Mumbai: Drug maker Ranbaxy Laboratories Ltd has again run foul of the US drugs regulator for violating norms of good manufacturing practices at a US factory owned by its subsidiary Ohm Laboratories Inc.

Ranbaxy, India’s largest pharmaceutical firm by revenue, told the Bombay Stock Exchange on Wednesday that Ohm Laboratories received a warning letter dated 21 December from the US Food and Drug Administration (FDA) for its liquid manufacturing facility in Gloversville, New York, one of its three US-based factories.

Graphics: Ahmed Raza Khan / Mint

Ranbaxy, a subsidiary of Japanese drug maker Daiichi Sankyo Co. Ltd, has been struggling to respond adequately the previous two warning letters issued by the FDA in September 2008 for similar deviations at its factories in Dewas in Madhya Pradesh and Paonta Sahib in Himachal Pradesh.

The FDA had blocked the import of 30 generic drugs from these two facilities to the US. In February, the regulator invoked its application integrity policy (AIP) to the Paonta Sahib plant, halting the review of all pending drug applications from this facility. Ranbaxy begun expanding its manufacturing units at Ohm Laboratories to cater to its US business after these warning letters were issued.

Ohm Laboratories has three plants, two of which were inspected by the FDA earlier this year and were found to adhere to rules. “These plants manufacture most of the products supplied in the US market," Ranbaxy said in a statement. According to a company spokesperson, the US facilities supply products only to that country’s market.

An analyst familiar with the company’s US operations said that the Gloversville facility had marginal or single-digit contribution to Ohm Laboratories’ US sales.

“Gloversville contributes less than 10% of the US sales. So, that means this will affect less than 3% of the overall revenues. Ranbaxy has a handful of products from this site. So the financial impact is not that grave," the Mumbai-based analyst with a foreign brokerage said on condition of anonymity as he was not allowed to speak on the matter.

“But there will be a sentimental impact on the stock due to the company history of warning letters but that will stabilise. The stock might even crash, but it will come back again," he added.

The company’s revenue loss in the US in the three quarters ending September is almost 40% compared with the year-ago period owing to the US import alert and invoking of the AIP.

Local woes

In India, too, the company has been plagued by declining growth in 2009 after Daiichi Sankyo took over management control.

In the three months ended 30 September, Ranbaxy posted a stand-alone net profit of Rs13.76 crore on sales of Rs1,352.4 crore.

While the company posted a year-on-year growth of 2% compared with an industry average of 14% in the September quarter, its show has been worse in the fourth quarter so far with a record drop of 8.8% in sales in November.

This has pushed Ranbaxy’s market share down to fourth position after Cipla Ltd, Piramal Healthcare Ltd and GlaxoSmithKline Pharmaceuticals Ltd.

Domestic sales account for 20% of the Delhi-based firm’s sales. It has a dominant position in medicines that treat infections, pain and cardiac ailments.

While anti-infectives, which contribute 37% to Ranbaxy’s local revenue, grew only 4.5% in the last six months compared with an industry growth of 11%, sales grew 20.1% and 13.4% in the pain killer and cadiology segments that contributes 10% and 13%, respectively, to its local sales.

According to drug retail market data released by PharmaTrac, a pharma market research service by All India Organisation of Chemists and Druggists Ltd and Pharma Softtech Awacs, Ranbaxy has been an exception in the market, which has seen all top companies posting high single-digit to double-digit growth in the past six months.

A PharmaTrac release last week stated that “all top companies, except Ranbaxy, have reported a growth (in November), and six of the top 10 companies have also reported higher than the average industry growth of 8.7%".

The companies that posted higher growth in November included Cipla, Sun Pharmaceutical Industries Ltd, Lupin Ltd, Mankind Pharma Ltd and Aristo Pharmaceuticals Ltd.

Sector analysts say that the company has not been aggressive in new launches in the local market while others such as Piramal, Lupin and even foreign drug makers such as Aventis Pharma Ltd had introduced several products.

A company spokesman said his company does not respond to market reports.

Two analysts from a Mumbai-based brokerage said Ranbaxy’s domestic sales was affected mainly because of a change in focus after the change in the management. The company has been focusing more on other emerging markets as it faced severe loss in revenue in the most important US market, they said on condition of anonymity.

Rajesh Vora, a pharmaceutical sector analyst with ICICI Securities Ltd, said the domestic market was not a critical part in Ranbaxy’s consolidated revenue.

“Since the local market is stable and contributes only about 20% to its total income, a drop in sales here may not make a big difference," he said.

Ranbaxy shares fell 1.55% to close at 520 on a day when the BSE rose 0.75% to close at 17360.6. Since March, the stock has risen some 285.22%, the second best among listed drug makers. The bourse’s benchmark Sensex has risen by 112.74% during this time.