Mumbai: Three manufacturing facilities of Dr Reddy’s Laboratories Ltd facing compliance issues with the US Food and Drug Administration (USFDA) will be re-inspected by the US regulator during the current quarter ending March, the company said in a presentation at the J.P. Morgan Annual Healthcare conference in San Francisco on Tuesday.
Dr. Reddy’s, India’s second-largest drug maker, received a USFDA warning letter on 5 November, 2015, regarding deviations from current good manufacturing practices (cGMP) at its active pharmaceutical ingredients (APIs) plants at Srikakulam, Andhra Pradesh, and Miryalaguda, Telangana, as well as violations at its oncology formulation facility at Duvvada in Visakhapatnam, Andhra Pradesh, following an inspection by the agency.
After receiving the warning letter, the Hyderabad-based pharmaceutical major submitted five responses to the US drugs watchdog at regular intervals, giving updates on the remedial work undertaken at the three plants. The company also hired an independent consultant to resolve the compliance issues at these units.
“All the commitments as part of warning letter response have been completed. Re-audit has been scheduled for Q1 of 2017,” the company said in the presentation.
A company official indicated that re-audit of the three plants by the USFDA will be held during February-March.
The warning letter had an adverse impact on the company’s earnings as new product approvals in the US from these sites were put on hold. The US market accounted for nearly half of Dr. Reddy’s total revenue of Rs15,470 crore in the year ended March 2016.
Manufacturing facilities of several Indian drug makers, including Sun Pharmaceutical Industries Ltd, Cadila Healthcare Ltd, Lupin Ltd, Cipla Ltd, Wockhardt Ltd, and Ipca Laboratories, have come under the USFDA’s scrutiny over the past few years for violations of norms.
Sun Pharma’s unit at Halol in Gujarat, which had received a warning letter in December 2015, was re-inspected in late- November 2016 but the USFDA again found lapses in manufacturing practices, disappointing investors who were expecting the plant to be cleared. After this episode, investors will be keenly watching for the outcome of the re-audit at Dr. Reddy’s facilities.
Along with the USFDA inspection timeline, Dr. Reddy’s has, in its presentation, charted out its growth strategy for the coming few years, which focuses largely on complex generics and specialty products in the US, as well as biologics.
The company has 83 abbreviated new drug applications awaiting the USFDA’s approval, which includes complex oral solids and complex injectables, ophthalmic products and dermatology products.
During fiscal years 2018-21, Dr. Reddy’s expects to commercialize a number of complex generics and over-the-counter brands in the US, ramp up its biosimilars business in India, and launch biosimilar Reditux, used to treat certain types of cancer and rheumatoid arthritis, in emerging markets.
During FY22-25, the company plans to launch specialty products in the US, expand in new markets like China, Japan and Columbia, and introduce differentiated proprietary products and biologics in regulated markets such as the US and EU.
The company is optimistic about its biologics portfolio and expects revenue of $150 million to $200 million from sales of these products in emerging markets by FY20 (2019-20). Contribution of biologics from emerging markets is expected to reach $300 million to $400 million by FY25.
Dr. Reddy’s has a portfolio of six existing biologic drugs, five products in clinical development and five in early-stage development. In 2012, the company had partnered with Merck Serono to co-develop its biosimilars portfolio and the pact covers co-development, manufacturing and commercialization of the compounds around the globe, with some specific country exceptions.
The company is likely to commercialize a few biologics in the regulated markets in the coming years and expects profits from these products in the range of $150 million to $200 million by FY25. The operating margin for the biologics business, which is currently negative, is expected to be 35% by FY25.
The pharma company also expects $500 million in revenue from sales of proprietary products, mainly in the dermatology and neurology segment, in the US market by FY22. Dr. Reddy’s has launched two proprietary products—Zembrace SymTouch injection and Sernivo spray--in the US this fiscal and has a pipeline of about 16-17 products.