Ranbaxy halts drug ingredient shipments from two plants as scrutiny mounts

By Zeba Siddiqui and Sumeet Chatterjee

MUMBAI (Reuters) - Ranbaxy Laboratories (NSI:RANBAXY.NS - News), hit by a rash of sanctions by the U.S. regulator, has suspended shipments of pharmaceutical ingredients from two plants amid growing scrutiny of its manufacturing processes by other regulators.

The suspension at the Toansa and Dewas plants, already banned by the U.S. Food and Drug Administration (FDA) from shipping products to the United States, Ranbaxy's biggest market, will hit supplies to other key markets such as Europe and India, two people with direct knowledge of the matter said.

Worries about quality control in India's $14 billion drug industry have come to the fore in the past year as plants run by Ranbaxy and local rival Wockhardt (WCKH.NS) have been barred from sending drugs to the United States after falling short of the FDA's "good manufacturing practices".

Margaret Hamburg, the head of the agency, last week completed a 10-day visit to India, which supplies about 40 percent of the generic and over-the-counter drugs consumed in the United States, urging heightened cooperation between Indian and global regulators.

Indian drug regulators inspected Ranbaxy's Toansa facility two weeks ago, Ajay Singla, assistant drug controller of northern Punjab state, where the facility is located, told Reuters on Tuesday. He said he has yet to receive a report on the inspection.

Regulators from other countries including India, Ranbaxy's second-biggest market, have sought clarification on last month's export ban at Toansa by the FDA, Ranbaxy said earlier this month.

Ranbaxy said in a statement on Tuesday that it was "examining processes and controls" at all its active pharmaceutical ingredients (API) manufacturing units.

"This voluntary decision was taken as a precautionary measure and out of abundant caution to better allow the company to assess and review the processes and controls," it said.

It did not give details about the impact of the move. The sources declined to be named due to sensitivity of the issue.

Without production at the Toansa and Dewas plants, Ranbaxy will be unable to make pharmaceutical ingredients in-house and will have to rely on sourcing from other companies for making generic drugs, which could push up costs, analysts said.

"If they don't supply even captively, which means they will have to buy from outside, that will impact their margins," said Surajit Pal, an analyst at brokerage Prabhudas Lilladher.

Shares in Ranbaxy fell as much as 2.7 percent in the early trading, but recovered later and closed 1 percent higher. The stock is down 20 percent since mid-September when its third plant was hit by the FDA import ban.

STRING OF BANS

Last month, the FDA prohibited Ranbaxy from shipping to its biggest market any pharmaceutical ingredient made at its Toansa plant.

The ban, which followed similar actions at two plants in 2008 including Dewas and another in September 2013, means Ranbaxy, controlled by Japan's Daiichi Sankyo Co Ltd , can no longer export to the United States from India.

Ranbaxy, which makes ingredients at the plants for drugs used in oncology, dermatology, gastrointestinal and cardiovascular disorders, generated 36 percent of its sales in the United States in the quarter ending in December.

India accounted for about 20 percent its sales in October-December and Europe and the Commonwealth of Independent States' contribution was 16 percent.

Ranbaxy also said on Tuesday it had set up a committee to provide oversight on manufacturing and quality operations, systems, organisation and integrity.

(Editing by Christopher Cushing, Tony Munroe and Matt Driskill)