Ranbaxy Shutters Liquids Unit At Gloversville Citing Rationalization; Keeps Optimism On Lipitor Exclusivity

MUMBAI - Calling it a process of rationalization, Ranbaxy Laboratories Ltd. announced that it has shut down the liquids manufacturing facility at its U.S.-based Ohm Labs unit based in Gloversville, New York. Ranbaxy Managing Director Arun Sawhney told analysts and investors during an Aug. 5 conference call to detail second quarter earnings that the company continuously looks at its global plants to maximize efficiencies. In the past, Ranbaxy has eased out from manufacturing operations in China and Vietnam.

Ranbaxy management informed analysts that alongside its parent Daiichi Sankyo Co. Ltd., the company has explored multiple new front- and back-end projects, but details of those plans, expected to be value accretive, will not yet be shared.

Liquids formed a small part of the Ohm Labs facility, a Ranbaxy official clarified, adding that present production will be moved to other suitable locations. Significantly, the same liquids manufacturing unit was inspected last year by U.S. FDA after which Ranbaxy received a stern warning letter to undertake comprehensive assessment of all its manufacturing sites for compliance with good manufacturing practices norms.

"FDA expects Ranbaxy immediately to undertake a comprehensive assessment of its global manufacturing operations to ensure that all sites manufacturing drugs for the U.S. market conform to U.S. requirements," the agency concluded in its warning served on the Ohm Lab's facility (Also see "Corrective Actions "Inadequate," U.S. FDA Warns Ranbaxy; Threatens Seizure And Injunction" - Scrip, 5 Feb, 2010.).

Will FDA Disputes Delay Generic Lipitor Launch?

After maintaining a studied silence for a long period on the status of FDA's investigation of Ranbaxy's disputed manufacturing sites in India, Sawhney for the first time expressed his "very optimistic" view about negotiations with FDA, adding that it was progressing "as per schedule."

The high-profile dispute threatens to delay launch in the U.S. of generic versions of Pfizer Inc.'s blockbuster Lipitor (atorvastatin) given Ranbaxy's first-to-file status.

"Ranbaxy continued to co-operate with the U.S. FDA and the Department of Justice for a comprehensive solution to its regulatory issues," a company release reiterated. "Negotiations with the regulators are progressing well."

Sawhney noted that capacity and inventories will not stand as a constraining factor to market generic versions of Lipitor in the U.S. even if regulatory approvals are granted closer to the date of expected launch.

He also told analysts that Ranbaxy expects to derive significant gains from the product even after expiry of its 180-day exclusivity period. Under a deal with Pfizer, Ranbaxy is entitled to launch generic versions of Lipitor on November 30, 2011, subject to regulatory clearances.

Sawhney declined to share any further details on the company's strategy for atorvastatin, including whether it would partner with another generic company to ensure an on-time launch (Also see "Ranbaxy Talks Up Monetization Of First To Files Like Lipitor, Diovan, Actos if FDA Issues Stay Foggy; Are Big Launches Imperilled?" - Scrip, 16 Mar, 2011.).

Several companies are expected to benefit from Lipitor's patent expiry, but each of those are caught in either regulatory or legal tangle (Also see "The Last Days Of Lipitor: Morass Of Regulatory, Legal Issues Could Mean Few Early Generics" - Pink Sheet, 14 Feb, 2011.).

Tertiary Sales In India Brighten But Below Estimates

Ranbaxy's consolidated sales from its global operations for the second quarter stood at $461 million as compared to $456 million during the same period last year. But after-tax profit fell by 25% to $122 million as profits shrunk from its 180-days exclusivity products like Valtrex (valacyclovir) and Aricept (donepezil).

Over 57% or $261 million was contributed via emerging markets. In the Indian market, Ranbaxy tightened its grip gaining 4.79% market share, up from 4.63% during its comparative period, on the back of strong growth witnessed in tertiary sales, or mainly smaller cities and towns. Its sales grew by 18% for the first six months of the year. However, an overall decline in the anti-infectives market in India, which also forms a large chunk of Ranbaxy's offerings, dented possibilities of achieving a higher growth rate.

Saion Mukherjee, an analyst at Nomura said, "Indian formulation sales failed to pick up materially during the quarter. Indian formulation revenues, including Glocal Consumer Healthcare, grew 10.6% year-on-year, well below our expectations of 19%....Overall, the company expects to grow higher than the Indian Pharmaceutical Market."

Meanwhile, Ranbaxy announced that its newest manufacturing site at Mohali, India has also just been inspected by U.S. FDA. No word yet, though, on the results.

- Vikas Dandekar ([email protected])