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THE actual revenue impact on the company will vary on a host of factors, such as inventory that has already been shipped to the US, on whether the company manufactures these drugs at other locations, and whether it has obtained marketing approval to manufacture the banned drugs in other facilities. Ranbaxy said three of the over 30 banned drugs—Simvastatin, Acyclovir and Larotadine D—are also made at its US facilities.

The action taken by the USFDA forms part of its ongoing investigations against Ranbaxy. The FDA served notices to the company voicing their concerns on crosscontamination and equipment validation at the two units. Ranbaxy is also under investigation by the American authorities for alleged data fabrication and selling adulterated drug in the US market from its Poanta Sahib facility.

Significantly, for Ranbaxy, the USFDA has explicitly stated that it has no evidence to show that the Indian drugmaker has shipped defective products. It also said its action does not involve removing products from the US market and it will not affect Ranbaxy’s products from other plants. It has also recommended that US consumers continue to take medications manufactured by Ranbaxy and not disrupt their therapy.

In addition to the 30 generic formulations, the USFDA has also banned seven Active Pharmaceutical Ingredients (API), used in the manufacture of these drugs. Sources say Ranbaxy sells about 130 drugs in the US from several USFDA-approved facilities, including three in the US. America is Ranbaxy’s single-largest market and for the sixmonth period ended June 2008, Ranbaxy’s US sales stood at $206 million or 24% of the company’s total revenue of $849 million. In 2007, the company had clocked annual sales of $398 million in the US.

The list of banned drugs includes Valcyclovir, the low-cost version of GSK’s billion-dollar drug, Imitrex. The drug could have translated into potential revenues of $90-100 million on its launch in mid-2009 in the US with Ranbaxy enjoying a six-month marketing exclusivity period. It is not known whether the Indian drug major has approval to manufacture this molecule from any other facility. The USFDA has allowed India’s largest drug company to import Ganciclovir though it falls within the banned list to avoid creating a shortage of the drug of which it’s the sole supplier in the US. These developments will not have any impact on Japanese drug major Daiichi Sankyo’s decision to buy Ranbaxy. The company said it will go ahead to complete the acquisition process of Ranbaxy.

In its reaction, the Indian company has expressed disappointment at the developments. “Ranbaxy is very disappointed by the action FDA has taken. In the past two years, the company has responded to every concern of FDA’s and had thought that progress was being made. We are, however, pleased that FDA’s testing and review led the agency to conclude that there is no reason to question the safety or effectiveness of Ranbaxy’s drugs.” The Gurgaon-based company added that it is yet to review the concerns cited by FDA in its warning letters. It said it would work towards resolving the issues once it has reviewed them.

But these are clearly trying times for Ranbaxy. In addition to the immediate revenue implications, analysts say the FDA’s action could dent Ranbaxy’s image in the US among retailers and consumers and make distributors less enthusiastic about its products. In addition, there are concerns about whether regulators in other countries could explore similar actions.

Ranbaxy sympathisers, however, point out that the FDA appears to have acted in haste and under pressure from some quarters. “Why should an import alert be announced when FDA admits there is no evidence to show that it shipped defective products and when it is not removing products from the market?” wondered a source close to Ranbaxy. Some industry watchers are concerned that other Indian drugmakers could be similarly targeted. “The image of India’s drug industry will definitely take a beating,” said an industry executive.

“Today’s actions are clearly warranted, based on the extent and the seriousness of the violations uncovered during our inspections of these two sites,” said Deborah Autor, director, CDER’s Office of Compliance, FDA. “Until the company addresses these deficiencies, APIs and finished drug products from these plants will remain on Import Alert, and we will not approve any Abbreviated New Drug Applications (ANDA) or New Drug Applications (NDA) that list either of the two facilities as the manufacturer of APIs or finished drug products,” Autor added.

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