Sun Pharmaceutical’s US subsidiary, Caraco Pharma, has decided to cut its workforce by more than a half after the recent clampdown by USFDA on the company’s manufacturing facilities had idled most units.
Caraco, which has a total of 667 full-time employees, has reduced its workforce by about 350 personnel, after USFDA pulled up the company for “repeated manufacturing standards violations” last month.
On June 25, the US Marshals, at the request of USFDA, seized drug products manufactured at Caraco’s Michigan facilities in Detroit, Farmington Hills and Wixom. The seizure put an immediate stop to the firm distributing drugs, pending an assurance that it would comply with USFDA’s current manufacturing practices.
“The process of instituting an indefinite reduction in the workforce is to align our expenses with the current voluntary cessation of manufacturing operations in connection with the recent action by USFDA,” said Caraco in a recent statement posted on the website. “The timing of the resumption of manufacturing operations, in whole or in part, depends on the outcome of discussions with USFDA,” statement added. When contacted, a Sun Pharma spokesperson declined to comment on the issue.
Caraco’s banker JPMorgan Chase Bank has said the company cannot draw on its $10-million (Rs 48 crore at current exchange rates) line of credit until the regulatory matter with USFDA was resolved. The US company, however, said this does not have any material impact on its current financial position.
“Manufactured product sales have represented approximately one-third of the company’s net sales revenue,” said Caraco. For FY09, net sales of manufactured products and of distributed products were $111.8 million and $225.4 million, respectively.
“We anticipate working with the FDA for resolution as expeditiously and effectively as possible,” the company added.
US officials had seized all medicines made at Caraco’s Michigan facilities, which makes 35 drugs, including generic versions of anti-diabetes, analgesics, anti-hypertensives, cardiovascular and psychiatric drugs. The company also has two packaging plants in Michigan.
The clampdown by the USFDA is the latest in a series of investigations against Caraco. FDA recently said its inspections have documented serious violations of good manufacturing practices by Caraco. The most recent inspection, which ended in May 2009, revealed deficiencies in the company’s manufacturing practices. Since January 2009, Caraco has recalled a number of products due to manufacturing defects, including oversized tablets.
The action against Caraco could likely hit Sun Pharma. Caraco sales contributes almost 33% to Sun Pharma’s revenue. On June 27, the Indian pharma major said it would come up with a revised guidance on its performance in the wake of action against Caraco. “We are withdrawing our guidance for this financial year. When we reissue guidance, that will factor a more measured response to all the current issues,” Sun Pharma CMD Dilip Shanghvi said in a conference call. While saying that the FDA action “is a large negative” for Sun Pharma, Mr Shanghvi said he didn’t see anything that will “negatively impact medium-term and long-term growth prospects.”