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Ranbaxy Laboratories (RBXY)
Pharmaceuticals
Rigorous provisions in fine print of consent decree. While the consent decree offers
a definite path towards resolution of outstanding issues, the fine print reveals more
rigorous provisions than we anticipated. Ranbaxy has lost FTF status on three out of
eight products and risks losing FTF status on another five. Provisions to bring back two
affected facilities into compliance are rigorous, time consuming, involve external
certification prior to FDA scrutiny and, shockingly if additional facilities are found to be
non-compliant, they can be brought under this decree. Due to non-disclosure of
affected FTFs, we remove FTF value/share of Rs50 from our target price. Downgrade to
SELL (from REDUCE) with target price of Rs400 (was Rs450).
Broad provisions of the consent decree
The decree lays down details with timelines and provides for guidelines of how (1) the “affected
facilities” - Dewas, Paonta, Gloversville (officially closed by Ranbaxy on October 13, 2011) or (2)
“affected applications” will be brought into compliance. Within five days of entry of the decree,
Ranbaxy must provide the FDA with a list of affected ANDA applications (those filed/approved
from the affected facilities). FDA has halted and will not resume reviewing the affected
applications until a Data Integrity Expert has made a detailed audit of the applications as per FDAagreed
protocol.
All the affected ANDA applications must be audited by a Data Integrity Expert first and then by the
FDA within four years, failing which Ranbaxy must withdraw the applications. Lipitor is not subject
to the consent decree provisions.
We believe around 45 pending ANDAs (non FTFs and excluding the 12 filed from Ohm and Mohali
in 2010) and the 30 banned ANDAs could be part of the “affected applications” which have to
scrutinized over next 4 years. As of December 2010, Ranbaxy disclosed that it had FTF status on 13
products (three were filed from Ohm, two have been launched since). Therefore the balance eight
FTFs are subject to the provisions of the consent decree as below
Ranbaxy may have lost FTF status on three products, risks losing FTF status on another five
We think Ranbaxy has lost FTF status on products slated for launch in the near term: Actos (August
2012 launch) (Rs15/share in our TP), Clarinex 5 mg (July 2012 launch) (crowded) and Provigil (April
2012) or Diovan (March 2012) (not in our estimates).
Four FTFs have been deemed as “excepted applications” (not affected) for now, for which
Ranbaxy must satisfy data integrity provisions (see details inside) by a specified date, failing which
it will lose FTF status on the products.
If Ranbaxy does not get final approval on the fifth ANDA by March 25, 2013, it will lose FTF on it.
We think this could be Valcyte (Rs5/share in our TP) for which Ranbaxy has settled to launch in
March 2013.
Data integrity provisions regarding “excepted“ applications
Within 30 days of the entry of the decree, Ranbaxy must appoint a Data Integrity Expert,
who will establish the reliability and integrity of data contained in all applications – affected
and excepted.
The Expert shall develop plans to audit “excepted applications” or the EA audit plan.
After the plan has been accepted by the FDA, the Expert shall begin auditing the
excepted applications in accordance with the plan.
The audited reports for each application will be submitted to Ranbaxy and the FDA
simultaneously.
The FDA shall audit the report for each application within 60 days to ascertain whether it
contains satisfactory/true/untainted regulatory data, compliant with CGMP norms.
For the four excepted applications if all these procedures are not complete by specified
timelines, Ranbaxy stands to lose FTF status on them.
4 ANDAs have been deemed as “excepted applications
ANDA 1 31-Dec-12
ANDA 2 31-Jan-13
ANDA 5 31-Jul-13
ANDA 4 30-Sep-14
Source: Company
Data integrity provisions regarding “accepted “applications
FDA has halted and will not resume reviewing affected applications until certain provisions
are satisfied. The provisions are as follows:
1. A Data Integrity Expert will develop internal review protocols for Paonta + Dewas, which
will be submitted to the FDA.
2. The FDA will have 60 days to approve or disapprove them.
3. If approved, the Expert will begin internal reviews in accordance with FDA-approved
protocols.
4. Based on results of internal reviews, the Expert will develop audit plans to audit all the
affected applications for Dewas and/or Paonta.
5. The audit plans will be submitted to the FDA for approval.
6. If approved, the Expert will begin review as per the plans and submit audit reports
simultaneously to the FDA and to Ranbaxy.
With respect to applications regarding Dewas, if the audit reports are found satisfactory, the
FDA will resume reviewing affected applications, or in the case of an approved application,
notify that issues regarding reliability of data are resolved.
7. Ranbaxy will then get 90 days to submit to the FDA an initial CAOP (Corrective Action
Operating Plan) addressing internal review findings of the facility and each affected
application. The CAOP shall ensure the integrity of the data submitted to the FDA.
8. Within 60 days of these procedures being completed, the FDA will review and notify
whether the CAOP is acceptable or deficient.
9. If approved by the FDA, Ranbaxy will implement the CAOP.
10. If all these conditions are satisfied, the FDA will promptly decide whether it needs to
inspect Paonta, If no inspection is necessary, it will revoke the AIP. If inspection is
required, the FDA will begin inspection within 90 days of making such a decision. If the
inspection is satisfactory, the AIP will be revoked.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ranbaxy Laboratories (RBXY)
Pharmaceuticals
Rigorous provisions in fine print of consent decree. While the consent decree offers
a definite path towards resolution of outstanding issues, the fine print reveals more
rigorous provisions than we anticipated. Ranbaxy has lost FTF status on three out of
eight products and risks losing FTF status on another five. Provisions to bring back two
affected facilities into compliance are rigorous, time consuming, involve external
certification prior to FDA scrutiny and, shockingly if additional facilities are found to be
non-compliant, they can be brought under this decree. Due to non-disclosure of
affected FTFs, we remove FTF value/share of Rs50 from our target price. Downgrade to
SELL (from REDUCE) with target price of Rs400 (was Rs450).
Broad provisions of the consent decree
The decree lays down details with timelines and provides for guidelines of how (1) the “affected
facilities” - Dewas, Paonta, Gloversville (officially closed by Ranbaxy on October 13, 2011) or (2)
“affected applications” will be brought into compliance. Within five days of entry of the decree,
Ranbaxy must provide the FDA with a list of affected ANDA applications (those filed/approved
from the affected facilities). FDA has halted and will not resume reviewing the affected
applications until a Data Integrity Expert has made a detailed audit of the applications as per FDAagreed
protocol.
All the affected ANDA applications must be audited by a Data Integrity Expert first and then by the
FDA within four years, failing which Ranbaxy must withdraw the applications. Lipitor is not subject
to the consent decree provisions.
We believe around 45 pending ANDAs (non FTFs and excluding the 12 filed from Ohm and Mohali
in 2010) and the 30 banned ANDAs could be part of the “affected applications” which have to
scrutinized over next 4 years. As of December 2010, Ranbaxy disclosed that it had FTF status on 13
products (three were filed from Ohm, two have been launched since). Therefore the balance eight
FTFs are subject to the provisions of the consent decree as below
Ranbaxy may have lost FTF status on three products, risks losing FTF status on another five
We think Ranbaxy has lost FTF status on products slated for launch in the near term: Actos (August
2012 launch) (Rs15/share in our TP), Clarinex 5 mg (July 2012 launch) (crowded) and Provigil (April
2012) or Diovan (March 2012) (not in our estimates).
Four FTFs have been deemed as “excepted applications” (not affected) for now, for which
Ranbaxy must satisfy data integrity provisions (see details inside) by a specified date, failing which
it will lose FTF status on the products.
If Ranbaxy does not get final approval on the fifth ANDA by March 25, 2013, it will lose FTF on it.
We think this could be Valcyte (Rs5/share in our TP) for which Ranbaxy has settled to launch in
March 2013.
Data integrity provisions regarding “excepted“ applications
Within 30 days of the entry of the decree, Ranbaxy must appoint a Data Integrity Expert,
who will establish the reliability and integrity of data contained in all applications – affected
and excepted.
The Expert shall develop plans to audit “excepted applications” or the EA audit plan.
After the plan has been accepted by the FDA, the Expert shall begin auditing the
excepted applications in accordance with the plan.
The audited reports for each application will be submitted to Ranbaxy and the FDA
simultaneously.
The FDA shall audit the report for each application within 60 days to ascertain whether it
contains satisfactory/true/untainted regulatory data, compliant with CGMP norms.
For the four excepted applications if all these procedures are not complete by specified
timelines, Ranbaxy stands to lose FTF status on them.
4 ANDAs have been deemed as “excepted applications
ANDA 1 31-Dec-12
ANDA 2 31-Jan-13
ANDA 5 31-Jul-13
ANDA 4 30-Sep-14
Source: Company
Data integrity provisions regarding “accepted “applications
FDA has halted and will not resume reviewing affected applications until certain provisions
are satisfied. The provisions are as follows:
1. A Data Integrity Expert will develop internal review protocols for Paonta + Dewas, which
will be submitted to the FDA.
2. The FDA will have 60 days to approve or disapprove them.
3. If approved, the Expert will begin internal reviews in accordance with FDA-approved
protocols.
4. Based on results of internal reviews, the Expert will develop audit plans to audit all the
affected applications for Dewas and/or Paonta.
5. The audit plans will be submitted to the FDA for approval.
6. If approved, the Expert will begin review as per the plans and submit audit reports
simultaneously to the FDA and to Ranbaxy.
With respect to applications regarding Dewas, if the audit reports are found satisfactory, the
FDA will resume reviewing affected applications, or in the case of an approved application,
notify that issues regarding reliability of data are resolved.
7. Ranbaxy will then get 90 days to submit to the FDA an initial CAOP (Corrective Action
Operating Plan) addressing internal review findings of the facility and each affected
application. The CAOP shall ensure the integrity of the data submitted to the FDA.
8. Within 60 days of these procedures being completed, the FDA will review and notify
whether the CAOP is acceptable or deficient.
9. If approved by the FDA, Ranbaxy will implement the CAOP.
10. If all these conditions are satisfied, the FDA will promptly decide whether it needs to
inspect Paonta, If no inspection is necessary, it will revoke the AIP. If inspection is
required, the FDA will begin inspection within 90 days of making such a decision. If the
inspection is satisfactory, the AIP will be revoked.
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