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Cadila Healthcare Gets Import Alert by WHO for Bad Manufacturing Practices


Cadila Healthcare was slapped with a World Health Organization (WHO) Notice of Concern (NOC) on the 29-Jan-15 (Note date: It’s three months ago) for the serious observations for not maintaining Good Manufacturing Practices (GMP) at the company’s Moraiya manufacturing facility in relation to 2 vaccines i.e. VaxiRab N and Lyssavac N.

Cadila Logo

When the investigation revealed these critical issues (26th to 30th October, 2015) – the company immediately stopped production, conducted an internal investigation and initiated a voluntary recall of all the batches of Lyssavac-N (Anti-rabies Vaccine) manufactured after April 2015.

WHO has said that it will withhold prequalification of all new products manufactured at this site within a reasonable time frame. The suspended manufacturing activities for vaccines and biologicals at this site will only resume after acceptable CAPAs have been submitted, assessed and confirmed through an onsite inspection to have been effectively implemented. If the observations are not corrected within the given time period, WHO will suspend the products listed as prequalified from the Moraiya manufacturing site.

Cadila Healthcare WHO Letter

Here are some of the violations highlighted in the Notice of Concerns which the company is yet to resolve and has time until the end of December, 2016 to resolve this post which a satisfactory inspection activity would lead to lifting of the NOC. The points below do not contain the additional actions/ activities recommended by the WHO in relation to Good Manufacturing Practices (GMP):

  1. The Cadila QC personnel falsified Quality Control (QC) records and reports when the test resulted in a positive contamination and the QC personnel captured the result as a negative contamination. This is equal to certifying a contaminated product as an uncontaminated one. This highlights a couple of loopholes in the process:
    1. Physical QC reports are not verified by the Quality Control head
    2. Absence of a Quality Assurance process in place
    3. Human contamination due to the absence of a system driven process
    4. Improper reporting leads to absence of a root cause analysis and further investigation and documentation in relation to the contamination.
  • Here are the pending (BASIC) actions/ activity to be completed before the end of the year (activities already completed have been excluded here):
    • Protocol for Authentication of data i.e. tracing the accuracy, completeness and reliability of the data
    • Corporate Policy on Data Integrity
    • Quality Assurance Process in QC Microbiology – Process and Implementation
    • Review of all the documents that the fired microbiologist handled
    • Independent Third Party Audit
  1. Cadila currently does not have a maker-checker concept in place for the Environmental Monitoring of clean rooms:
    1. Absence of data to prove that the Environmental Monitoring plates and filters have not been contaminated before their installation
    2. Absence of a process in place wherein the person installing the systems is not the same as the person verifying whether the installation has been done as per the laid down guidelines.
  • Here are the pending (BASIC) actions/ activity to be completed before the end of the year (activities already completed have been excluded here):
    • Air Sampling – a sterilized lid needs to be used instead of sanitization.

Other issues include:

  1. Audit checklist maintained by the company was not in the required format as the checklist did not contain the company’s logo, header or footer. Additionally for the contracted laboratory (Venky’s India) the audit checklist was filled in the by the contractor and neither by the company nor an independent audit entity.
  2. Absence of management review meetings in place
  3. Change control handling was deficient
  4. Absence of Deviation Categorization systems in place leading to a weak Deviation Management process
  5. Deficient systems and processes in the manufacturing facility DS I and Vaccine R Buildings including Environmental Monitoring.

Here is what the company said:

“There have been some reports regarding the pre-qualification plant inspection of the vaccines facility by WHO in terms of the possible linkage with our oral solids and injectable facilities at the Moraiya manufacturing complex.

In this regard, we hereby inform that we have a separate manufacturing facility for vaccines and this does not form a part of the oral solids and injectable facilities at Moraiya, which cater to the US markets. Regarding the anti-rabies vaccine manufactured at the vaccine facility we have already responded to WHO and have been implementing remedial measures. There is no significant impact on the business and there were no exports of this product to the US. Thus it does not impact our US business”

Our View:

The company has already initiated the voluntary recall of the 64 final bulks/ final finished batches if the non-prequalified VaxiRab N vaccine and Prequalified Lyssavac N vaccines ready for local sales as well as to countries including Angola and Georgia.

The impact is that all 

Some analysts estimate a revenue hit to the extent of Rs. 35 Crore and this is not the first time the company’s plant has come under fire. Earlier in January, the US FDA issued warning letters to the company for both its Moraiya and Ahmedabad facility. It would be interesting to see if the UK MHRA and other International Agencies also impose such bans and put the company’s manufacturing facility on a watch list. (remember the January US FDA warning letter led to a huge drop in the share price).

Cadila Healthcare Stock Price

While we do not have a call on the company, it’s important to note that the Moraiya facility the WHO has banned imports from, is not the same buildings as the one supplying to the US. The US building has earlier received warning letters from the US FDA already, but those are separate. The immediate damage is that the company loses less than 1% of revenues (Cadila makes 10,000 cr. in revenues per year, and the loss due to this directly is 35 cr) which is peanuts.

But the larger issue is: how the heck is a company like Cadila getting a
way with false data, and a badly designed quality system? How can drugs that test positive for contamination be recorded as uncontaminated? Obviously this is a failure of the company, not just the tester involved. This brings into question the drug testing techniques they currently employ anyhow; and if the culture of doing such things is not addressed, there will only be more such alerts in future. 

Here is what others had to say about this:

Disclosure: Capital Mind had earlier recommended Cadila Healthcare as part of a momentum portfolios, but at the moment it is not a stock in any recommended portfolio. The authors at Capital Mind  do not own it in their personal/family accounts, and the company does not own any position in the company’s stock. There is no business relationship between the companies mentioned and Capital Mind.



Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion. 

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

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