Silence on Ranbaxy supply resumption a worry

In 2008, US FDA banned 30 generic drugs produced by Ranbaxy at its facilities in Dewas, Paonta Sahib

For Ranbaxy Laboratories, the worst might not be over yet. Now, the Street is seeking a resolution to a consent decree and the resumption of supplies from the company’s key units at Dewas and Paonta Sahib, which have been under the US drug regulator’s import alert list since 2008.

Yesterday, the company had pleaded guilty to felony charges related to drug safety. It would pay $500 million in civil and criminal fines under the settlement agreement with the US Department of Justice.

“The latest development certainly means the issues with the Department of Justice are settled, according to the provisioning made by the company in 2011. But this does not mean the company is back on track, as far as operations are concerned; that may take time. There is still no clarity from the company management, as far as the consent decree is concerned; neither has a time frame been indicated for the restart of supplies from the Indian units,” said Praful Bohra, senior research analyst at Nirmal Bang.

In 2008, US Food and Drugs Administration had banned 30 generic drugs produced by Ranbaxy at its facilities in Dewas and Paonta Sahib, citing violation of approved manufacturing norms. It had also denied marketing approval for new products from the company’s Indian facilities. After negotiating for about two years, Ranbaxy had signed a consent decree with the US authorities in December 2011, putting an end to the long-running regulatory tussle. Though the settlement allowed Ranbaxy to resume drug imports from India, it prevented the company from manufacturing drugs at its Paonta Sahib, Batamandi, Dewas and Gloversville facilities for introduction to the US market and for the President’s Emergency Plan for the AIDS Relief programme, until the production of drugs at these facilities was in compliance with US manufacturing quality standards.

In July 2011, the Daiichi Sankyo-owned company had also closed its Gloversville facility in New York.

Industry experts and analysts say unless the company implements corrective measures at these facilities and restart supplies to the US, it may continue to suffer huge financial losses. Recently, the company had to disrupt supplies from its new manufacturing facility in Mohali, after its generic version of Lipitor was recalled from the US.

“We believe the stock would be closely monitoring its operating performance, which, we believe, will take some time to improve,” says Sarabjit Kour Nangra, V-P (pharmaceuticals research), Angel Broking.

Today, the Ranbaxy stock opened on a weak note on BSE and fell four per cent in early trade. However, it recovered to touch a high of Rs 458.4, before closing at Rs 455.5, up 3.6 per cent.