Ranbaxy recalls generic Lipitor in US, scrip hit

Written by fe Bureau | New Delhi | Updated: Nov 24 2012, 06:42am hrs
Ranbaxy Laboratories, already on notice under a US Food and Drug Administration scrutiny for past slippages, seems to have erred again. The company on Friday said that it is recalling select lots of its most remunerative product, generic versions of Lipitor (atorvastatin calcium) from its most lucrative market the US. The company said that the recall would lead to a temporarily disruption in supplies.

The investigation with regard to....this issue (reasons of recall) is expected to be completed within two weeks and thereafter the company expects to resume supplies, a company spokesperson said. This disruption in supplies for a minimum of two weeks may take a toll on the companys Lipitor market share of over 45% in the US, which it has gained painstakingly amid fierce competition.

The news saw the company's share price nosedive on the BSE, closing 3.27% down at Rs 496.

While most analysts stressed the need to wait and watch till the reasons for the recall are clear, some fear that if supplies are not resumed swiftly after the specified two weeks, it may adversely impact or delay the ongoing consultation on consent decree that the company has been put under.

A consent decree is a legal agreement between a pharma firm and the US government that contains a series of corrective steps the erring company must implement to avoid litigation by the FDA and to continue to remain in business in the US market. A consent decree is also a court order in itself, which binds the firm to address all listed lacunae within a specified timeline and get these steps verified by independent auditors.

Ranbaxy Pharmaceuticals Inc is conducting a voluntary recall for atorvastatin calcium tablets, in connection with its 10mg, 20mg and 40mg dosage strengths, packaged in 90s and 500 count bottles and only with respect to certain select lot numbers. The recall does not affect or relate to the 80mg strength. The recall is being conducted at the retail level for such select batches that may contain a foreign substance (small glass particles approximately less than 1mm in size), Ranbaxys US website said.

The immediate financial impact of this recall on the company could be around $5 million. But it is the imminent loss of market share of this product in the US that is more troubling for the company. Considering there are so many players in the fray with abundant inventory, it wouldn't be surprising to see Ranbaxy losing a few percentage points of market share in this period. If the delay gets lengthier, the recurring loss on this account may grow further. Reclaiming the edge it has built in the case of this product in the market can emerge as a challenge, said Hemant Bakhru of CLSA. He feared that if this matter is not resolved quickly in the determined time, it may delay the ongoing discussion on consent decree.

Ranbaxy has hired consultants to spell out corrective measures it needs to undertake at its Indian facilities under the consent decree to meet the US drug regulator's needs. The company settled its long-drawn regulatory issues with the US FDA in December 2011.

We would really have to wait and watch to see the root cause of this recall. If the reasons relate to stability issues, there may not be much to worry about but if the problems are related to manufacturing, the consequences for the company can be really grave, said Ranjit Kapadia, senior vice-president, Centrum Broking. However, he added that the US market would not see any crunch in supply of the drug as there are many generic players such as Watson, Dr Reddy's, Apotex and Mylan marketing the drug after the six-month market exclusivity period ended in May. The intense competition has led to a shrinkage in the market size by 99% in case of this drug but Ranbaxy, which built an early lead in the race, maintained it by cornering almost half of the sales of this best-selling drug.

In September 2008 the US FDA banned over 30 medicines manufactured by the drug maker at its select Indian facilities Paonta Sahib in Himachal Pradesh and Dewas in Madhya Pradesh. Four months later, the noose around the company tightened further as the US drug regulator invoked the application integrity policy, which meant it also decided not to grant any new drug approvals from Paonta Sahib. Since then, the firm has pursued discussions with US agencies, which culminated in the consent decree three years later.