* Move to keep "substandard" drugs out of US-FDA
* Most Ranbaxy products now barred from key market
* Shares in Ranbaxy drop nearly 20 percent
* Parent Daiichi Sankyo's shares also hit
By Toni Clarke and Sumeet Chatterjee
WASHINGTON/MUMBAI, Jan 23 Indian drugmaker
Ranbaxy Laboratories Ltd faces long delays and high
costs in launching big-selling generic drugs in the United
States after products from a fourth plant were banned from
entering its main market due to manufacturing violations.
The U.S. Food and Drug Administration's sanction is the
latest in a series of regulatory rebukes for India's largest
drugmaker by revenue since Japan's Daiichi Sankyo Co Ltd
took control of the company in 2008, and deals a
further blow to the $12 billion Indian drug industry.
The FDA said Ranbaxy is prohibited from making and selling
pharmaceutical ingredients from its facility in Toansa in the
northern state of Punjab, "to prevent substandard quality
products from reaching U.S. consumers."
The FDA ban on Ranbaxy's Toansa plant followed an inspection
completed on Jan. 11.
The U.S. regulator had previously barred products from the
company's facilities in Paonta Sahib, Dewas and Mohali in India
as part of a 2012 consent decree designed to ensure compliance
with good manufacturing practices.
Indian drugmakers are among the world's biggest producers of
cheap generic medicines. Demand for generics is on the rise as
the United States battles rising health-care costs and as more
big-selling branded drugs go off-patent in western markets.
But the rise in demand for generic drugs has led to closer
regulatory scrutiny and sanctions imposed on top drugmakers
including Ranbaxy and Wockhardt Ltd, which has been
hit by import bans from both the FDA in the United States and
Britain's drug regulator.
The latest ban will hit Ranbaxy's U.S. business, its largest
export market, bringing in roughly 40 percent of total sales, by
cutting the supply of raw ingredients for making drugs at its
Ohm Laboratories plant in New Jersey, analysts said.
"I don't think anything is possible in the next one year at
least," said Surajit Pal, a sector analyst with brokerage
Prabhudas Lilladher, referring to new launches and a possible
turnaround in operations.
He said the company could report operating loss from the
March quarter as regulatory and other costs rise and new
launches get delayed.
Ohm is the only Ranbaxy facility that makes generics for the
U.S. market after shipments from its three FDA-approved plants
in India were banned by the U.S. regulator over quality
concerns. Ohm gets nearly three-quarters of its ingredients from
the Toansa plant, according to some brokerage estimates.
Ranbaxy has been planning to launch couple of high-yielding
generic drugs in the United States, including a version of
Novartis AG's hypertension drug Diovan, with
ingredients from Toansa, a source with direct knowledge of the
Ranbaxy shares fell as much as 19.8 percent on Friday to
their lowest level in nearly four months. The stock is headed
for it worst fall since Sept. 16 last year when a third company
plant was hit by the FDA import ban.
Shares in Daiichi Sankyo, which paid $4.2 billion for
control of Ranbaxy in 2008, ended down 6.4 percent.
Ranbaxy may have to outsource the ingredients for making
generic drugs, resulting in higher costs and delays and hurting
its profit margins, analysts said.
The FDA action could also delay the launch of a generic
version of AstraZeneca Plc's blockbuster heartburn and
ulcer pill Nexium in the United States, they said.
Ranbaxy said it was disappointed with the FDA's action and
that it had voluntarily suspended shipments of products from the
Toansa facility to the U.S. market when it received the
"This development is clearly unacceptable and an appropriate
management action will be taken upon completion of the internal
investigation," Chief Executive Arun Sawhney said in a
The company did not immediately respond to a request for
comments on the financial impact of the FDA's decision.
Daiichi Sankyo said in a statement that it was "confirming
the situation with Ranbaxy" and would issue a statement when it
had more details.
Ranbaxy has been a major supplier of drugs, especially
generics, to the United States and this latest enforcement
action means most Ranbaxy products are now banned there.
Ranbaxy's other major markets are India, its No.2 sales
generator, as well as Europe and Africa. Indian drugmakers'
plants that do not ship to the United States are not regulated
or inspected by the FDA.
"Almost like the worst-case scenario for Ranbaxy building up
in the U.S. and extremely negative for the company in the long
term as well," Mumbai brokerage Emkay Global said in a client
The FDA's action follows an inspection that identified
"significant" violations of sound manufacturing practices.
Staff at the Toansa facility were found to have re-tested
raw materials and other ingredients after the items failed
analytical testing "in order to produce acceptable findings,"
and did not report or investigate the failures, the FDA said.
The agency said the Toansa facility was now subject to
certain terms of a consent decree entered against Ranbaxy in
2012. Under that agreement, Ranbaxy is prohibited from exporting
active pharmaceutical ingredients made at the facility to the
United States, including for drugs made at its Ohm facility.