Why Granules India Share Price is Falling

India's pharmaceutical sector has witnessed robust growth, driven by factors such as increasing healthcare spending, a growing population, and a focus on generic drug manufacturing.

This growth has created opportunities for companies to expand their operations and capture market share.

Granules India, a leading pharmaceutical company, has been a key beneficiary of this industry expansion. The company specialises in manufacturing active pharmaceutical ingredients (APIs) and finished formulations. It has a strong global presence, catering to customers in over 50 countries.

The company's stock has had a stellar run, with a gain of 76% in the past year alone. In fact, its share price recently hit a 52-week high on 2 September 2024 as the company received approval for Glycopyrrolate Oral Solution.

However, its stellar rally has come to a halt. The 15% fall in its share price in the past five days, has raised questions.

Let's delve into the underlying reasons behind this sudden reversal.

USFDA Inspection

Granules India is under pressure after the US Food and Drug Administration (USFDA) conducted an inspection of one of its facilities.

The inspection resulted in the issuance of Form 483 with six observations, pointing out various deficiencies. This development has had a direct impact on the company's share price, which has seen a significant drop.

The USFDA issued six observations concerning critical aspects of Granules India's manufacturing processes.

One of the main issues raised was the improper cleaning of utensils and equipment. This indicates lapses in maintaining hygiene and quality standards.

The USFDA also noted that there was a failure to review unexplained discrepancies in the manufacturing process, which is a major quality concern.

Another significant observation was the lack of written responsibilities and procedures for the quality control (QC) unit, which were either not documented or not followed. This raises red flags about the company's adherence to regulatory standards.

Additionally, the inspection revealed that written procedures were not being followed, and the company's buildings and facilities were not being properly maintained to ensure that products met the required quality and purity standards.

These observations can lead to serious regulatory actions, including potential disruptions in production, additional scrutiny, and delays in approvals for new products. For investors, this raises concerns about future revenues and profits, contributing to a sharp drop in Granules India's share price.

When the USFDA flags such issues, it signals to investors that the company could face prolonged challenges in addressing these problems, which can hurt its reputation and financial performance.

What Next?

Granules India has laid out an ambitious strategy to drive its future growth, despite recent challenges.

The company is focused on expanding its core business, particularly in the formulation development (FD) segment. This has already contributed significantly, with the FD share rising to 76% in Q1 FY25, up from 65% in FY24.

This growth in formulations is expected to continue as the company expands its new product pipeline and strengthens its geographical presence, especially in the US market.

The company is also focusing on building its presence in key therapeutic areas such as CNS and ADHD. The investments in its US manufacturing arm, particularly in the CNS and ADHD segments, are already showing promising results.

In the coming quarters, the company expects to increase production capacity and optimise operations, which will further enhance its position in this segment.

In the oncology space, the company is working on expanding its infrastructure. It is set to build a new oncology API manufacturing facility, along with increasing its finished dosage capacity.

The company has made significant progress in developing oncology products and plans to file several products in the next few quarters, with launches expected to start in FY26. This expansion is critical for the company to solidify its position in the oncology segment.

Research and development (R&D) remains a key focus for the company. Granules has increased its R&D spending to Rs 620 million (m) for the quarter, with further investments planned.

The company is working on a wide range of complex and innovative products, including enzyme-based manufacturing technology. This platform is expected to bring global cost leadership and improve manufacturing efficiency, helping Granules stay competitive in the global market.

Overall, Granules India is positioning itself for sustained growth by strengthening its product portfolio, expanding its manufacturing capabilities, and driving innovation through R&D.

These efforts, combined with its focus on key markets like the US, will likely enable the company to overcome recent regulatory challenges.

How Granules India Share Price has Performed Recently

In the past five days, Granules India share price has tumbled 15%. In the last month, it has slipped 16.6%.

The stock price has surged 37% in the 2024. Additionally, it has rallied 76% in the last year.

The stock touched its 52-week high of Rs 724.6 on 2 September 2024 and a 52-week low of Rs 319.2 on 26 October 2023.

About Granules India

Granules India is a pharmaceutical company that manufactures and distributes active pharmaceutical ingredients (APIs), pharmaceutical formulation intermediaries (PFIs), and finished dosages (FDs).

The company is headquartered in Hyderabad, India, and has manufacturing facilities in India and the United States.

Granules India's products are sold in many markets, including the United States, Canada, Latin America, Europe, Asia Pacific, and India.

To know more, check out Granules India factsheet and its quarterly results.

For a sector overview, read our pharmaceuticals sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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