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Habil Khorakiwala, 70, the chairman of Wockhardt, is getting a sense of déjà vu. Within months of getting out of a financial crisis and fighting a prolonged court battle with foreign bond investors, he’s readying for another fight. This time his opponent is the US Food and Drug Administration, which charged Wockhardt last week of hiding crucial information on its India plant which supplies medicines to US patients.
In a re-run of the 2008-09 crisis, Wockhardt’s stock investors are jettisoning the ship. Its share price fell 60 per cent in the past three months from an all-time high of of Rs 2,100 on March 2012. Khorakiwala, who owns 74 per cent of Wockhardt, saw his own personal wealth falling by Rs 11,700 crore in these three months. “This is certainly another crisis for the company and we are taking all steps to fight it,” said a company insider.
They say soon after the US FDA sent a scathing warning letter on July 18, Khorakiwala flew there to meet their officials. Meantime, investors sold Wockhardt shares and these fell 30 per cent to close at Rs 660 on Wednesday. Soft-spoken Khorakiwala, a Harvard graduate, is known in business circles here as extremely well-networked and hardworking. He fought off the previous financial crisis by selling part of his hospital chain to Fortis and the nutrition business to Danone of France.
In the multinational versus poor patients debate, he sides with the latter, saying when it comes to saving lives, pharmaceutical companies should let go of profits. In an interview in March, Khorakiwala said Wockhardt would be a billion-dollar company and aim to earn almost 80 per cent of its revenue from abroad, as its US operations alone were growing at a healthy rate of 45 per cent yearly.
“A lot of products are going off-patent in the US and we will continue to focus on the anti-infective market,” he said. This was worth $100 billion in revenue globally and Wockhardt was aiming to get a slice. "In the last 10 years, we have transformed from an Indian company to a global company,” he’d said.
Now, with the FDA’s scathing warning notice, many of these plans will be delayed significantly. In its letter, the FDA said Wockhardt’s Waluj facility in Maharashtra failed to prepare batch production and control records for each batch of drug products manufactured and also failed to ensure that laboratory records included complete data derived from all tests necessary to assure compliance.
So, analysts are already writing off the company for the next two years. “We think the speed with which Wockhardt is able to resolve these issues with the FDA is going to be critical (unlikely before FY15, in our view),” says a Macquarie report on the company dated July 23.
Interestingly, just few months ago, Khorakiwala was celebrating the highest rise in market capitalization in calendar 2012. His family threw a generous birthday party as he turned 70 this year which was attended by Mumbai's who's who. His own wealth grew by 10,000 crore in 2012.
But now with a prolonged battle with FDA now on cards, Khorakiwala may not end 2013 with such a high note.
