US import curbs likely to hit Ranbaxy Laboratories' growth plans

The US drug regulator's move to impose import restrictions on Ranbaxy Laboratories' Mohali plant is likely to slow the Indian pharmaceutical company's growth plans and could hit product launches in its biggest market.

The US Food and Drug Administration (FDA) issued the import alert on the grounds that the plant in Punjab did not meet US drug manufacturing requirements, making it the company's third plant to be barred from shipping its products to the United States.

Analysts said the US import restrictions would not affect Ranbaxy's existing operations but the fate of its future launches hung in the balance.

"We expected Mohali, which is a new facility, to be a key contributor to US revenue growth as more than 35 ANDAs (Abbreviated New Drug Applications) are filed from the facility. With Mohali under import alert, there are uncertainties on new product approvals," says an analyst report by Nomura.  "Existing operations (of the company) are not impacted much as there are no sales to the US from the Mohali facility."

Ranbaxy has been pinning its hopes on Mohali after the FDA slapped import bans on its Paonta Sahib and Dewas plants in 2008. It was banking on three generic drugs - blood pressure pill Diovan, stomach medicine Nexium and anti-viral medicine Valcyte - which it expects to roll out of the plant in Punjab this year.

But the extension of the Consent Decree to Mohali means Ranbaxy is barred from supplying any products from that plant to the United States until it has the US drug regulator's approval.

"We expect Ranbaxy to pursue approval of key exclusivities like Diovan and Nexium from Ohm Labs, the only formulation facility of Ranbaxy supplying to the US market," Nomura said in the report.

The drug regulator's move is the latest in a string of blows to hit Ranbaxy's US business. In May, it had pleaded guilty to felony charges relating to the safety of drugs made at two units in India and agreed to pay $500 million to US authorities as a penalty.

"Given the importance of the facility in the overall growth of the US business of the company, the future growth of the US business, will be impacted," says Sarabjit Kour Nangra, Vice President, Research, Pharma, at Angel Broking.

The pharmaceuticals company says it hopes the matter will be resolved soon and is willing to cooperate with any regulator that wants to investigate its manufacturing practices.

"Ranbaxy will review the details and will continue to fully cooperate with the US FDA and take all necessary steps to resolve the concerns at the earliest," Ranbaxy said in a statement. "The company believes that it has made further improvements at its Mohali facility since the last inspection in 2012, and remains committed to addressing all concerns of the US FDA. Ranbaxy is hopeful of an early resolution of these concerns."

Ranbaxy's stock plummeted nearly 30 per cent on Monday after the US drug regulator's move before recovering by 3.1 per cent to Rs 328.75 on Tuesday.