Drugmaker Dr. Reddy’s Laboratories Ltd on Monday said a law firm representing an investor had filed a class action lawsuit against the company and its executives, including the CEO, for alleged violation of US federal securities law.
The lawsuit alleges that the company made materially false and misleading statements, specifically with regard to a warning letter from the US Food and Drug Administration (FDA) in November 2015, and a letter from the Regulatory Authority of Germany recently, Dr. Reddy’s said in a stock-market disclosure.
The lawsuit seeks damages to compensate the investors for a purported drop in company’s share prices on the New York Stock Exchange between June 2015 and August 2017.
Dr. Reddy’s, however, did not specify the name of the law firm, and said it is yet to be served with the lawsuit.
“The company will respond to the allegations after it has been served with the lawsuit and as and when it may be required to do so by the court,” it added.
Last week, New York-based Rosen Law Firm said it had filed a class action lawsuit to recover damages for Dr. Reddy’s investors under the federal securities laws.
In 2015, US law firms Lundin Law and Khang & Khang had issued a press statement accusing Dr. Reddy’s of misrepresenting facts in connection with the warning letter from the US FDA. The company had then trashed the charges, calling them “advertorial press releases by law firms”.
Indian pharmaceutical companies, which supply about 40% of the generic drugs sold in the US, have come under the FDA’s scrutiny over issues around quality and manufacturing practices.
Dr. Reddy’s had received a warning letter in November 2015 against three of its facilities for violation of good manufacturing practices. In April, the US FDA issued 11 observations after inspecting its manufacturing plant in Hyderabad and two observations after inspecting a unit in Srikakulam, Andhra Pradesh.
The company received another blow earlier this month after its German subsidiary received a communication from the Regulatory Authority of Germany for not renewing the good manufacturing practices compliance certificate for a unit in Bachupally, near Hyderabad.
Other pharma majors from India, including Sun Pharmaceuticals, Cadila Healthcare Ltd and Emcure Pharmaceuticals, have also got warning letters from the US FDA.
The Dr. Reddy’s Laboratories stock fell to Rs 2,049.75 in morning trade, down 1.84%. Its shares had touched a high of Rs 4,285 on October 30, 2015.
Like this report? Sign up for our daily newsletter to get our top reports.