Ranbaxy Lab suffers another setback as US FDA bans its 4th plant, shares slump 20%

Written by PTI | Washington | Updated: Jan 25 2014, 02:49am hrs
Ranbaxy LabFDA prohibits Ranbaxy Lab from distributing in the US the drugs manufactured using active pharmaceutical ingredients in Toansa facility in Punjab.
In yet another setback for

Ranbaxy Laboratories Ltd, the US health regulator banned the import of products from its fourth plant, halting the shipment of all the company's drugs to the US from India.

Citing manufacturing norm violations, the US Food and Drug Administration (USFDA) prohibited Ranbaxy Laboratories from distributing drugs produced at the Toansa unit in Punjab, including medicines made by the company's Ohm Laboratories facility in New Jersey.

In an order yesterday, the USFDA also prohibited Ranbaxy from providing active pharmaceutical ingredients from Toansa to other companies, including other Ranbaxy facilities, that make products for American consumers.

"We are taking swift action to prevent substandard quality products from reaching US consumers," said Carol Bennett, acting director of the Office of Compliance in the FDA's Center for Drug Evaluation and Research.

The USFDA said it exercised its authority under a provision in a January 2012 consent decree, which permits the agency to extend those terms to any Ranbaxy-owned or operated facility if an FDA inspection finds it in violation of the Federal Food, Drug, and Cosmetic Act or FDA regulations, including current good manufacturing practice requirements.

"This development is clearly unacceptable and an appropriate management action will be taken upon completion of the internal investigation," Ranbaxy Chief Executive Officer and Managing Director Arun Sawhney said.

Expressing disappointment, the company said it "would like to apologise to all its stakeholders for the inconvenience caused by the suspension."

Japanese parent Daiichi Sankyo confirmed the Toansa plant is now subject to certain terms of the consent decree of permanent injunction entered against Ranbaxy in January 2012.

Ranbaxy will cooperate with the USFDA and comply with the consent decree in both letter and spirit, it said.

Ranbaxy Lab shares plunged 19.54 per cent to Rs 335.65 at the close on the BSE.

"With this import alert, the operations of the company in US business, which contributes around 40 per cent, could come under impact unless it can compensate for the same at the earliest and manage a smooth supply of key raw material," said Sarabjit Kour Nangra, Angel Broking VP - Research Pharma.

According to Arvind Bothra, Vice President of Institutional Research at Religare Capital Markets, Ranbaxy's US quarterly sales of USD 125 million (base) may be hit by 35-40 per cent for the next three to four quarters, until they get site transfers for key products.

"The US and India are the only two businesses that have been contributing to profitability and with this adverse regulatory action, Ranbaxy's profitability for next four to six quarters would be under duress," he said.

In September last year, the USFDA imposed an import alert on Ranbaxy's Mohali plant in Punjab for violating current good manufacturing norms.

Ranbaxy's key facilities at Paonta Sahib in Himachal Pradesh and Dewas in Madhya Pradesh have been under a US import alert since 2008.

In May last year, Ranbaxy pleaded guilty to 'felony charges' related to the manufacture and distribution of certain 'adulterated' drugs made at the Dewas and Paonta Sahib units and agreed to pay USD 500 million to US authorities as penalty.

This followed a series of actions by the USFDA, which in 2008 banned the import of 30 generic drugs produced by Ranbaxy at the two plants for violation of manufacturing norms.

Ranbaxy is now required to hire a third-party expert to inspect the Toansa facility and certify to the USFDA that the plant and its methods and controls are adequate to ensure continuous compliance with current good manufacturing practices.

Ranbaxy will not be permitted to resume manufacturing and distributing active pharmaceutical ingredients for FDA-regulated drugs from Toansa until the agency is satisfied that the company has addressed manufacturing quality issues at the facility.