With the US Food and Drug Administration (FDA) having barred Ranbaxy from using drug ingredients made at its Toansa plant to produce any medicine that would be sold in the American market, the stock took a tumble on Friday, losing as much as 20% on the BSE to close at R335.65.
Toansa, which supplies around 75% of the active pharmaceutical ingredients (APIs) used by Ranbaxy to produce finished drugs, has also been placed under an ongoing consent decree with the US Justice Department to ensure compliance with manufacturing standards and address data integrity issues. The FDA has also banned Ranbaxy from selling APIs from Toansa to other companies for making products for the US market.
This is the fourth Ranbaxy unit, after Paonta Sahib, Dewas and Mohali, to be prohibited from selling products in the US because of quality control issues. The FDA’s inspection of the Toansa facility, which concluded on January 11, found that the plant workers retested drug products to produce acceptable findings after the items originally failed analytical testing.
Analysts said the ban on the API unit could impact revenue opportunities from the launch of big first-to-files in the US including anti-hypertensive drug Diovan, anti-viral Valcyte and anti-acid reflux Nexium. These three drugs together are estimated to earn around $800 million during their six-month exclusivity period.
“This hurts not only prospects for new approvals expected in 2014 (eg, Nexium FTF, Diovan FTF) but also prospects for the ongoing US sale of existing drugs (Lipitor, Aricept, etc),” Shinichiro Muraoka and Yukihiro Koike, analysts at Morgan Stanley Research, said. While Ranbaxy holds around a 2% market share of Lipitor in the US, it has FDA approval to sell Aricept only in December 2013.
However, the company’s largest product in the US, Absorica (which holds a 17% market share), would not be affected by the ban as it is manufactured by the US-based Cipher Pharma. Some analysts are hopeful the company may be able to source APIs to feed its US facility.
But other analysts believe the sales would take a fairly big hit. Sources said that Ranbaxy is in the process of finalising a tie-up with a multinational firm to procure raw materials, though that would lower the firm’s potential earnings; it had earlier tied up with an MNC firm to source APIs for the generic version of Pfizer’s Lipitor and had shared 45% of the profits.
"We expect US