The move is significant because the Toansa facility, which supplies 70-75 per cent of the pharmaceutical ingredients, is Ranbaxy’s main API factory.
Though there is no restriction on supplies from this facility to the US at present, failure to address the concerns raised by US FDA could lead to a ban on all US exports from this factory. The US drug regulator had inspected the facility last week.
All the other India-based Ranbaxy factories — at Paonta Sahib (Himachal Pradesh), Dewas (Madhya Pradesh) and Mohali (Punjab) — are already barred from exporting drugs to the US, the firm’s largest market.
“On Saturday, January 11, 2014, Ranbaxy received the Form 483 with certain observations, as a result of the recent US FDA inspection at its API plant at Toansa, Punjab. The company is assessing the observations, and will respond in accordance with the agency’s procedure to resolve the concerns at the earliest,” Ranbaxy said in a clarification to stock exchanges.
Shares of Ranbaxy on Monday fell 9.6 per cent on BSE to touch Rs 420, its lowest level in nearly a month.
The Toansa factory, started in 1986, is one of the country’s oldest API facilities and accounts for a majority of Ranbaxy’s captive API consumption. APIs are the main ingredients or raw materials used in making finished dosage formulations or medicines sold by drug companies.
API sourcing is considered a crucial part of pharmaceutical business. Companies are required to make separate applications or Drug Master File (DMF) to US FDA for APIs used in medicines sold in the US. If the regulator finds any problem with the API sourcing, it is likely to hold back products using that particular API.
Experts suggest if Ranbaxy fails to address the concerns raised at Toansa, its gross margins might take a hit of three-four per cent, as it will have to outsource all the ingredients at a premium.
Apart from captive consumption, Ranbaxy also earns some revenue from its API business. According to its annual report, the company’s API business clocked sales of $137 million during 2012.
Toansa had earlier come under the US drug regulator’s scanner in December 2012, too, when the US FDA had highlighted several violations in manufacturing practices at the API unit.
“Ranbaxy continues to improve its systems and processes, and remains fully committed to upholding the highest standards that patients, prescribers, regulators and all other stakeholders expect from the company,” Ranbaxy said in its statement to exchanges.