US Food and Drug Administration's action didn't dent Jubilant Pharma's ratings: Fitch Ratings

Jubilant Pharma's credit profile remains unaffected by the US Food and Drug Administration's (USFDA) recent regulatory action at its Roorkee facility, Fitch Ratings said on Wednesday. The current rating of the company is 'BB-', with stable outlook.

According to Fitch, the 'BB' rating indicates an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments. The rating agency said it expects Jubilant Pharma Ltd's (JPL) management to take timely measures to address the issues raised by the US health regulator.

The plant makes generic solid-dosage products and has limited contribution to JPL's revenue and earnings due to the Singapore-based company's greater focus on specialty-pharmaceutical segments, Fitch Ratings said in a statement. The USFDA had issued a warning letter for the Roorkee facility on March 6 after classifying it under the official action indicated status in December 2018, it added.

JPL believes that the manufacturing and sale of existing products from the facility, which contributed less than 5 per cent in sales, will not be affected, Fitch Ratings said. "Fitch expects JPL management to take the necessary remediation steps required to address the USFDA's concerns in a timely manner," it added.

JPL has limited dependence on generic formulations as its speciality-pharma segments - such as nuclear imaging, contract manufacturing of sterile products and allergy therapy - contributed more than 85 per cent of pharma Ebitda in the financial year ended March 2018, the statement said. "In our view, JPL's speciality focus helps to reduce its exposure to ongoing pricing pressure in the US generic-pharmaceutical market and supports its credit profile in comparison with larger and more diversified generic-pharmaceutical companies," Fitch Ratings said.

The USFDA action underscores Fitch's view of an above-average level of regulatory risk in JPL's business due to its small size and smaller number of production facilities, it added. "We believe the company's proactive approach in resolving past regulatory issues and a largely satisfactory compliance record since 2014-2015 help to mitigate the risk to an extent. Nonetheless, any further adverse USFDA actions, especially in production facilities catering to speciality segments, may have a greater impact on JPL's credit profile," Fitch Ratings said.

(With inputs from agencies.)