As part of a damage-control exercise, Ranbaxy Laboratories Ltd, whose fourth plant in India was recently banned by the US drugs regulator, may outsource production or even acquire a manufacturer, say industry watchers.
And while the company is working on a Plan B, other local manufacturers of active pharmaceutical ingredients (API) will have a clear shot at the US opportunity.
On January 23, the US Food and Drug Administration (FDA) prohibited imports of drugs made at Ranbaxy’s Toansa facility in Punjab.
With the US-based Ohm Labs being the only Ranbaxy unit in the good books of the FDA, the Toansa ban has opened up a huge market for the company’s peers, say analysts.
The Toansa factory accounted for over 70 per cent of Ranbaxy’s API business, which was behind sales of $137 million in calendar year 2012, according to the company’s annual report. A pharmaceuticals analyst, who did not want to be named, said it could take seven-eight months for Ranbaxy to zero in on an API manufacturer to replace supplies from the Toansa facility. “Ranbaxy is sitting on cash of over Rs 12,000 crore. My sense is that they should already be in touch with manufacturers to acquire them.”
Since the Toansa facility is also under the Consent Decree it signed with the US Justice Department last January, there would be no special litigation initiated against the recent violation, said Sarabjit Kaur Nangra, Vice-President (Research), Angel Broking. “If they can get the Toansa facility back in a year, say, they may go for outsourcing. But there is always the possibility of acquisition.”
How the company will outsource is difficult to predict, says Nangra. “Since API is diverse, the outsourcing contracts will go to a wide mix of companies. It will be difficult to say which companies may benefit from this.”
Nevertheless, companies close on Ranbaxy’s heels in products such as cholesterol-control drug Atorvastatin stand to benefit, says B Arvind Shah, Managing Director and CEO, Arvind Remedies. The Chennai-based listed company is readying its Rs 250-crore plant for the US market.
“For players with an FDA-approved factory, this is a good opportunity.”