Sun Pharma hit by FDA ban on Gujarat plant, shares fall

MUMBAI Thu Mar 13, 2014 3:07pm IST

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MUMBAI (Reuters) - The U.S. Food and Drug Administration (FDA) has banned imports from Indian generic drugmaker Sun Pharmaceutical Industries Ltd's(SUN.NS) plant at Karkhadi in Gujarat, in the latest quality blow for India's drug sector.

The FDA has imposed a rash of regulatory sanctions on Indian generic makers in the last year, triggering concerns about the quality of the medicines supplied by the $14 billion industry to countries including the United States, the biggest market.

India is second only to Canada as a drug exporter to the United States, where it supplies about 40 percent of generic and over-the-counter drugs.

"The FDA is becoming more stringent. It's a learning curve for everyone. You have to invest more," said B&K Securities analyst Rohit Bhat. "Companies will have to pull up their quality parameters."

It was not immediately clear why the FDA imposed the ban on Sun Pharma's Karkhadi plant.

The FDA issued an "import alert" against the factory on its website said on Wednesday. The agency defines such a sanction as something that results in the detention without physical examination of drugs from firms that have not met so-called good manufacturing practices.

The ban on the plant underscores growing concerns about the quality of medicines made in India, often referred to as the low-cost "pharmacy to the world", as demand for generics grows in countries from the United States to Japan.

A Sun Pharma spokeswoman said the financial impact of the FDA ban on U.S. shipments from the plant, which makes antibiotic cephalosporin, would be "negligible". The plant accounts for less than 1 percent of its overall sales, she said.

Sun Pharma also said it had initiated "several corrective steps" to address the FDA's concerns, and kept its guidance for consolidated sales for the fiscal year ending this month.

The Karkhadi plant is one of Sun Pharma's 25 manufacturing plants, of which 11 are in India. Three of those plants, including the Karkhadi plant, are in Gujarat.

Shares in Sun fell as much as 6.4 percent on Thursday.

Industry officials in India say weak local regulatory oversight and a lax approach to quality control by some drugmakers in a rush to tap growing global demand for generics can result in sub-standard manufacturing processes.

The urgency to be first with a generic version of a drug coming off patent is one of the reasons for quality problems, they say. The company that first launches such a drug enjoys a six-month exclusivity period, which can be lucrative for the generic version of a commercial blockbuster.

MORE INDIAN COMPANIES SCRUTINISED

The FDA, which last month called for more collaboration with the Indian regulator to improve drug quality, has banned imports from all the Indian plants of Ranbaxy Laboratories Ltd (RANB.NS) India's No.1 drugmaker by sales, over production quality lapses.

Separately, rival drug maker Dr Reddy's Laboratories Ltd (REDY.NS) started a recall of 58,656 bottles of its heartburn drug lansoprazole in the United States in January due to a microbial contamination, information posted on FDA website on Wednesday showed.

A spokesman for Dr Reddy's was not immediately available to comment.

Also this month, the FDA announced drug recalls from both Ranbaxy and Sun Pharma.

Wockhardt Ltd (WCKH.NS) has also been barred from exporting drugs from some of its plants to the United States and Britain.

Most of the drugs that Ranbaxy, Wockhardt and their Indian peers, including Dr Reddy's and Lupin Ltd (LUPN.NS), export to the United States are cheaper copies of drugs with expired patent protection.

"When a company is small, it can be managed by strong supervision. As companies get bigger, supervision can break down," said a chief executive officer at a top Indian drugmaker.

"You need systems and a culture to maintain proper supervision - and we are in that process of growing up, I think," said the CEO, declining to be identified.

(Additional reporting by Ben Hirschler in LONDON; Editing by Tony Munroe and Jeremy Laurence)

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