A third Ranbaxy Laboratories plant in India has been sanctioned with an import alert ban from the U.S. Food and Drug Administration, triggering the worst single day fall in its stock on Monday and a brokerage downgrade.
The FDA slapped the alert on Mohali factory in northern India on Friday, saying the plant owned by India's biggest drugmaker by sales had not met so-called good manufacturing practices, the U.S. regulator said on its website.
Ranbaxy, however, said it had not received any communication from the FDA on the import ban. (Read)
India is the biggest overseas source of drugs to the U.S. and is home to over 150 FDA-approved plants including facilities run by global players. Pharmaceutical exports from India to the U.S. rose nearly 32 per cent last year to $4.23 billion.
The latest ban on Ranbaxy, controlled by Japan's Daiichi Sankyo, comes just a few months after the company pleaded guilty to U.S. felony charges related to drug safety and agreed to a record $500 million in fines.
Two of the company's other plants at Dewas and Paonta Sahib were hit with the same alerts in 2008, and are still barred from making shipments to the United States. The company has a total of eight plant locations across India.
Shares in Ranbaxy plummeted on Monday, sinking as much as 32.6 per cent to post their worst single day fall. The stock ended 30.27 per cent lower on the BSE at Rs 318.85, while the Sensex ended flat. (Track stock)
Brokerage HSBC said in a research note on Monday it was downgrading Ranbaxy to "underweight" from "overweight" due to the FDA import alert for its Mohali plant.
HSBC said Ranbaxy had started shipping generic Lipitor, the widely used cholesterol lowering medicine, from its Mohali plant in April last year but six months later it recalled some of the batches due to the potential presence of glass particles.
After this Ranbaxy had to stop exporting Lipitor from its Mohali plant, the brokerage said.
"Given there are no sales from Mohali, the import alert has no financial impact ... However, hopes for approvals for new products from Mohali have been dashed. We understand Ranbaxy had been working with the USFDA on approval of Diovan from Mohali."
The company has been awaiting the U.S. drug regulator's final nod for its generic versions of Novartis AG's hypertension drug Diovan.
India's drugmakers have come under closer scrutiny this year as the FDA, the guardian of the world's most important pharmaceuticals market, has increased its presence in the country to bolster quality and confidence in Indian-made drugs.
India produces nearly 40 per cent of generic drugs and over-the-counter products and 10 per cent of finished dosages in the United States. In March, India allowed the FDA to add seven inspectors, which will bring its staff in India to 19.
Increased on-the-ground oversight reflects India's growing importance as a supplier to the United States, and should ultimately bolster quality and confidence in Indian-made drugs.
The FDA's stepped-up presence should also accelerate what some in the domestic industry hope is a more rigorous attitude towards compliance in a country whose cheap generics have made it the low-cost pharmacy to the world.
Another Indian drugmaker Strides Arcolab said on Monday a plant of its unit Agila Specialties Private Limited had also received a warning letter from the FDA after its inspection by the regulator in June.
Strides said it was working with the FDA to resolve concerns cited in the warning letter in the "shortest possible time".
Strides shares fell as much as 6.7 per cent.
Copyright Thomson Reuters 2013