St hammers Sun Pharma as USFDA seizes 33 drugs of arm

Mumbai, India: US authorities seized drugs made by Sun Pharmaceuticals’ US subsidiary for violation of manufacturing standards, pushing down share

prices of India’s biggest drug company by market value by 12%. US Marshals on Thursday seized nearly 33 drug products, including generic versions of heart, pain and psychiatric medicines, manufactured at three units of Sun Pharma’s US subsidiary, Caraco Pharmaceuticals in Detroit, Farmington Hills and Wixom.

The seizure, which was carried out at the request of the US Food and Drug Administration (USFDA), put immediate halt to the US firm distributing drugs until there is assurance that it complies with the FDA’s current good manufacturing practices (cGMP).

“The action follows Caraco’s continued failure to meet the FDA’s cGMP requirements, which assure the quality of manufactured drugs,” the USFDA said in a media release. “The FDA is committed to taking enforcement action against firms that do not manufacture drugs in accordance with our cGMP,” Janet Woodcock, director of the FDA’s Centre for Drug Evaluation and Research, said in the statement.

Sun Pharma owns about three-fourth of Caraco. “Products manufactured at these facilities contribute around 15% to Sun Pharma’s topline and slightly more to the bottomline. So, in the short term, the impact will be around 15%. However, such issues do not get rectified quickly and I estimate that it will take around three quarters to resolve. It will be a stage by stage recovery,” said an analyst, who did not want to be named due to the sensitivity of the issue.

The Sun management, he said, may consider shifting the production base to other sites and look at other acquisitions, which is a time consuming process. “Over all, Sun’s image has been damaged and it will take Sun Pharma some time to regain it. In the meanwhile, it will lose market share that won’t be easy to recover,” he said. The market reacted sharply. The stock lost 18%, its biggest intra-day drop, during the trading hours.

However, it closed at Rs 1,140.45 on Friday, approximately 12% lower than Thursday’s close on the BSE. Caraco shares, on Thursday, plummeted 43% to an all-time low of $2.39 after the seizure. A Sun Pharma spokesperson declined to comment on the issue. However, it’s learnt that the company will host a conference call for investors on Saturday morning.

“While we have not fully determined the impact of the FDA action on our financial condition, we believe that it may have a material adverse effect on our near-term operations. We anticipate working with the FDA to resolve these concerns as effectively and expeditiously as possible. We believe that corrective actions have been made and continual improvements are in process,” Caraco said in a media statement.

Caraco filed 10 abbreviated new drug applications (ANDAs) with the FDA in FY09 and has 29 ANDAs pending approval by the FDA, which includes

four tentative approvals. The action by the FDA, however, has put all future approvals on hold for the company, casting doubt on the company’s future pipeline of products.

Caraco had earlier disappointed analyst with a drop in annual sales and income for FY09. Net sales dropped 4% to $337.2 million for FY09 as compared with $350.4 million for FY08. Net income decreased to $20.5 million during FY09 compared with $35.4 million in the previous year. Sun Pharma is not the only Indian company to be pulled up by the USFDA in recent times.

In September 2008, the FDA banned Ranbaxy from importing more than 30 generic drugs into the US because of manufacturing violations at its two Indian plants — Ponta Sahib and Dewas. In May this year, the FDA issued a warning letter to Lupin related to quality issues at a company facility in India and also sent queries to Cipla about four of its plants during routine inspections.

Caraco contributes almost 33% to Sun Pharma’s turnover. Of the 33 products manufactured by Caraco, three of its top products contribute almost one-third of its total revenue. Generic versions of Ultracet, made from the active pharmaceutical ingredient (API) Tramadol, has limited competition, as it is a difficult product to make and is likely to take the biggest hit. With the seizure of the drugs, the FDA anticipates that there may be a shortage of choline magnesium trisalicylate oral tablets, another product that is manufactured by Caraco.

This is the latest in a series of investigations against Caraco. A May 2008 inspection revealed serious deficiencies in the control of the company’s manufacturing practices. Since January 2009, Caraco has recalled a number of products due to manufacturing defects, including oversized tablets.

Seizures often lead to court orders that require companies to take steps to correct cGMP violations in their manufacturing processes. These steps may include hiring outside experts, writing new procedures and conducting extensive training to their employees.

Gasket Standardization: A New Tool for Cost Reduction in API Pharmaceutical Processes

The API pharmaceutical market has been increasingly buffeted by winds of global change. Even as new and innovative drugs have been developed and brought to market successfully, manufacturing operations have been increasingly challenged by the need to be more competitive and productive.

The trend has been to move to more efficient operations and lower costs, while at the same time increasing process reliability and the throughput of high purity products. Furthermore, manufacturing operations are shifting to the most desirable locations to meet the increased demands of cost controls and efficiency. Older, lower-volume facilities are being consolidated with larger, higher-volume sites that require ever-tighter process effectiveness. For API pharma manufacturers, this means finding new methods to economize and streamline all production processes. This has led the way to adopting new technologies and more simplified procurement processes, leading in turn to "standardization" as a tool to meet these challenges. And in fact, manufacturing and maintenance simplification, as well as inventory reduction, are achievable goals with standardization.

As process optimization trickles down from the most expensive items, it is reaching into all corners of processing plants that handle chemicals and other aggressive media. For example, there is already a definite trend in the chemical process industry towards the standardization of materials. We believe this will take place in the API pharmaceutical sector as well. Higher-cost items such as pumps and piping systems have seen the rapid advance of standardization. Now the trend is moving to standardization of smaller process components such as mechanical seals, bearings, O-rings, gaskets – and even nuts and bolts. Each of these categories has their own unique standardization challenges.

Gasket Standardization

Gasket standardization is one of the challenges now being addressed by chemical plants and processing units. From recent market research conducted by W. L. Gore & Associates, Inc. among leading North American chemical processors, it was found that approximately 75% of the companies interviewed have a gasket standardization effort in place. In most cases, the processors have standardized on a specific gasketing material for each of the three main piping categories – steel, glass-lined and FRP – while also allowing for some exceptions in the case of abnormal application requirements. Among the gasketing experts interviewed, 80% feel that gasket standardization is a top-level or highly important activity.

What does gasket standardization mean in terms of an "ideal world" to these experts? It means essentially one thing: a single gasket that can be used anywhere and is suitable for practically all applications. Unfortunately, ideal situations rarely exist. Thus, the focus has been to reduce the number of materials rather than to standardize on a single gasket material.

Several gasket materials available today may be categorized as suited for only one pipe class (e.g., for FRP, for glass lined steel, or for steel piping). Now, technology developed by Gore is capable of overcoming this challenge. The GORE™ Universal Pipe Gasket is compatible with steel, glass-lined, and FRP piping. It has been adopted successfully by many CPI chemical companies over the past five years.

The strategic benefits of this type of standardization are significant. Today, cost-effectiveness is integral to the strategic plans of all plants in the chemical and pharma processing industries. Gasket standardization can unlock the long-term strategic value that plants are seeking. Not only will the lowest procurement cost to seal a flange be achieved, but also the total "lifetime cost" of sealing will be optimized, producing continuous annual cost savings.

Gasket simplification of the type envisioned here would facilitate system-wide standardization across piping classes – metal, plastic and glass-lined – while increasing reliability and safety. A Pressure Vessel Research Council (PVRC) study showed that the average plant experienced 180 leaks per year, with 2% being serious enough to cause a process shutdown or worse. Knowing that the primary causes of leaks are improper installation of gaskets and use of the wrong gasket for the service, it's not difficult to conclude that installation effectiveness would be positively impacted with a standard gasket. In the final analysis, gasket standardization is a "win" for every function that is now involved with gasket selection, acquisition and use.

The Right Material

Approximately 95% of all process piping systems operate at less than 450°F and 1,000 psi internal pressure. To enable standardization, the gasketing material must withstand as close to 100% of these operating parameters as possible. This gasket material must achieve a bolt load retention that emulates graphite. It must also have the tightest sealing and lowest emissions, as well as the greatest safety against blowout. In other words, it should be the most reliable gasket. It must work effectively and deliver this performance across all three piping classes -- glass-lined, FRP and steel pipes. It must also support the full range of 0-14 pH service and low stress-to-seal systems.

There are additional, unique benefits available to API pharmaceutical companies with the standardization of gasket materials. The needs of this industry go beyond CPI in that the final products must maintain high purity and are subject to regulatory controls. Every component in the process system that comes into contact with the process fluid must meet the highest purity standards – and many need full traceability to the source of the material as well. The GORE™ Universal Pipe Gasket is the only 100% ePTFE non-contaminating (USPC VI Tested) gasket which can replace all non-metallic gaskets used in applications below 600°F, can effectively seal all types of process piping, and is fully traceable to the source.

Such technology enables API pharmaceutical companies to achieve all the cost reduction benefits of standardization to one gasket material while increasing process reliability, safety and purity.

Cost Considerations

In addition to performance qualifications, the standardization process offers economic advantages as well. Cost reduction is a primary driver of standardization, so obviously a gasket material must be cost-competitive if it is has any hope of becoming a standardization "flag bearer." It is important to look at the complete picture when analyzing the cost impact of standardization.

The initial cost of the gasket is one consideration, but additional cost savings are achieved when the correct gasket is always at hand. Maintenance requires less time, thus lowering labor costs. Fewer errors are made, resulting in fewer interruptions to production. Finally, inventory requirements are reduced.

API pharmaceutical companies can realize many benefits by standardizing on a single gasket material for all processes below 600°F that utilize non-metallic gaskets. In doing so, be sure to choose a gasket material that has passed USPC VI qualification testing and is traceable to the source, while also delivering the reliable sealing performance upon which every processing plant must rely.