Lupin#39;s US FDA compliance woes suggest the problem runs deeper
There is no end in sight for India’s third largest drug maker Lupin’s regulatory woes. The company on January 13 said its Tarapur active pharmaceutical ingredient (API) manufacturing site in Maharashtra has been classified as official action indicated (OAI) by US FDA.
The site was inspected by US FDA between September 16 and 20 last year, and issued three observations at the end of inspection.
US FDA classifies its inspection as OAI for plants found in an unacceptable state of compliance with regard to current good manufacturing practices (CGMP), attracting agency’s possible action such as withholding new approvals, warning letters and import alerts.
The agency will intimate the company about the classification within 90 days of the inspection.
Lupin said it is in the process of sending further updates of its corrective actions to the US FDA and is hopeful of a positive outcome.
“The company does not believe that this inspection classification will hove on impact on disruption of supplies or the existing revenues from operations of this facility,” Lupin said.
What is ailing Lupin?
Tarapur is Lupin’s fifth facility in the past 12 months to be hit by regulatory compliance issues. The other plants under US FDA scanner include Indore Unit-2 (makes oral solid and ophthalmic formulations), Goa (oral solids), Mandideep Unit-1 (cephlosporins) and Somerset (oral, derma and controlled substances). All the four facilities were warning letters by US FDA that bars them from getting new approvals.
To be sure there will be no impact on existing facilities, but the warning letters and OAIs put lid on new approvals, critical for profitability and growth of generic companies in US.
Analysts says that repeat of Lupin’s compliance woes point to much deeper problem.
“The OAI status comes as a surprise to us, considering that the observations hardly seemed to be of a serious nature,” said Kotak Securities in its latest report on Lupin.
“This suggests that the US FDA was either not satisfied with the proposed corrective plan, or has linked the facility outcome to the four OAI facilities, thereby making a further case for the system-wide remediation,” the report added.
“Any enterprise wide quality transformation is a lengthy process and takes years. Lupin’s top management is aware of it, luckily for them, levothyroxine – the most important launch of FY20 in US, came from a site that is not under US FDA scanner,” said an analyst on condition of anonymity.
But however Lupin needs to resolve its regulatory as it has 153 filings pending approvals, which is key to their growth in coming quarters.
US is critical market for Lupin’s profitability, as it generated about 35 percent of its revenues in FY19. Analysts expect Lupin’s US business to be largely flat, in best case scenario they project a growth of 2-5 percent.
Lupin is taking several measures to improve its compliance tract record. The company is implementing a programme called Quality First, across manufacturing sites to upgrade and strengthen quality and compliance systems
The programme spans across all our sites, covers people processes, products, SOPs (standard operating procedures), training, among others.
To lead the quality function, Lupin appointed Johnny Mikell as Global Head of Quality of the company.
Mikell who was previously heading quality function at Canadian drugmaker Apotex will help steer the company towards enhanced standards of quality and compliance.
The company is planning to offer its Goa and Somerset (US) sites, for re-inspection by the end of fourth quarter FY20. Those re-inspections will be litmus test for Lupin’s ability to turn the tide.
To be sure it isn’t Lupin alone, Aurobindo Pharma’s Srikakulam API plant, Strides’ Puducherry facility; Alkem Laboratories’ St Louis site in the US; Indoco’s Goa unit; Jubilant Life’s Nanjangud unit in Mysore, Karnataka and Cadila Healthcare Moraiya have all received warning letters in over past one year.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.