As Ranbaxy's plant problems mount, so do its losses

Given that Indian drugmaker Ranbaxy Laboratories is under FDA sanctions for its manufacturing misses, a quarterly loss of $25.5 million may not sound so bad. But the January ban of a key API plant stands to make the current quarter worse, and competitors are looking for every opportunity to take even more business away.

"We are facing some major regulatory challenges and are disappointed with the developments," CEO Arun Sawhney said in Wednesday's earnings announcement. "I would like to assure all our stakeholders that we will do whatever is necessary to address all concerns of the USFDA and are committed to resolve them as early as possible."

That said, the ban placed last month on Ranbaxy's Toansa API plant is a big hurdle for the drugmaker, which relied on it for a reported two-thirds of the ingredients used to make drugs for the U.S. market. It is reportedly looking to buy from an outside supplier the API it needs for a generic launch of Diovan, the Novartis ($NVS) blockbuster blood pressure med, but doing that would shave the thin margins on a generic even more. Sawhney told analysts that the company is sourcing some APIs from other places and only relied on Toansa for 15% of its needs last year, without elaborating.

The company reported a $162 million loss for the year, compared to a profit of $147 million in the previous year, pulled down by the ongoing issues. But some analysts see more difficulties ahead. Its three FDA-approved formulation facilities have already been banned, leaving only its Ohm Laboratories facility in the U.S. able to serve the U.S. market. And regulators in other countries might follow the FDA's lead and also stop sales of some Ranbaxy products.

"I don't think the worst is over for the company," Surajit Pal, an analyst with brokerage Prabhudas Lilladher, told Reuters. "There are many risks and one of them could come from regulatory action from other countries, Europe or India." 

The ban on Toansa followed a January follow-up inspection in which inspectors cited the drugmaker for serious violations in analytics testing and deleting failed results from its database, as well as issues of sanitation. Ranbaxy earmarked 2.57 billion rupees ($41 million) in the last quarter to cover the losses related to the FDA action, Reuters pointed out.

Meanwhile, competitors that have picked up business as a result of Ranbaxy's problems continue to look for chances to swoop in and relieve Ranbaxy of more sales. Lupin CEO Vinita Gupta told Bloomberg, "In the situations where we have an overlap, we have gained in the past and continue to do that."

- here's the earnings release (PDF)
- and the financial report (PDF)
- read the Reuters story
- get more from Bloomberg

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