The US drug regulator has blacklisted Ranbaxy Laboratories’ Mohali plant, its third factory to face such an import ban, dealing a body blow to the company’s reputation and bringing its share prices crashing by 30.3% on Monday.
Separately, another Indian drug maker Strides Arcolab said on Monday that a plant of its unit Agila Specialties had also received a warning letter from the US Food and Drug Administrator (USFDA) after its inspection by the regulator in June.
Both instances show how India’s pharma companies, which produce cheaper copies of expensive drugs after their patent expires, are facing increased compliance scrutiny by world’s drug regulators.
For Ranbaxy, the import alert can potentially stop shipments of 11 medicines produced in its Mohali plant.
Its stock price closed at Rs 318.40 on Monday, bringing down its market cap by more than Rs 6,000 crore to Rs 13,491 crore on a single day.
Strides, in a stock market filing,said it was working with the FDA to resolve concerns in the “shortest possible time.”
Strides shares fell as much as 3.45% to close at Rs 869.10 a share.
In May Ranbaxy agreed to pay about Rs 2,750 crore as penalty for selling adulterated medicines in the US and lying about it to the authorities.
In 2008, the USFDA had banned 30 generic drugs produced by Ranbaxy at its Dewas and Paonta Sahib units in India, citing gross violation of approved manufacturing norms. The firm has admitted to improperly making these medicines at the two facilities.
The drug maker’s Japanese parent Daiichi Sankyo had blamed the company’s former Indian owners for concealing and misrepresenting critical information about US investigation into sale of adulterated drugs, and said it will pursue legal remedies.
The Japanese drug maker had bought Ranbaxy Laboratories for an eye-popping $4.6 billion (about `20,000 crore then) in 2008.
The import alert on the Mohali plant would mean that Ranbaxy will have to rely on New Jersy-based Ohm Labs to service all its US business, the world’s most lucrative drugs market.
India’s drug companies, which produce copies of expensive patented drugs at a fraction of their price, are facing increasing compliance scrutiny by world’s drug regulators. According to estimates, nearly 40% of generic and over-the-counter-medicines sold in the US are produced by Indian companies.
“Given that sometimes import alters take longer to resolve, as seen in the case of Ranbaxy (came in in 2008 and still unresolved), they could be a huge setback for Ranbaxy,” said Sarabjit Kour Nangra, analyst at Angel Broking.