|Sun Pharma headquarters in Mumbai, India--Courtesy of Hemant Mishra/Mint|
Last week started bright for India's Sun Pharmaceuticals with an earnings report that showed strong growth in the U.S. where it has been trying to expand its business. But it is ending on a downer, with a recall of nearly 500,000 bottles of antibiotics made by its U.S. arm Caraco Pharmaceutical Laboratories, the fourth since announcing its $4 billion deal to buy compatriot Ranbaxy Laboratories and fix its ongoing quality faux pas.
According to the FDA, Caraco is recalling 454,230 cephalexin capsules in 250-mg and 500-mg doses because it wasn't following good manufacturing practices when it made the active pharmaceutical ingredients that went into them. Cephalexin is a common antibiotic that is prescribed to treat everything from ear and urinary infections to pneumonia.
On Tuesday, Sun reported that its last quarter earnings were up 13% to 3,927 crore ($646 million). Sales of finished dosage meds in the U.S. were up 7% to $389 million and made up 60% of Sun quarterly revenues. Sales in the U.S were dampened by Taro Pharmaceutical, the Israel-based drugmaker of which Sun owns about 65%. Taro's U.S. sales of $130 million sank 15% after taking what Sun called a "price protection" charge.
The drugmaker also said that it is planning a takeover of Ranbaxy Laboratories, India's largest drugmaker, an acquisition that will make Sun the largest drugmaker and make it a much more prominent player in the U.S. market. Ranbaxy has been able to rack up lots of first-to-file approvals for generics of blockbusters like Pfizer's ($PFE) cholesterol behemoth Lipitor, Novartis' ($NVS) heart drug Diovan and AstraZeneca's ($AZN) heartburn blockbuster Nexium.
But years of problems with the FDA for having slipshod manufacturing quality has crippled those efforts. FDA bans on four of its 5 FDA-approved plants have delayed launches, costing it money and prestige. Finally this year, Japan's Daiichi Sankyo, which owns the majority of Ranbaxy, decided to give up trying to get the Indian company to shape up and agreed to sell it to Sun in a deal that will leave Daiichi as Sun's largest shareholder. In announcing the deal, Sun's founder and managing director, Dilip Shanghvi, promised that Sun would get Ranbaxy's standards up to par. But since making that pledge in April, Sun has had to face the embarrassment of having one of its own plants in India banned by the FDA and issuing recall after recall because of poor-quality manufacturing.