May 10, 2014 4:50 am JST

India's Ranbaxy swallows big loss amid US export ban

TAKAFUMI HOTTA, Nikkei staff writer

MUMBAI -- Ranbaxy Laboratories sank into the red in its latest fiscal term as the Indian generic-drug producer suffers from a spate of quality issues.

     Ranbaxy, a subsidiary of Japan's Daiichi Sankyo, posted a loss of 10.8 billion rupees ($180 million) for the 15 months from January 2013 to March. The company remained in the red for a fourth straight quarter in the three months ended March 31.

     In January, the U.S. Food and Drug Administration slapped an export ban on the company's Toansa ingredient facility, citing such misconduct as data manipulation during the manufacturing process. The inability to ship products to the world's biggest market had far-reaching consequences. It disrupted ingredient supplies, affecting exports, Chief Executive Officer Arun Sawhney explained.

     Daiichi Sankyo decided last month to sell Ranbaxy to another Indian player, Sun Pharmaceutical Industries. "The poor earnings of Ranbaxy prompted Daiichi Sankyo's management to part ways with the subsidiary," says a source at Sun Pharma. The deal was reached after only several months of negotiations.

     Ranbaxy is not alone in having quality issues. "Many Indian drugmakers are having a hard time satisfying FDA standards," says a local analyst. Data from the FDA shows that more than 20 facilities in India have been subject to export bans since 2013.

     India has emerged as a leading supplier of generic drugs in recent years, and today some 40% of such drugs in the U.S. are said to have been produced in the South Asian country. While touching upon the importance of India's generic-drug industry, FDA Commissioner Margaret Hamburg emphasized during her trip to the country in February that Indian companies selling pharmaceuticals in the U.S. must meet the standards there.

     Although some argue that the FDA measures are politically motivated, quality improvement is necessary. And reviews of production processes and worker training are expected to drag on.