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Ranbaxy, pioneer of India’s generic medicine power, heads for ICU

business Updated: Jan 25, 2014 00:23 IST
HT Correspondent

India’s iconic pharmaceutical company, Ranbaxy Laboratories, is badly in need of some good medicine itself.

US drug regulator USFDA on Friday blacklisted Ranbaxy Laboratories’ Punjab-based Toansa plant—the generic drug makers’ fourth factory to face such an import ban—dealing a body blow to the company’s reputation and bringing its share prices crashing by nearly 20% on Friday.

Japanese drug maker Daiichi Sankyo had bought the company for an eye-popping $4.6 billion (about Rs 20,000 crore at the time) in 2008 from its former promoters, Malvinder Mohan Singh and family.

The latest ban could not have come at worse time for the one-time poster-boy of India’s pharmaceutical industry that is nursing a welter of festering wounds from run-ins with regulators to employee exits and penalties for felony. (See graphic)

The company will now have to negotiate prolonged scrutiny before it can introduce new products in key markets.

Analysts warned of a drop in earnings by upto 40% over the next one year as exports from Indian are effectively ruled out .

It could also hit the company’s plans to exploit “patent cliff” opportunities, ruling out a shot at a multi-billion dollar opening of drugs whose patents expire soon.

Ranbaxy has been found wanting compared to its peers, facing pointed posers on production and hygiene standards. The USFDA on Thursday prohibited it from making and selling active pharmaceutical ingredients (API) from its facility in Toansa.

Violations included staff re-testing raw materials and drugs after they “failed analytical testing and specifications in order to produce acceptable findings.”

The plant was supplying upto 75% of its demand for APIs—the core component that goes into a medicine’s production—to its other units including the one based in Ohm in the US.

“We would like to apologise to all stakeholders for the inconvenience caused by the suspension,” said Arun Sawhney, CEO and MD, Ranbaxy, promising “appropriate management action” after an “internal investigation.”

In September 2013, the USFDA had blacklisted Ranbaxy’s Mohali plant, effectively stopping shipments of 11 medicines, including the generic version of blood-pressure drug Diovan, produced at the plant.

This had raised questions about the violation of hygiene and manufacturing norms even by Daiichi Sankyo, although it had in May blamed the company’s former Indian owners for concealing and misrepresenting critical information about US investigation into sale of adulterated drugs, and filed for arbitration in a Singapore court.

In 2008, the USFDA had banned 30 generic drugs produced by Ranbaxy at its Dewas and Paonta Sahib units.

There have also been murmurs of discontent among a section of employees over discriminatory human resource practices.

“The company’s US operations, which contribute around 40%, would be impacted,” said Sarabjit Kour Nangra, analyst at Angel Broking.

“We expect US quarterly sales of over Rs 750 crore to be bit by 35-40% for next 3-4 quarters,” said Arvind Bothra, vice-president, research, Religare.