Ranbaxy tanks as US FDA raises concern over its Toansa plant

Written by fe Bureau | New Delhi | Updated: Jan 14 2014, 07:12am hrs
RanbaxyThe US FDA has rapped Ranbaxy for not maintaining its Toansa plant in line with the required standards, reports fe Bureau in New Delhi.
The US Food and Drug Administration (FDA) has rapped Ranbaxy for not maintaining its Toansa plant in line with the required standards, reports fe Bureau in New Delhi. In an observation letter sent to the drug major last week, the USFDA noted that Ranbaxys Toansa (Punjab) plant did not conform to established equipment maintenance programmes and procedures that would ensure raw materials manufactured at the plant were of standard quality and purity. The Ranbaxy stock lost 5.42% on Monday closing at R438.35 on the Bombay Stock Exchange (BSE).

According to sources, the FDA wrote in the Form 483 that equipment maintenance programmes at Toansa were deficient and sampling plans and procedures were not scientifically sound and appropriate to ensure that raw materials were in line with established standards of quality.

About 70% of active pharmaceutical ingredients (APIs), or raw materials, used by Ranbaxy in its formulations (finished drugs) are manufactured at the Toansa plant. Moreover, analysts say a few important FTFs may be impacted. First to file opportunities for Diovan, Valcyte and Nexium may be dependent for API supplies, from this facility, analysts Anshuman Gupta and Perin Ali of Edelweiss wrote in a note.

The total revenues from the launches of these three products are estimated at $800 million, during the six-month exclusivity period. Diovan, which was to be launched in September 2013 has been delayed.

A Ranbaxy spokesperson said: On Saturday, January 11, 2014, Ranbaxy received the form 483 with certain observations as a result of the recent US FDA inspection at its API plant at Toansa, Punjab, India. The company is assessing the observations, and will respond to the US FDA in accordance with the agencys procedure to resolve the concerns at the earliest.

While a form 483 is used by FDA to document and communicate concerns discovered during inspections, it does not mean the regulator has concluded that the unit is guilty of manufacturing malpractices or has banned products from them.

Analysts said that if Ranbaxy is able to resolve FDAs concerns in Toansa, it may become easier to rectify manufacturing and quality issues at other Indian plants which have been banned from selling drugs to US. With Toansa plant also under scanner, it would have an impact on the operations of the company in US unless it can compensate for the same at the earliest and manage a smooth supply of key materials, said Sarabjit Kour Nangra, vice-president (research), Angel Broking.

Currently, drugs from Ranbaxys key formulations plants in India in Dewas, Paonta Sahib, Batamandi and Mohali are barred from the US market because of quality control issues. These were part of fraud allegations by US authorities which Ranbaxy agreed to settle in May, last year, for $500 million. This has had a negative impact on the companys sales and profitability.

In December 2012, FDA had issued its first form 483 for the Toansa plant which had been satisfactorily responded to according to the company.

Prior to that, in September 2012, Ranbaxys Mohali plant was also handed a form 483 citing deviations from its prescribed manufacturing practices. Subsequently, the FDA, in September 2013, imposed an import ban on Mohali facility, barring it from supplying any products to the US. The Mohali factory (also in Punjab) is currently part of an on-going consent decree with the FDA to take corrective measures.

With Absorica market share plateauing, we see limited triggers for margin improvement till Mohali comes out of the consent decree, said Sonal Gupta, analyst at UBS Global Research.

Companies are given an opportunity to respond to a form 483 and it is only if its concerns are not adequately addressed, the FDA proceeds to issuing a warning letter and subsequently an import ban, said analysts.