US FDA issues import alert for key Ranbaxy products

The US FDA has issued two warning letters to Ranbaxy Laboratories and an import alert for generic drugs produced by the company's Dewas and Paonta Sahib plants in India. The warning letters identify the Agency's concerns about deviations from US cGMP requirements, while the import alert covers more than 30 different generic drug products produced in multiple dosage forms at these two locations.

While the FDA noted that it was confident that other manufacturers could meet market demands, and no product recall had been issued, the Wall Street Journal has reported that some drug stores are looking for alternative suppliers and were nervous that if they did switch they would be liable for cost increases due to contract provisions. Meanwhile, other countries have started to look at bans. In New Zealand, for example, the Health Ministry's drug regulatory arm has said that it was checking with regulators abroad to see if audits since then had given it a clean bill of health, though like the FDA it noted that there were no concerns about the medicines themselves and that users should continue taking the drugs.

This is not the first time that Ranbaxy has been in hot water with US regulators, and represents the second time in less than three years FDA has issued a Warning Letter to Ranbaxy. In 2006, FDA cited the Indian firm for violations of US cGMP at its Paonta Sahib facility. Since then, Ranbaxy has been attempting to resolve the issue with US regulators. However, in 2007, US officials seized documents from Ranbaxy's US headquarters in New Jersey. Furthermore, in July 2008, the US Department of Justice claimed that the company submitted false information about stability and bioequivalence to support ANDAs for antiretrovirals distributed by the President’s Emergency Plan for AIDS Relief (PEPFAR) programme. Prominent Congressmen on the US House Committee on Energy and Commerce indicated at the time that they would commence a formal investigation into the Ranbaxy drug approvals and potential violations of GMP regulations.

Daiichi Sankyo, which agreed to acquire the majority of the voting capital of Ranbaxy in June, has yet to comment on the latest events, though both firms have previously stressed that the share purchase agreement is binding and final. North America is a significant market for Ranbaxy, however; the region constituted around 26% of the firm’s revenues in 2007. Ranbaxy is already looking aggressive in its attempts to overturn the FDA’s ruling, enlisting former New York mayor Rudy Giuliani to represent it in Court in an attention-grabbing move. Nevertheless, the firm may need more than PR to help it out of its current predicament.

Jonathan Way - Editor, World Generic Markets

Teva eyes new markets following Barr purchase; DOJ targets Ranbaxy

Teva Pharmaceutical Industries has elaborated on its recent purchase of Barr Pharmaceuticals. The deal, valued at US$7.5 billion, raises interesting questions about Teva’s new scope. The two firms held an acquisition luncheon a few days after the announcement, in which they emphasised the strong strategic fit between the two companies, its expanded product portfolio and pipeline and its increased presence in first-to-file/paragraph IV applications.

Most significantly, Teva discussed its strengthened presence in key global markets; post-takeover, Teva will be able to offer direct sales in more than 60 countries. Eastern and Central Europe were highlighted as areas of strength for the combined firm. Barr and Teva combined would have been ranked fifth in Germany, third in Poland, ninth in Russia and first in Croatia in 2007. The new presence in Europe will be complemented by Teva’s new Spanish capabilities, following the successful completion of Teva’s Bentley Pharmaceutical purchase.

As for future growth opportunities, Teva CEO Shlomo Yanai noted in an interview with the Financial Times that he is now keen to forge a joint venture in Japan to capitalise on the country’s fast-growing generics market. "Right now Japan is more ripe for generics, (but still) difficult to break into," Yanai commented. Japan has traditionally been reluctant to accept generic medicines; the government has been keen to change habits, however, in an attempt to reduce medical costs. Recent rule changes compel generic substitution unless a doctor specifically requests a patented drug on the prescription form.

Any attempt by Yanai and Teva to get into the Japanese generics market is likely to come after Ranbaxy’s entrance via Daiichi Sankyo, which is in the process of buying the Indian firm. The deal between the two is still on track, in spite of recent allegations from the US Department of Justice against Ranbaxy. The DOJ claims that the company submitted false information about stability and bioequivalence to support ANDAs for antiretrovirals distributed by the President’s Emergency Plan for AIDS Relief (PEPFAR) programme. Prominent Congressmen in the US House Committee on Energy and Commerce have now indicated that it will soon commence a formal investigation into the Ranbaxy drug approvals and potential violations of GMP regulations. The moves have seemingly not deterred Daiichi however, which has been keen to stress that its share purchase agreement with Ranbaxy is binding and final.

Jonathan Way - Editor, World Generic Markets

Daiichi shocks industry with Ranbaxy share deal

Daiichi Sankyo and Ranbaxy Laboratories have surprised the pharmaceutical industry by entering into a binding share purchase and share subscription agreement, which will eventually leave Daiichi with a controlling interest in the Indian firm. The deal values Ranbaxy at US$8.5 billion and the total transaction value is expected to be between US$3.4 billion to US$4.6 billion. Daiichi Sankyo and Ranbaxy highlighted the complementary business combination that the link-up would create, noting that it would leave Daiichi with an expanded global reach and strong growth potential by complementing proprietary drugs with generics. Daiichi also hinted that it may shift part of its production to India, commenting that it could achieve further cost competitiveness by optimising its new R&D and manufacturing facilities.

The move represents Daiichi Sankyo's first foray into generic drugs, and contrasts with the strategy adopted by its Japanese rivals: Takeda Pharmaceutical, for example, bought biotech firm Millennium Pharmaceuticals in April, while Eisai bought speciality manufacturer MGI Pharma in December 2007. The Ranbaxy deal should bolster Daiichi’s revenues more quickly however, with income from the acquisition expected from the fiscal year after next.

Interestingly, Daiichi is following the model of Novartis by incorporating generic sales into its structure; this strategy has the obvious benefit of maximising the full pharmaceutical life-cycle of products, and also hedges the inherent riskiness of new molecules with a more steady supply of generics. The model follows long-term assumptions over the future of the industry, where a handful of global players will dominate, crowding out all competitors bar the smaller niche-orientated firms.

This major deal in many ways mirrors the divestiture of Merck Generics last spring. That deal saw a brandname manufacturer look to sell its generics division; the race to buy the firm was eventually won by Mylan Laboratories, which had to fight off competition from a number of other major generic firms. These included Ranbaxy, which was an early contender, along with Teva Pharmaceutical Industries and Actavis. At the time, it seemed these three companies would be in the forefront of bidding for the next big generics target; ironically, Ranbaxy itself has now become a target. That flurry of activity after the initial Merck Generics bid could indicate a similar bidding process for Ranbaxy; indeed rumours have since circulated that Pfizer may bid for the remaining shares. However, without the support of the Singh family, Ranbaxy’s largest and controlling shareholders, a counterbid may prove difficult. For now, Daiichi remains in the vanguard.

Jonathan Way - Editor, World Generic Markets