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Wockhardt profit dives on U.S., UK regulator demands

Various medicine pills in their original packaging are seen in Ljubljana February 14, 2012. REUTERS/Srdjan Zivulovic/Files

By Aradhana Aravindan and Sumeet Chatterjee

MUMBAI (Reuters) - Wockhardt Ltd (NSI:WOCKPHARMA) faces a year or more to get U.S. and British regulators to end curbs on its shipments of medicines to the two countries, the Indian drugmaker said on Friday after posting its smallest profit in six quarters.

Indian firms, which make nearly 40 percent of generic and over-the-counter drugs for the U.S. market, face more regulatory woes, including a record fine for Ranbaxy Laboratories (RANB.NS), amid increased scrutiny by overseas regulators.

That has included export restrictions imposed on three out of 12 Wockhardt plants, including the key Chikalthana and Waluj factories in western India, in the last six months.

Wockhardt expects its "corrective and remediation plans" to address the regulatory issues to take about six months, which will be followed by an inspection by the authorities, said Managing Director Murtaza Khorakiwala.

"So probably the entire process would take upwards of a year from now. It could be earlier than that, it could take longer than that. The situation is very uncertain," he said on a call with analysts.

Shares in Wockhardt, which makes insulin, painkillers and generics for treating cardiology and neurological disorders, ended 1.1 percent lower at 456.35 rupees in the main Mumbai market, (.NSEI) which fell 0.3 percent. The stock is down about 80 percent from a record high hit in March.

Khorakiwala said the company was expanding capacity at some of its other Indian plants to cushion the impact of the regulatory actions in two of its largest markets.

It is, however, not likely to be able to generate revenue soon from a shift to other plants as the products would require fresh approvals from overseas health regulators, which analysts say may take two-to-three quarters.

Wockhardt reported a net profit of 1.4 billion rupees for the three months ended September 30, compared with 4.5 billion rupees a year earlier. Revenues fell 11 percent to 12 billion rupees, the company said in a statement on Friday.

"The financial results are not something the market is looking at. The market is more focused and concerned about the regulatory actions," said Jagannadham Thunuguntla, head of research at SMC Global Securities.

"It's not a question of a project or contract loss, but it's a question of credibility now."

Wockhardt has said a U.S. import alert at its Waluj factory, imposed in May, could cost it $100 million in annual sales.

Its factory in Chikalthana, India, was earlier this month hit by the British drug regulator's curb on imports from the plant over manufacturing deficiencies.

The U.S. Food and Drug Administration has also raised concerns with Wockhardt about the plant, and the company said it has responded and has yet to hear back from the agency.

Wockhardt has said it has taken measures to improve quality oversight at its factories, including the appointment of a new quality chief, hiring an outside consultant and training staff. (Additional reporting by Abhishek Vishnoi; Editing by Jeremy Laurence, Tony Munroe and Patrick Lannin)