Able Laboratories (ABRX)

[TechKim]

Posted 6/19/2005 9:17 PM Updated 6/20/2005 4:25 AM
http://www.usatoday.com/money/industries/health/drugs/2005-06-19-able-usat_x.htm

Massive drug recall spurs questions
By Julie Schmit, USA TODAY
A small New Jersey company is at the center of one of the biggest drug recalls ever, and a month after it began, little is clear about why millions of doses were suddenly pulled off the market.
Able Laboratories, a growing maker of generic prescription drugs, recalled all of its products on May 23, saying deficiencies in its testing procedures might have resulted in "sub or super potent" drugs.

The Food and Drug Administration says millions of doses were likely in the market. "We're getting reports of a large number of products being recalled, literally truckloads," says Margaret Glavin, associate commissioner at the FDA.

Check your drugs

Consumers who have drugs made by Able Laboratories should return them to their pharmacies, the FDA says.
Bottles or packages may not say the name Able. But numbers or letters imprinted on tablets or capsules will identify them. A recall list is at:
www.fda.gov
www.ablelabs.com
Able can be reached at: 800-982-2253.


Able produces about 30 generic drugs, some well known, including generic versions of the painkiller Vicodin, Tylenol with codeine, blood-pressure drug Atenolol and nitroglycerin tablets for chest pain.

Promethazine, an antihistamine, is its top seller, with more than 50% of the generic U.S. market.

The recall — highly unusual because all products were involved — has devastated Able and shareholders. Able's stock has dropped 86% since mid-May.

The recall is also likely to raise questions for the FDA. Able passed 11 FDA plant inspections in the past three years, the FDA says. Never did the FDA raise what it considered to be a serious concern about the company's manufacturing processes.

When all is known, "The FDA might end up with egg on its face," says Sharon di Stefano, stock analyst with Sky Capital. "The recall was unprecedented and shocking."

Able's downfall was swift

May 5: Able announces first-quarter revenue up 43% to $30.7 million. Damage was "fairly contained," CEO says in next-day conference call when questioned about a February product recall. "I thought to myself, 'Oh, no big deal,' " says Tom Bishop, editor of investment newsletter BI Research.

May 10: Able files a report with Securities and Exchange Commission. It says company is probing operating practices because of three recent product recalls.

May 19: Able says it suspended shipments, found "departures from standard operating procedures" in lab testing and that the CEO was resigning.

May 23: Able announces total recall.

May 25: Able tells customers what to do with their drugs.

June 9: Able announces more job cuts, in addition to the 200 announced on May 27.


The recall's exact size won't be known for weeks or months. Able produced 1.3 billion tablets, capsules and suppositories last year.

Drugs made earlier might be in the market, too, if they haven't expired.

The FDA and the company advise consumers to keep taking the drugs until they get new medications from their doctors. A sudden stop could do more harm than taking a possibly compromised drug, they say.

"The drugs might be fine, but you just don't know," says Sheila Weiss Smith, associate professor in the University of Maryland's school of pharmacy.

Manufacturing ends

Since the recall, Able, with sales of $103 million last year, has halted manufacturing and laid off more than half its 400 employees. Its CEO and co-founder, Jay Wadekar, has resigned, and the company has given no assurance as to when, or if, it'll resume production.

"I've never heard of a recall resulting in the shutdown of an entire company," Smith says. "It's hard to tell if this was a new problem or something that had been going on for a long time."

The company has refused to comment. Wadekar could not be reached. Calls to four Able board members were not returned. At least eight shareholder lawsuits have been filed since the recall's announcement

"The board is diligently working to solve the problem," says company adviser Mallory Factor, who refused to comment further.

The first hints of trouble emerged in mid-May, when Able announced an internal review after recalling three products in the first quarter. Days later, Able said some laboratory testing practices showed "departures from standard operating procedures."

The full recall came four days later.

It was also three months after the FDA had inspected the South Plainfield, N.J., plant, where most of Able's production was done. The February inspection, designed to check the practices that Able later said were lacking, turned up nothing that would warrant an FDA warning letter, the FDA says. Warning letters are made public and demand corrections under threat of more serious sanctions.

Five of the FDA's 11 Able inspections since early 2002 looked at the company's manufacturing practices, the FDA says. The others focused on new-product approvals, so were narrower in scope.

In 2004, Able was cited for failing to tell the FDA about 27 consumers who had adverse reactions after taking Able-made drugs. Seven other drugmakers received warning letters for similar issues since 2002, FDA records show.

While Able repeatedly passed FDA muster in recent years, it hasn't always.

In 1991, the FDA charged Able with failing to comply with good manufacturing practices, and the company operated under a consent decree for 10 years.

Able has also had at least 12 product recalls since 1991, the FDA Web site says. The far bigger generic-drug maker Mylan Laboratories, with $1.3 billion in fiscal 2005 sales, has never had a product recall due to its own error, it says.

Able's recalls show that the company struggled with a broad range of problems:

• In 1993, it recalled non-prescription aspirin and a vegetable laxative that were feared subpotent, and non-prescription cold tablets that had longer expiration dates than allowed.

• In 2001, it recalled 126,000 nitroglycerin tablets, taken for chest pain, because they were mislabeled in terms of strength.

• This year, it recalled 3 million Atenolol tablets, distributed in Florida and Ohio, because of subpotency concerns; 75,000 mislabeled bottles of antibiotic Metronidazole capsules; and 2 million suppositories made of Promethazine Hydrochloride, used to treat allergies and control nausea. The suppositories failed stability tests, which include purity and efficacy.

FDA steps in

The FDA says it's investigating what went wrong at Able.

The company's two biggest distributors, McKesson and Cardinal Health, say they've returned all of their product. They handle about 29% of Able's production.

The recall has also ensnared other companies. Quality Care Products of Michigan bought Able drugs and sold them under the Quality name. Last week, it put out its own recall notice.

It was the first that co-owner and CEO Mike Holmes remembers doing in years — and the first for a manufacturer's entire product line.

The recall won't cost his company much, Holmes says, but "you never want to have your company name in a recall even though we had nothing to do with it."

While Quality expects little sting from the event, Able's future is uncertain.

In addition to suspending manufacturing, Able withdrew seven new drug applications pending at the FDA because it said it can no longer rely on the data upon which they were based.

That is a sharp reversal from the direction Able had been heading. Since 2001, it was FDA-approved to make 25 new drugs. It is close to opening a new plant that could boost production at least 300%.

The trouble that struck the company was unseen on May 5 when Able said first-quarter profit was up 75%.

Several stock analysts, on a conference call with company executives the next day, complimented the strong quarter.