Pfizer to shutdown Chennai, Aurangabad plants, may impact 1700 employees

Global pharma major Pfizer Inc. has said that it will be shutting down two plants in India. The two plants located at Irungattukottai and Aurangabad employs a total of 1,700 people. According to media sources, the company is looking to shut down the plants in early 2019.

During its operational days, the Irungattukottai plant manufactured generic injectables, while the Aurangabad plant supported Irungattukottai operations by supplying APIs. Both the sites were also suppliers to Orchid Pharma which went bankrupt owing to its high debt after aggressively infusing capex. Regulatory issues at Pfizer’s injectable plant in Kansas also contributed to the shutdown of these plants.

Pfizer Inc. has said that it is shutting down these plants as it has seen a long-term decline in the products manufactured from these sites, and hence, it has become unviable to continue to be operational from these sites.

Both these sites were earlier part of Orchid Pharma. Hospira acquired the Irungattukottai plant in December 2009, while the Aurangabad plant was acquired in 2012. Both these sites became part of Pfizer after it acquired Hospira for $17bn in 2015. The Kansas plant also became part of Pfizer with the acquisition of Hospira.

The Irungattukottal plant had been facing several regulatory issues since 2011. The plant received a USFDA warning letter in 2013 and saw repeat observations again in 2018. Pfizer had suspended work at Irungattukottal in November 2016. The fate of the Aurangabad plant depended upon the Irungattukottal plant due to the production arrangement, and hence, Pfizer has now decided to shut down both the plants.

The Kansas injectable plant, under Hospira, had also faced several regulatory issues and received a warning letter in 2017. Following this, in December 2018, the plant also received a form 483 with repeat observations.

Pfizer’s decision to shut down Indian plants will not have any impact on the listed Indian subsidiary Pfizer Limited as it is engaged in domestic formulations.

A key lesson for the pharma sector is not to downplay the significant impact that regulatory non-compliance can have on operations. Companies such as Alkem Laboratories (saw repeat observations at Daman), Lupin and Dr. Reddy’s Lab (outstanding warning letters), IPCA, and Wockhardt (outstanding import alert), in particular, should be carefully looked into. We already know about Sun Pharma’s struggle to get USFDA’s clearance for Halol over 2014-2018.

Lately, Indian pharma companies have been increasingly receiving EIRs and clearing USFDA audits, indicating that compliance has gone up. Investors, however, should always be wary of companies which have shown a continuous track record of non-compliance with regulatory agencies. Repeat observations and warning letters should be taken extremely seriously by companies, their management, and investors, which has been emphasized enough by Pfizer’s shutdown of the two abovementioned plants.