Able Laboratories (ABRX)

[TechKim]

Able Labs' stunning fall still rippling
From Florida to India, other drug firms are feeling the pain
Sunday, June 05, 2005
BY GEORGE E. JORDAN
Star-Ledger Staff
http://www.nj.com/business/ledger/index.ssf?/base/business-0/1117947445116140.xml&coll=1&thi...


Pailla Reddy said he spent last week waiting anxiously by the telephone for a call that never came.

Now, he thinks it never will.

Reddy, chief executive of InvaGen, an upstart pharmaceutical research firm on Long Island, said he had been expecting a $1.5 million check from Able Laboratories, a generic drug maker based in Cranbury. But two weeks ago, Able abruptly halted operations and recalled all of its products from the market. Since then, it has lost its credit line and cut almost half its staff.

The problem for Reddy is that last month Able signed an agreement to produce and sell generic drugs developed by InvaGen, a private venture launched two years ago. The initial payment, for $1.5 million, was due May 27.

"We're going to have financial problems because of these stupid people," Reddy said of Able's executives. "They are not calling me and I want to know what happens. I'm looking for my money."

Now, Reddy said, InvaGen faces the real possibility of going belly up, caught in the backwash of Able's implosion.

InvaGen isn't alone. From Boca Raton, Fla., to Madison, Miss., and Bangalore, India, other drug companies that did business with Able have been hurt by its apparent collapse.

The Able case highlights the complex web of interrelationships in the generic drug industry, and shows how the problems of a tiny drug maker can potentially have a wide impact on the nation's prescription drug supply.

"When there is a recall, it's going to affect the entire market, depending upon the size of the company's sales," said lawyer Peter Reichertz, who works with drug companies on manufacturing issues from his office in Washington, D.C.

"Able doesn't have a blockbuster product, but they have niche products," he said. "Even though they are a small player overall, they could be a significant player in one product."

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Able was a familiar name in the pharmaceutical industry because of its fast-growing stable of products, including widely available generic versions of popular brand-name drugs for pain, inflammation, obesity, cardiovascular problems and neurological ailments. Its top seller was a generic version of the allergy tablet Promethazine.

Last year alone, Able produced 1.3 billion doses of prescription medication in nondescriptwarehouses in New Brunswick and South Plainfield.

Since the May 19 resignation of Chief Executive Dhananjay Wadekar, the company has said its product line suffered from "improper laboratory practices and noncompliance with standard operating procedures," and that some of its products may be "sub- or super-potent."


The company has repeatedly declined to answer questions about its difficulties.

Arthur Wong, a pharmaceutical analyst at Standard & Poor's, said generic drug makers buy one another's products and enter into development agreements to expand their operations on the cheap.

"How else to they expand their portfolios? Their internal research and development is not fast enough, so they license, buy, do distribution agreements, development agreements," he said. "A lot of the pharmaceutical industry is intertwined these days."

In addition to InvaGen, Able entered into a development agreement last year with the New Jersey subsidiary of Strides Arcolab, one of India's largest manufacturers and exporters of pharmaceutical products. At the same time, Able purchased raw products from suppliers in India, according to its filings with the Securities and Exchange Commission.

The recall affected medicines produced under both the Able Laboratories brand and LiquiSource, a New Brunswick manufacturer and supplier acquired by Able two years ago. It manufactured 12 difficult-to-produce liquid medications, including cough-cold products and antihistamines.

Glenn Pruitt, regulatory director at Cypress Pharmaceutical, a generic drug house in Madison, Miss., said the LiquiSource portion of the recall has generated a mountain of paperwork and expense. Cypress stopped buying Able products a year ago, he said, but the long expiration dates on LiquiSource goods means many bottles are still in circulation.

"That certainly hurt us pretty hard," he said. "It's not just the cost of the product, but a recall is expensive. The costs can run thousands and thousands of dollars. You have to pay the wholesalers, there's a lot of shipping and a lot of aggravation. Nobody wants a recall."

Recalls last year by Able -- including batches of a liquid pediatric nausea medication and tablets of the popular blood pressure medication Atenolol -- prompted Cypress to stop doing business with Able, Pruitt said.

Larry Runsdorf, president of Boca Raton-based Breckenridge Pharmaceutical, said the only drugs his company purchased from Able were LiquiSource antihistamines. IVAX, a Miami-based generic drug manufacturer, said it also purchased a significant number of goods from LiquiSource.

Both Breckenridge and IVAX said Able's recall was causing them serious financial and logistical headaches.

Reddy of InvaGen said he soon expects to get angry letters from consultants and suppliers that are owed a total of $692,000 for work related to the agreement with Able.

He recalled the satisfaction on the faces of his scientists -- lured from Genentech, Pfizer and other top pharmaceutical laboratories -- the day Able signed to bring InvaGen's first products to the marketplace.

"We don't have money to pay. Now we need more bio-studies. We don't know what to do," Reddy lamented. "We're looking for new investors, who are very difficult to find.

"Everybody is hurt because of this stupid company."



George E. Jordan may be reached at [e-mail] or [phone].