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Will USFDA follow Canada and the UK in recalling Losartan?

Financial risk - least; regulatory risk may amplify for Indian companies

* From May-Sep’21, Canada has recalled over 170 lots of Losartan manufactured by five different companies due to the higher-than-permissible levels of azido impurities, which raises the risk of cancer in patients taking the drug regularly.

* With the UK also issuing similar recalls on Losartan in Aug’21, along with Irbesartan, there is an increasing risk, that the USFDA may follow suit in recalling Losartan finished formulations, where the limit of azido impurities are found to be higher than permissible levels.

* While Indian Pharma companies – Aurobindo Pharma (ARBP), Cadila Healthcare (CDH) and Lupin (LPC) – dominate the Losartan formulations market in the US, their exposure is just 1-3% of US sales and ~1% of total sales. The recall may have a minimal financial impact.

* However, the regulatory headwinds may increase, which may delay new approvals. Given the situation of intense pricing pressure in the base business, a product recall and/or delay in new launches would reduce the operating leverage and impact overall profitability.

Azido impurities pose a new risk to patients

* Due to the continuous usage of Losartan and other Sartans to keep blood pressure under control, patients are exposed to impurities over time. The azido impurity, in this case, is a mutagen that causes changes in the DNA of a cell. This may increase the risk of cancer in patients taking these drugs.

* Losartan belongs to a class of drugs known as an angiotensin II receptor blocker (ARB) used to treat patients with high blood pressure and to help prevent heart attacks. It is also used by patients who have suffered recent heart attacks and those with heart failures.

Indian companies have a low financial exposure if a recall is activated

* Certain Indian companies (ARBP/CDH/LPC) have a meaningful market share (25%/20%/10%) in Losartan formulation in the US. Global/US consumption of Losartan API stands at ~1,400TPA/400TPA and 14b/4b tablets (formulations market size: USD320m/USD125m). It is witnessing a volume CAGR of 5-6%.

* Exposure of Losartan in our coverage companies is very small (0.4-2.8% of US sales). At a time, when there is heightened pricing pressure in the base business, the loss of sales and cost of executing the recall could hinder the sales recovery in the US to some extent.

However, regulatory issues may escalate

* Past instances of NDMA impurities above permissible limits in Valsartan had led to the issuance of a warning letter on the sites. This escalated regulatory woes and significantly delayed new approvals, impacting overall utilization of the manufacturing asset. We are monitoring the situation closely for further updates.

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