Ranbaxy manufactures a colossal first quarter

Just how important resolving manufacturing problems can be to a drugmaker's upside was evident in the skyrocketing first-quarter earnings of Ranbaxy Laboratories.

The Indian genericsmaker finally resolved manufacturing and regulatory issues in the U.S., including getting a major new plant in India approved for U.S. production. FDA approvals included a copycat version of Pfizer's ($PFE) Lipitor, of which it has sold copious amounts. Canada also signed off on the plant and the drug.

The result was that Ranbaxy's North American sales doubled during the period, to 20.93 billion rupees ($375 million), Reuters reports. It's the company's first full quarter on the market with generic Lipitor. Net earnings were 12.47 billion rupees--$234.3 million--from 3.04 billion rupees last year. Compare that to last quarter when the company took $500 million charge related to its manufacturing issues and a $606 million loss for the fourth quarter. That was the biggest quarterly loss in four years for India's largest generic drugmaker.

It was by getting its manufacturing house in order that it cut costs and manufactured phenomenal earnings. And what a turnaround for Ranbaxy, which has been embroiled in manufacturing problems since 2008, when the FDA barred 30 products from the U.S. The problems raised questions about whether it could get generic Lipitor to market in time to reap the rewards.

Ranbaxy finally came reach an agreement with the Department of Justice and FDA late last year, which includes some very stringent conditions. It has to have outside consultants oversee its manufacturing and quality testing, and that consultant reports to the FDA as well as the company. It also had to hold certain products off the U.S. market until two Indian plants met FDA standards. Then, at the last minute, the company won FDA approval for its version of Pfizer's blockbuster.

Ranbaxy launched its knockoff in the U.S. and some European markets. Ranbaxy and Watson Pharmaceuticals ($WPI) are the only two genericsmakers that can sell Lipitor copies in the U.S. until May 31. So far, Ranbaxy's version has captured 47% of that market.

- read the Reuters story