India's new drug nods from US dip in Q1 due to increased scrutiny on firms

The first quarter (Q1) of the financial year (2019-20, or FY20) saw a 28 per cent drop in abbreviated new drug applications (ANDAs) received by Indian pharma firms to 111 approvals, compared to 155 in the previous quarter. Analysts feel this may be a fallout of the stringent regulatory action of the US drug regulator on Indian manufacturing sites since January. 

India’s share of ANDA approvals given by the US Food and Drug Administration (USFDA), too, has fallen from 43 per cent in fourth quarter (Q4) of 2018-19 (FY19) to 33 per cent in Q1FY20. 

Krishnanath Munde of Reliance Securities, who has analysed the USFDA approvals data, said the fall in Q1 of the financial year is largely due to increased scrutiny by the USFDA on Indian drugmakers. 

Since January, there have been more than eight official action indicated classifications of the inspections conducted by the USFDA on Indian drugmakers’ manufacturing sites, which include companies like Alkem Laboratories (St Louis), Aurobindo Pharma, Lupin, Emcure Pharmaceuticals, Strides Pharma Science, Jubilant Life Sciences, etc. 

Earlier, in Q4 of 2017-18 (FY18) and Q1FY19, too, approvals from the USFDA had dipped sharply. It was also a time when the pricing pressure in the US generic market was high, in mid-double digits. 

“Companies became cautious about launching products in the US market around a year back and withdrew some of their ANDAs which they felt would be non-profitable. We rationalised our portfolio and decided to focus on limited competition products where we could enjoy some pricing premium. Our filing run rate came down slightly — from over 80 products or so per year to around 60-65 products. This, however, is not going to impact our profitability,” said a senior executive of a drugmaker, which draws significant revenues from the US and is one of the top grosser, in terms of ANDA approvals. 

Sun Pharmaceutical Industries’ Managing Director (MD) Dilip Shanghvi, too, had told Business Standard that it has withdrawn ANDAs because of economic viability. “It is difficult to predict the future trend,” he had said. 

After Q2 results in FY19, Cipla’s Global Chief Financial Officer Kedar Upadhye had told Business Standard that the company will continue to focus on high margin limited competition products in the US market and will rationalise its research and development spend. The company has been filing aggressively to build a product portfolio in the US market for the past three years. It plans to reduce the number of filings and focus only on limited competition products for the US market. 

“We have been filing 20-25 products each year in the US and we will be selective in our filings. We plan to do 12-15 filings a year,” Upadhye had said. 

“While higher ANDA approvals lead to high competitive intensity, mid- and large-sized pharma companies will be selective in new launches owing to lack of adequate profitability enabling normalisation of prices to some extent. This can be gauged from the fact that companies have withdrawn 606 approved ANDAs in FY18 (October-September period), compared to 214 and 248 withdrawals in 2016-17 and 2015-16, respectively,” said ICRA analyst Gaurav Jain.

In the past year or so, more than 50 per cent of the filings are in complex generics.

Munde, however, also pointed out that Indian drugmakers are now filing for products for the US market from different sites, against an earlier trend of concentrating the filings from one or two sites. Companies now have multiple plants for the US business, which reduces the overall risk,” said Munde. The approval runrate would not be slow; it is expected to pick up, felt analysts. 

Nilesh Gupta, MD of Lupin, too echoed the same. It has reshaped its pipeline and does not envisage any decline at this time. “In addition to focusing on complex generics like inhalation, injectables, and biosimilars, Lupin reshaped its pipeline to focus on select oral solids that were complex and first-to-file (FTF) or first-to-market three years ago. We have a focused pipeline at this time and we don’t envisage a decline or drop at this time. The pipeline that we have has a good degree of complexity and strong growth prospects. We also have a healthy pipeline of over 40 ANDAs that are already filed and are first to file and of this, 15 are exclusive FTFs addressing a market size of $3.4 million”.