Regulatory Approvals Continue To Haunt Ranbaxy

Indian healthcare companies have been seeing a lot of traction both in terms of international reach and increasing revenues.Indian companies have been making good revenues through the sale of generics across the globe and most of the biotech firms have been increasing their R&D investment.

We recently had an article on the Indian Health Care sector and how they have performed in the Stock Markets.The numbers and the sentiment pretty much looks promising on the whole.Infact, discussions with readers have yielded a positive outlook.The retail investor is bullish on the Healthcare sector.In fact, a lot of Mutual Funds have allocated a healthy part of their portfolio to health care and pharma stocks.

However, the nagging worry that the Indian healthcare sector faces is none other than international regulatory approval.United States is a strategic and critical market for the healthcare industry in India.The company that has been constantly under the radar for sometime now is Ranbaxy.

FDA has again issued a warning to Ranbaxy’s US unit regarding manufacturing practises at Ohm Laboratories.They have expressed concerns that their plant is violating the necessary manufacturing best practises.The timing could not have been worse for Ranbaxy given that  it recently launched a new generic version of a drug.The target market was United States and it was the Ohm Laboratories in US that had received the FDA approval. The company was expecting sales to the tune of $200 million in the 6 months exclusive marketing period.

The FDA warning had an immediate reaction the price of Ranbaxy stock on Friday.The Ranbaxy stock tanked a whopping 7% in intra-day trade to 3 month low of 395.10 rupees.Looks like Ranbaxy has still a long way to get the regulatory issues over its head.It is noteworthy that Ranbaxy faced a similar warning from FDA last year too, the concerns raised directed at Ranbaxy’s Paonta Sahib Plant in India.

According to some noted market analysts, Ranbaxy is having issues sorting its quality issues and a FDA is clearly not happy with the progress made my Ranbaxy to ensure industry best practises.Like last time, where FDA banned the import of 30 drugs, a FDA approval is critical for the drug makers to make headway into the US market.

Instances like these make me wary of investing in pharma companies.Even if theses incidents are too far and few, the enormity of even a single such incident can have a disastrous impact.No matter how good the company’s fundamentals are or the breakthrough products they are able to produce, if they are not able to sell it, i am worried.

What do you think is the solution for the pharma companies in terms of getting regulatory approvals? Could it be a case of the FDA governing body being too hard on the Indian pharma companies

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Author: Ankit Agarwal

Ankit Agarwal is an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion. You can follow him on twitter @ankit_a

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Tagged as: critical market, fda approval, health care sector, healthcare sector, indian health care, indian healthcare, pharma stocks, Ranbaxy, retail investor, target market