USFDA action on Caraco could severely hit Sun Pharma’s revenues

US sales contribute about a third of Sun Pharma’s overall revenue

India’s leading generic player Sun Pharma could take a major hit in its bottomline in consequence of USFDA seizure of drugs and raw materials alleging repeated violations in manufacturing practices in Caraco’s facilities in Detroit.

US marshals, at the request of the FDA, seized drug products manufactured at Caraco’s  facilities in Detroit, Farmington Hills, and Wixom on 25th June. The seizure also includes ingredients held at these same facilities, Caraco said in a press statement.

Generic drugs seized by federal authorities could cost Detroit-based Caraco Pharmaceuticals an estimated $15 million to $20 million in lost inventory.

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“While we have not fully determined the impact of this action by the FDA on our financial condition, we believe that it may have a material adverse effect on our near-term operations,” Caraco said in the statement.

Currently, US sales contribute about a third of Sun Pharma’s overall revenue. The revenues from US sales are almost equally divided between the drugs made and sold by Caraco and those made by Sun Pharma and distributed by Caraco.

The US FDA action follows Caraco’s continued failure to meet the FDA’s current Good Manufacturing Practice (cGMP) requirements.

Since January 2009, Caraco has initiated voluntary recalls of drug products to protect the public from potentially defective medications. The recalls involved manufacturing defects, including oversized tablets and possible formulation error.

The FDA’s most recent inspection of Caraco, completed in May 2009, found unresolved violations of cGMP requirements. Today’s seizure is intended to lead to major changes at Caraco’s facilities, an FDA release said.

Through this seizure, the FDA seeks to immediately stop the firm from further distributing drugs until there is assurance that the firm complies with good manufacturing requirements.

Caraco manufactures 33 drugs in multiple strengths.The FDA seizure of Caraco’s drugs may create a shortage of one product, choline magnesium trisalicylate oral tablets, which are commonly used as pain relievers.

Products manufactured by third party companies and sold under the Caraco label won’t be affected by the FDA seizure. Nor will the seizure affect products recently sold into the market by Caraco, the release said.

Caraco sells about 3.6 billion generic tablets in more than 50 products annually to wholesalers, drug distributors and retail giants.

Caraco manufactures a wide variety of drugs, including the popular diabetes medicine metformin and the pain reliever tramadol (see Caraco’s complete list of products below) .

Recently, USFDA initiated a similar action banning Ranbaxy from importing more than 30 generic drugs into the U.S. because of manufacturing violations at two Indian plants. The FDA action considerably dented the near term and long prospects of the company.

In May, the FDA issued a warning letter to generic drug maker Lupin Ltd. related to quality issues at a company facility in India.

Observational letters were also sent to Cipla Ltd.’s plants during routine inspections earlier this year.

For Caraco, the FDA move comes after the company had in November last year received a warning letter from the agency related to quality control issues at its Detroit manufacturing plant.

The company earlier this year voluntarily initiated a recall of some products manufactured in the Detroit facility.

For the fourth quarter ended March 31, Sun Pharma’s consolidated net sales fell 9.8% to 11.34 billion rupees from a year earlier, dragged down by a 67% drop in Caraco’s fourth-quarter sales.

List of Drugs Manufactured by Caraco

Allopurinol Tablets

Amlodipine Tablets

Atenolol Tablets

Baclofen Tablets

Carvedilol Tablets

Cetirizine Tablets

Cetirizine IR Tablets

Choline Magnesium Trisalicylate Tablets

Citalopram HBR Tablets

Clonazepam Tablets

Clozapine Tablets

Digoxin Tablets

Flurbiprofen Tablets

Fluvoxamine Maleate Tablets

Glipizide Tablets

Glipizide/Metformin Tablets

Hydrochlorothiazide Tablets

Meloxicam Tablets

Meperidine HCl C-II Tablets

Metformin Tablets

Methimazole Tablets

Metoprolol Tartrate Tablets

Midrin Capsules

Mirtazapine Tablets

Oxaprozin Tablets

Paromomycin Sulfate, USP Capsules

Paroxetine Tablets

Phentermine HCl Tablets

Ticlopidine HCl Tablets

Tizanidine HCl Tablets

Tramadol HCl Tablets

Tramadol HCl/Acetaminophen Tablets

Zolpidem Tartrate Tablets

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