After A Brief Pause, Injectables Cash Cow Agila Is Back Into Production; Pfizer Expects Shipping To Commence Soon
Pink Sheet Daily
July 10, 2013
Executive Summary
Agila, as its name suggests, was agile in correcting deficiencies outlined in an FDA 483 last month and is back on track to supply global customers like Pfizer, GSK and Eli Lilly. But Mylan’s planned buyout of Agila, Strides Arcolab’s cash cow, has hit a snag and been put on hold by India’s finance ministry.
After halting manufacturing last month, Agila Specialties Pvt. Ltd. has commenced production at all five of its manufacturing units in India. Agila stopped production at all its sites, following inspectional observations in June by U.S. FDA officials at its sterile specialty formulation facility at Bommasandra, roughly 90 kilometers north of Bangalore.
In a cautionary move, Agila shot off missives to its global customers that it would voluntarily suspend production as part of a corrective action plan to ensure quality. When contacted by PharmAsia News, a U.S. FDA official said as a policy it does not discuss investigations it may or may not be conducting.
According to sources, FDA inspectors took issue with the quality of gloves used at the sterile manufacturing site. While the exact nature of the violation arising out of faulty gloves could not be ascertained, Agila is said to have changed the vendor for the gloves to mitigate risks.
Pfizer Reacts
Without naming Agila, Pfizer Inc., one of Agila’s key customers, told PharmAsia News that, “Due to an issue with one of our third-party suppliers, we are experiencing a backorder on a number of our sterile injectable products, including some of our antibiotic products.”
The New York-headquartered firm added it was working to resolve the issue as quickly as possible and expected to be able to start shipping the affected products in July.
Agile Corrective Moves
Industry experts commended Agila’s swift moves to alert its customers and inform them about the issues detected at the manufacturing site. “While any deviations, if prolonged, can result in souring business relationships, the company had installed sophisticated instruments that would automatically stop production and minimize risks to quality,” one industry expert suggested.
Agila has five sites in India – a specialty formulations facility at Bommasandra, two at Billekhalli and two more facilities, one of which focuses on cephalosporins.
With the exception of the present FDA 483 inspectional observations, Agila has built an impeccable track record for quality and delivery with clients that include Eli Lilly & Co., GlaxoSmithKline PLC apart from Pfizer.
The company has also driven strong financial performance over the last two years even as some of its largest competitors like Hospira Inc. were faulted on good manufacturing practices issues resulting in an acute shortage of injectable oncology drugs.
As a result of the shortage, Agila emerged as a lucrative takeover target, and Bangalore-based Strides Arcolab Ltd. sold Agila, its injectables cash cow, to Mylan Inc. for $1.6 billion in February.
Mylan is investing heavily to create a competitive advantage based on manufacturing quality – and public policy. The firm’s recruitment of FDA’s Deborah Autor highlights a strategy to spend more on quality while aiming at higher margins, especially in sterile injectables where the company sees an opening after the widespread quality breakdowns across the industry.
In a July 2012 research note, analysts Nitin Agarwal and Vineet Chandak at financial securities firm IDFC, said Strides had 161 ANDAs alone in the sterile injectables space although only 43 have been commercialized so far. Strides could file for as many as 50 new ANDAs during 2013, which leaves a lot of opportunity to scale up.
“Given the tight steriles market in the U.S. and availability of abundant FDA-approved capacities backed by its superb ANDA pipeline, we expect Strides’ specialty business to scale-up briskly in the second half of 2013,” the analysts wrote.
In contrast to its larger Indian rivals like Ranbaxy Laboratories Ltd., Wockhardt Ltd. and Aurobindo Pharma Ltd., which over time have reeled under comprehensive FDA investigations and suffered revenue losses, Agila has maintained a clean slate, devoid of quality lapses.
Deal Stuck In Government Quagmire?
Meanwhile, Mylan’s pursuit to acquire Agila is struck in inter-government squabbles. On objections raised by the Department of Industrial Policy and Promotion under the commerce ministry, the finance ministry is learned to have held back its approval to the deal.
Most of the commerce ministry concerns are reportedly linked to fear about shortages of critical drugs in the Indian market if a foreign drug maker is allowed to acquire the company. India’s Economic Times reported July 8 that the DIPP was particularly concerned about foreign companies owning facilities that make oncology drugs.
Current discussions could lead to new prerequisite requirements before a foreign company is cleared to buy an Indian asset, an industry source said.
Under present statutes, proposals by foreign companies to set up new facilities or greenfield projects may not require additional clearances, but if companies propose to a complete or 100% buyout of an existing Indian enterprise, government permissions are required. For pharma companies, certain conditions may be imposed such as providing existing essential bulk drugs up to a period of at least five years after acquisition date. For minority acquisitions, up to a 49% limit, a deal can pass without such close scrutiny.
Strides sent a notice to the India stock exchanges July 4 that its board of directors approved an increase in the limit of investments by foreign investors from 49% to 74% in the equity share capital of the company.