Mumbai / New Delhi / Hyderabad: Ranbaxy Laboratories Ltd will suffer an estimated revenue loss of some Rs300 crore in 2008, or about 5% of its annual sales last year, because of a decision by the US drugs regulator to suspend imports of cheap drugs made at two of the firm’s factories, say industry analysts.
But the bigger loss for the drug firm, India’s biggest by revenues, could be a significant, public blow to its reputation that could also have some halo effect on India’s pharmaceuticals industry, which exports Rs34,000 crore of drugs each year.
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India’s drug quality regulator, drugs controller general of India Surinder Singh, was travelling and his office declined to comment.
But former controller M. Venkateswarlu predicted the US food and drug administration’s, or FDA’s, Tuesday decision would have an impact in India as well. “Though the US quality compliance is always a few steps ahead of Indian standards, the issues like cross-contamination and other safety issues are cause for concern in India too,” he said. “This is a wake-up call for the 108 units that have been approved by the USFDA in India.”
“The Indian industry should now expect tougher inspection by USFDA for all new registrations, and also more stringent routine inspections for existing approved units making the future US exports for Indian drug makers much more difficult,” said Gopal K. Nair, chief executive of Grasp Enterprises India, a Mumbai-based pharma manufacturing consultancy firm. India is home to the largest number of FDA-approved manufacturing plants after the US.
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Meanwhile, Ranbaxy’s shares dropped 6.87% to Rs375.50 a share on the Bombay Stock Exchange.
Ranbaxy, which has been trying to underplay the issue in recent months even as it is in the process of majority control being acquired by Japan’s Daiichi Sankyo Co. Ltd, said the impact on its exports to the world’s largest drug market wasn’t immediately clear.
Ranbaxy said it “is very disappointed in the FDA action as company has responded to each concern FDA has raised during the past two years and had thought that progress was being made.”
On Tuesday, FDA blocked at least 30 generic drugs, including profitable antibiotic and cholesterol drugs from Ranbaxy, citing poor quality in two of its manufacturing sites: Dewas in Madhya Pradesh and Paonta Sahib in Himachal Pradesh. The Indian firm has 30 days to reply to the regulator’s latest letters.
Ranbaxy’s US revenues account for about 24% of its total sales (Rs6,690 crore in 2007). The FDA decision will affect about half of such US sales, especially its key generic or off patent drug brands Zocor, Cipro and Sotret, said the two analysts who didn’t want to be identified because of the sensitive nature of the issue. The analysts’ Rs300 crore revenue impact estimate is for the rest of 2008.
Ranbaxy hinted it would shift production to some of its 25 other manufacturing plants in 11 countries.
“According to the FDA announcement, the warning letters and import alert do not apply to Ranbaxy’s other facilities...,” the company added in a statement. The US facilities make almost 50% of the Ranbaxy products consumed in the US.
Still, a location shift may not be easy for Ranbaxy to bring about in its production schedule because FDAapproval for generic drugs is directly linked to the standards maintained at a particular manufacturing location, according to two regulatory experts. This would mean that Ranbaxy’s US sales will erode until such time quality issues at these facilities are sorted out.
“Ranbaxy could shift the manufacturing process of these (US import banned) 30 drugs to another site but for that too, they will need an approval from the FDA. Plus, it is a time consuming process and could take anything between a month and a year,” said one of these experts, who also didn’t want to be identified.
Responding to a Mint email, a spokeswoman for the European Medicines and Healthcare products Regulatory Agency (MHRA) said it “maintains close links with the FDA and we will take careful note of any developments concerning this issue. At present we have no evidence that any of the products on the UK market (that are manufactured by Ranbaxy) are of unacceptable quality; we have commenced a programme of laboratory testing to provide assurances in this regard.”
She added that the MHRA inspections of Ranbaxy facilities have not identified any issues to date that indicate a significant risk.
A late-2006 inspection of one Ranbaxy site that manufactures products imported into the UK found “some non-compliance” but “these were not of a critical nature and the company’s proposed corrective action was appropriate”, the spokeswoman wrote. “This site is scheduled for a re-inspection by MHRA inspectors in October.”
Analysts don’t expect any impact on the sale of some 34% equity in Ranbaxy for Rs10,000 crore by its promoter Singh family to Daiichi. Daiichi, which concluded an open offer to buy 20% from public investors at a price more than double Wednesday’s share price, said the deal was on track. “We will continue to pursue the terms we agreed with Ranbaxy,” said Satoru Ogawa, Daiichi Sankyo’s spokesman.
Bloomberg contributed to this story.