Unichem Labs Shares Drop 5% on EU Fine Demand Notice

The European Commission’s demand notice, issued from Brussels, targets Unichem Laboratories and its wholly owned subsidiary Niche Generics Ltd for alleged violations of European Union competition legislation. The case centers on a 2005 patent dispute settlement between Unichem’s subsidiary and Servier Group concerning Perindopril, a cardiovascular medication used to treat hypertension and heart failure. The €19.49 million fine breakdown reveals a principal penalty of €13.97 million and accumulated interest of €5.52 million, indicating the long-standing nature of the regulatory proceedings.

According to the company’s exchange filing, Unichem had already remitted €2.79 million in installments, leaving a substantial outstanding balance of €16.70 million. While the principal amount had been previously recorded on the company’s financial records, the interest liability of €5.52 million will now be recorded in the fiscal year 2025–26, creating an additional financial burden that investors clearly found concerning given the immediate stock price reaction.

The market response was swift and negative, with Unichem Laboratories shares tumbling nearly 5% during Friday’s trading session before settling 2.27% lower at Rs 495.30 on the National Stock Exchange by 1:20 pm. This significant decline reflects investor concerns about the financial impact of the fine on the company’s balance sheet and future earnings potential. The timing of the demand notice creates additional uncertainty as the company must now allocate substantial resources to address both the financial obligation and potential legal challenges.

The penalty comes at a time when pharmaceutical companies face increasing regulatory scrutiny globally, particularly regarding competition practices and patent settlements. For Unichem, which operates six manufacturing facilities across India with certifications from reputable international organizations including the US FDA, UK MHRA, and European regulatory bodies, this EU action represents a reputational challenge beyond the immediate financial impact.

Unichem Laboratories has indicated that it is reviewing legal alternatives in cooperation with its law firm, suggesting the company may challenge the European Commission’s decision. The complexity of EU competition law and the fact that the underlying events date back nearly two decades provide potential grounds for legal arguments regarding the appropriateness of both the principal penalty and the substantial interest component.

The case highlights the long-reaching arm of EU competition enforcement, even for companies based outside the European Union. For Indian pharmaceutical firms like Unichem that have achieved international certifications and operate in global markets, this development serves as a reminder of the importance of compliance with international regulatory frameworks. The outcome of Unichem’s legal review and any subsequent appeals could set important precedents for how EU competition authorities handle cases involving non-EU companies and historical patent settlements.

As Unichem navigates this challenge, investors will be watching closely how the company manages this financial obligation while maintaining its operations across therapeutic areas including gastroenterology, cardiology, diabetology, and neurology. The resolution of this matter will likely influence the company’s financial performance and stock valuation throughout fiscal year 2025-26 as the interest liability is formally recorded and any legal proceedings progress.