’s active pharmaceutical ingredient(API) facilities, one at Srikakulam in Andhra Pradesh and the other one at Miryalaguda in Telangana and an Oncology formulation manufacturing facility at Duvvada near Visakhapatnam in Andhra Pradesh.

This was the first time the company, which is the country’s second largest generics drug maker, has been facing a regulatory scrutiny of this magnitude involving three of its facilities after it had received an import alert on its Mexican chemical plant way back in July 2011.

Any similar action will have a much larger financial impact on the company as these API facilities alone account for 10-12 per cent of the total sales according to the company’s earlier admission . Dr Reddy’s API business caters to leading innovator and generic companies across the US, Europe, Latin America, Japan, Korea and other emerging markets while most of these products are consumed in house in the formulations manufacturing by the company.

“They want us to tell the management strategy and action plan with respect to the corrective steps. The letter does not talk about any precipitative action,” Saumen Chakraborty, chief financial officer of Dr Reddy’s said.

According to him, the the company management has been giving periodic updates to the US FDA on the corrective steps ever since it had received the 483 observations on these facilities. “Maybe our remedial actions had addressed a quite a few of these observations while on some they may still feel our actions are inadequate,”he added.

The company has also been making efforts to shift the products(site tranfer) manufactured in the two facilities to other sites while working on the corrective actions in line with the US FDA observations, according to him.The oncology facility, which was also cited in the latest warning letter, was at the technology transfer stage and the manufacturing of injectables were yet to start from here.

“It may take 1-2 years to make the corrective steps as required by the US FDA at these facilities. The impact of the API facilities would depend on how quickly the company could fix the problem,”Sarabjit Kour Nangra of Angel Broking said. The Oncology formulations facility, which was set up a year ago, will not have any significant impact on the revenues, according to her.

The latest regulatory action follows after the US FDA had conducted inspections of these facilities between November 2014 and February 2015. First the company had received 483 observations from the inspectors, notifying the company of certain objectionable conditions. Two of the company’s clients have recently received rescinding orders from US FDA pertaining to a couple of drug approvals as they were supposed to come the Srikakulam facility.

“We take quality and compliance matters seriously and stand by our commitment to fully comply with the cGMP quality standards across all of our facilities. We will respond with a comprehensive plan to address these observations within the stipulated time-frame of 15 days. We will continue to actively engage with the agency to resolve these issues and we have also embarked on an initiative to revamp our quality systems and processes, as an organization-wide priority,” said G V Prasad, co-chairman and chief executive officer of Dr Reddy’s said in a statement.