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 The U.S. Food and Drug Administration's sanction is
the latest in a series of regulatory rebukes for India's largest
drugmaker by revenue since Japan's Daiichi Sankyo Co Ltd. took
control of the company in 2008, and deals a further blow to the $12
billion Indian drug industry.
The FDA said Ranbaxy is prohibited from making and selling
pharmaceutical ingredients from its facility in Toansa in the
northern state of Punjab, "to prevent substandard quality products
from reaching U.S. consumers."
The FDA ban on Ranbaxy's Toansa plant followed an inspection
completed on January 11.
The U.S. regulator had previously barred products from the company's
facilities in Paonta Sahib, Dewas and Mohali in India as part of a
2012 consent decree designed to ensure compliance with good
manufacturing practices.
Indian drugmakers are among the world's biggest producers of cheap
generic medicines. Demand for generics is on the rise as the United
States battles rising health-care costs and as more big-selling
branded drugs go off-patent in western markets.
But the rise in demand for generic drugs has led to closer
regulatory scrutiny and sanctions imposed on top drugmakers
including Ranbaxy and Wockhardt Ltd., which has been hit by import
bans from both the FDA in the United States and Britain's drug
regulator.
The latest ban will hit Ranbaxy's U.S. business, its largest export
market, bringing in roughly 40 percent of total sales, by cutting
the supply of raw ingredients for making drugs at its Ohm
Laboratories plant in New Jersey, analysts said.
"I don't think anything is possible in the next one year at least,"
said Surajit Pal, a sector analyst with brokerage Prabhudas
Lilladher, referring to new launches and a possible turnaround in
operations.
He said the company could report operating loss from the March
quarter as regulatory and other costs rise and new launches get
delayed.
Ohm is the only Ranbaxy facility that makes generics for the U.S.
market after shipments from its three FDA-approved plants in India
were banned by the U.S. regulator over quality concerns. Ohm gets
nearly three-quarters of its ingredients from the Toansa plant,
according to some brokerage estimates.
Ranbaxy has been planning to launch couple of high-yielding generic
drugs in the United States, including a version of Novartis AG's
hypertension drug Diovan, with ingredients from Toansa, a source
with direct knowledge of the matter said.
Ranbaxy shares fell as much as 19.8 percent on Friday to their
lowest level in nearly four months. The stock is headed for its
worst fall since September 16 last year when a third company plant
was hit by the FDA import ban.
Shares in Daiichi Sankyo, which paid $4.2 billion for control of
Ranbaxy in 2008, ended down 6.4 percent.
LAUNCH DELAY
Ranbaxy may have to outsource the ingredients for making generic
drugs, resulting in higher costs and delays and hurting its profit
margins, analysts said. The FDA action could also
delay the launch of a generic version of AstraZeneca Plc's
blockbuster heartburn and ulcer pill Nexium in the United States,
they said.
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Ranbaxy said it was disappointed with the FDA's action and that
it had voluntarily suspended shipments of products from the Toansa
facility to the U.S. market when it received the inspection
findings.
"This development is clearly unacceptable and an appropriate
management action will be taken upon completion of the internal
investigation," Chief Executive Arun Sawhney said in a statement.
The company did not immediately respond to a request for comments on
the financial impact of the FDA's decision.
Daiichi Sankyo said in a statement that it was "confirming the
situation with Ranbaxy" and would issue a statement when it had more
details.
EXTREMELY NEGATIVE
Ranbaxy has been a major supplier of drugs, especially generics, to
the United States and this latest enforcement action means most
Ranbaxy products are now banned there.
Ranbaxy's other major markets are India, its No.2 sales generator,
as well as Europe and Africa. Indian drugmakers' plants that do not
ship to the United States are not regulated or inspected by the FDA.
"Almost like the worst-case scenario for Ranbaxy building up in
the U.S. and extremely negative for the company in the long term as
well," Mumbai brokerage Emkay Global said in a client note.
The FDA's action follows an inspection that identified "significant"
violations of sound manufacturing practices.
Staff at the Toansa facility were found to have re-tested raw
materials and other ingredients after the items failed analytical
testing "in order to produce acceptable findings," and did not
report or investigate the failures, the FDA said.
The agency said the Toansa facility was now subject to certain terms
of a consent decree entered against Ranbaxy in 2012. Under that
agreement, Ranbaxy is prohibited from exporting active
pharmaceutical ingredients made at the facility to the United
States, including for drugs made at its Ohm facility.
(Additional reporting by Chang-Ran Kim
in Tokyo and Abhishek Vishnoi in Mumbai; editing by Chris Reese, Matt Driskill and Tony Munroe)
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