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Thursday, June 22, 2017

USFDA plans to ease market entry of generic drugs

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Mumbai: The US Food and Drug Administration (FDA) is working to lift certain barriers that delay entry of generic drugs into the market, as part its efforts to provide affordable medicines to patients, said FDA commissioner Scott Gottlieb in an official blog on Wednesday.

The move is likely to benefit Indian generic drug makers that supply a large chuck of their products to the US market. For leading pharmaceutical companies like Sun Pharmaceutical Industries Ltd, Dr. Reddy’s Laboratories Ltd and Lupin Ltd, the US accounts for nearly half of the total revenue.

“Too many patients are being priced out of the medicines they need. While FDA doesn’t have a direct role in drug pricing, we can take steps to help address this problem by facilitating increased competition in the market for prescription drugs through the approval of lower-cost, generic medicines,” said Gottlieb.

The development comes in the backdrop of US President Donald Trump and lawmakers’ emphasis on reducing medicine prices in the country. According to a Bloomberg report last week, the Trump administration is preparing an executive order aimed at lowering US drug costs.

Gottlieb said the USFDA is working on a Drug Competition Action Plan and in this regard it intends to hold a public meeting on 18 July to solicit inputs on places where FDA’s rules are being used in ways that may create obstacles to generic drugs access instead of ensuring competition.

Over the last decade alone, generic drugs have saved the US healthcare system about $1.67 trillion, the commissioner said in the blog. The US regulator has observed that innovator companies use certain regulatory norms to delay or block entry of generic drugs in the market and is looking to modify such rules.

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“We know that sometimes our regulatory rules might be ‘gamed’ in ways that may delay generic drug approvals beyond the time frame the law intended, in order to reduce competition. We are actively looking at ways our rules are being used and, in some cases, misused,” Gottlieb said.

He said one example of such gaming is the increasing unavailability of certain branded products for comparative testing. To perform the studies required to develop a generic alternative to a branded drug, a generic sponsor generally needs 1,500 to 3,000 doses of the originator drug.

“I understand that generic sponsors are willing to buy these products at fair market value; but, in some cases, branded companies may be using regulatory strategies or commercial techniques to deliberately try to block a generic company from getting access to testing samples,” he said.

Besides limiting access to testing samples, some branded companies may be using the statutory default requirement to have a single shared Risk Evaluation and Mitigation Strategy (REMS) across both the branded and generic versions of a drug as a way to block generic entry, Gottlieb said.

The drug regulator is also looking to coordinate with the Federal Trade Commission (FTC) in identifying and publicising anti-competitive practices.

Altice raises $1.9 billion in year’s second-biggest US IPO

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New York: Billionaire Patrick Drahi’s Altice USA Inc. raised $1.9 billion in the second-biggest US initial public offering of the year.

Altice USA and some existing shareholders sold 63.9 million shares for $30 apiece, near the top end of the marketed price range of $27 to $31 each, according to data compiled by Bloomberg. The company said in a filing earlier Wednesday that it was increasing the size of the deal because Canada Pension Plan Investment Board and BC Partners had boosted the number of shares they were offering.

The IPO comes exactly one year after Altice USA was formed when its parent company, Altice NV, closed the acquisition of Cablevision Systems Corp. That business was combined with Suddenlink, which Altice bought in 2015, to create the fourth-largest US cable provider.

Altice USA’s IPO is the second-biggest of the year in the US, behind Snap Inc.’s $3.9 billion deal that includes an overallotment to underwriters, according to data compiled by Bloomberg. The ranking excludes real estate investment trusts, special purpose vehicles and funds.

The company reported 4.9 million customers in 21 states at the end of March, according to its latest SEC filing. Accounting for the Cablevision acquisition, Altice USA posted a net loss of $721.6 million in 2016 on revenue of $9.2 billion.

JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. led the IPO, according to the filing. The stock will begin trading Thursday on the New York Stock Exchange under the ticker ATUS.

Cable fight

Altice USA plans to use money raised in the IPO for acquisitions, following in the footsteps of its parent company. Drahi, 53, is well known in the global M&A market after spending the past few decades amassing a cable empire across Europe and the US.

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Cable companies have been fighting for market share as consumers move away from traditional TV services, pushing consolidation across the industry. They’ve also made moves into the wireless market. Comcast Corp. and Charter Communications Inc., the two largest US cable providers, last month announced plans to collaborate on their wireless businesses.

Others are simply combining. AT&T Inc. acquired DirecTV in 2015 to become the largest pay-TV operator in the US and is awaiting regulatory approval for its $85 billion takeover of Time Warner Inc. Last year, Charter Communications acquired Time Warner Cable Inc. and Bright House Networks to become the No. 2 cable-TV provider behind Comcast.

Lenders may split Icomm Tele’s defence, telecom tower businesses

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Mumbai: The lenders to Icomm Tele Ltd, led by Axis Bank Ltd, are considering splitting the Hyderabad-based engineering company’s two main business lines—telecom towers and defence equipment—into separate companies, before selling stakes in both, two people familiar with the matter said on condition of anonymity.

The company had a debt of Rs1,702 crore on its books as of January 2016, and is now controlled by its lenders.

“As a policy, we don’t comment on client-specific transactions,” a spokesperson for Axis Bank said in an email.

Emails and text messages sent to Icomm Tele promoter and managing director Sumanth Paturu and Sreekumar Kurup, a director at the firm, did not elicit any response.

Established in 1989, Icomm Tele is an engineering, procurement and construction (EPC) company that focuses on providing infrastructure solutions, primarily in the telecom, power, and the water and waste-water sectors.

Apart from its EPC business, the company is also engaged in designing, developing, manufacturing, installing and commissioning communications equipment for telecom operators and for the defence sector.

Icomm Tele was a vendor to the Indian army’s cruise missile programme ‘Brahmos’.

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But it has run into rough times, largely on account of the slowing of the infrastructure sector, according to one of the two people cited above.

The company’s financial performance deteriorated from 2010, when it was doing well enough to file documents to sell shares. That public offering was subsequently shelved.

From Rs1,063 crore in financial year 2007-08, the company’s revenue dropped to Rs440.9 crore in fiscal year 2014. The company reported a loss of Rs84.5 crore in FY 2014. Latest revenue and profit/loss figures are unavailable.

“Lenders, who had initiated debt restructuring at the company under the corporate debt restructuring (CDR) mechanism back in 2012, invoked strategic debt restructuring (SDR) at Icomm Tele last year and they have converted part of their loans to a majority stake in the company,” said the first person,

Under the latest debt resolution plan at Icomm Tele, bankers are splitting the company into two. One of them will house the power transmission and telecom tower EPC business.

The other will have the defence business, said the second person.

“The tower business will be transferred to a company called Icomm Ltd, and the defence business will be transferred to Icomm Electronics Ltd. The move is likely a precursor to sell stakes in these businesses,” this person added.

A resolution could also help the company’s private equity investors—Kotak Private Equity and Tano Capital—realize some returns from their almost decade old investment in the company. The two funds had invested in Icomm in 2008.

Spokespersons for both Kotak Private Equity and Tano Capital did not respond to e-mails seeking comment.

Moves to resolve debt-related issues at Icomm Tele come at a time when the central government and the Reserve Bank of India have intensified their efforts to resolve the Rs10 trillion of non-performing assets clogging the Indian banking system.

Last month, the government notified an ordinance to the Banking Regulation Act, giving RBI broad powers to deal with specific bad loans cases, to speed up resolution.

Sebi’s showcause notice to NSE in algo-trading case points to another shoddy investigation

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The Securities and Exchange Board of India’s (Sebi’s) show cause notice to the National Stock Exchange of India Ltd (NSE) generates a lot of noise and smoke, but lacks substance.

Considering that over two years have passed since it received an anonymous complaint about the exchange’s algorithmic trading policies and practices, the investigation falls woefully short of standards expected from the regulator.

Sebi’s main charge is that NSE did not provide fair and equitable access to the brokers using its co-location facility, and that certain brokers unduly benefitted as a result.

But strangely, Sebi’s investigation department hasn’t bothered to find out the financial gain the said brokers made by getting faster access to the exchange’s data and systems, or whether they made any gains at all.

Much of the other evidence provided is circumstantial, as far as the charge about undue benefits go. The fact that the regulator has failed to mention anything concrete on this leaves us with some disturbing inferences: the regulator is incompetent to analyse the relevant data; or that it has studied the data and hasn’t found evidence of undue financial gains; or, worse still, that it studied the data and found evidence of undue gains, but hasn’t brought it up to help NSE save face.

In recent years, Sebi’s track record with investigations has left a lot to be desired.

With NSE, an immensely important case, it had a chance to redeem itself. Besides, it had the luxury of time, the services of a forensic auditor (even though it was one appointed by the exchange at the instruction of the regulator), as well as a study commissioned by its technical advisory committee (TAC).

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Despite all of these resources, the notice to the exchange only makes a passing reference to the possibility of undue gains. The reference is to a report commissioned by the TAC, which states that OPG Securities, a trading member, gained materially by exploiting NSE’s systems.

The committee, in turn, relied on the following observation to conclude that the member benefitted materially: It found that OPG’s success in getting its orders executed reduced dramatically when NSE changed its trading architecture from the TCP/IP model of communication to IP Multicast. While the former (transmission control protocol/internet protocol) scores high on reliability, it also results in minor differences in the speed at which market data reaches each trading member. OPG is said to have exploited this feature to be ahead of other brokers while receiving data from the exchange and using it to be the first to gain from arbitrage opportunities.

In mid-2014, NSE introduced the IP Multicast mode of communication, where data is sent simultaneously to many recipients together.

The report commissioned by the TAC and the show cause notice point that this significantly altered OPG’s activity on the exchange.

But all of this is vague.

Did OPG’s turnover and profit reduce substantially post 2014? Did its revenue and profit jump significantly in the period it is said to have taken advantage of the TCP/IP architecture? Was it an outlier in terms of gains made by brokers that employed similar trading strategies?

Finding answers to these questions isn’t rocket science; exchanges have all the necessary trade data and all the regulator needs to do is ask for it.

Of course, all of this is not to say that NSE is not at fault. Even if it turns out that OPG didn’t make material undue gains, the fact remains that there were shortcomings in the exchange’s policies and practices, and worse still, there was a concerted attempt to cover them up.

Besides, the forensic audit by Deloitte Touche Tohmatsu India Llp points to instances where emails and records of key staff were unavailable.

This includes records of two chief technology officers who served at the time of the alleged infractions, as well as a key employee who is alleged, according to some market participants, to have colluded with OPG. Sebi’s notice also claims that the exchange withheld information from Sebi and failed to co-operate with the regulator and other investigators. Undoubtedly, the exchange must face the music for these blunders.

But having said that, a key piece of information the regulator needs before it imposes a penalty on the exchange is the quantum of undue gains allegedly made by the brokers mentioned in Sebi’s show cause notice.

Besides, news reports suggest the exchange is keen to settle the case once and for all through the consent mechanism. But again, how will the penalty under the consent mechanism be determined unless the regulator has a handle on the size of unlawful gains?

Of course, not all is lost. Sebi can still pull up its socks and do the needful.

In a briefing with reporters on Wednesday, the new Sebi chairman, Ajay Tyagi, said the regulator will engage a forensic auditor to ascertain whether brokers made unfair gains. It’s difficult to understand what kept the regulator from doing so earlier.

But as they say, it’s better late than never.

In sum, the show cause notice is weak as far as incriminating evidence goes, even though it’s true that the circumstantial evidence points to lapses on the exchange’s part. The regulator should remedy this before it issues its final order.

Why Uber boss Travis Kalanick’s resignation is good news for Ola

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Bengaluru: The resignation of Uber CEO Travis Kalanick, who was a big backer of the company’s money-losing India business, may cause uncertainty in the short term at Uber India and boost Ola’s chances of retaining its market leadership, analysts said.

The change at the top could force Uber to cut its aggressive spending aimed at gaining market share, analysts said. If Uber reduces spending on driver incentives as well as keeping prices low for riders in markets like India, it will hit growth and benefit rivals, they added.

“The new chief executive may not be as aggressive or forward thinking as Kalanick. A company with a founder as CEO will have more aggressive growth than a professional CEO who is likely to take a cautious approach. In the long term, things will stabilize, but in the short and medium term, Uber may take a hit. Secondly, the investors may rethink further investments and will wait and watch. A professional CEO and chief operating officer will continuously be guided by the board, which will look for profitability,” said Jaspal Singh, partner at Valoriser Consultants, a research firm focused on transportation.

Kalanick’s resignation, prompted by investor pressure, came after a wide-ranging probe into Uber’s practices on tackling issues such as sexual harassment at the company and the professionalism and ethics of its leaders. Uber’s board hired two law firms, Perkins Coie and Covington and Burling, to conduct the investigation after reports emerged earlier this year about instances of sexual harassment and inappropriate behaviour by members of the company’s management team.

Two of Kalanick’s trusted leaders—Uber’s business chief Emil Michael and Eric Alexander, former head of Uber’s Asia Pacific business—were forced to resign in the last two weeks.

Still, Kalanick’s resignation came as a shock, not least to Uber employees.

On Wednesday morning, junior employees and executives at Uber India were caught off guard by the news about Kalanick’s resignation, according to two company executives. Only later in the day did they hear officially from the company when Kalanick wrote an email to employees, according to the executives.

“We all got to know about Travis’s exit this morning around the time the story broke in the media. Right now everybody is stunned and still coming to terms with the news, but it’s business as usual otherwise,” said one Uber executive, on condition of anonymity.

An Uber India spokeswoman declined to comment on the potential impact of Kalanick’s exit on the company’s India business.

Since its launch in India in 2013, Uber has been spending aggressively on discounts, driver incentives and increasing supply. Uber was expected to increase spending in India to beat Ola after it sold its China business to local rival Didi Chuxing last year.

In a September interview, Uber India president Amit Jain said that Uber’s completed trips had risen from 165,000 a week in January 2015 to 5.5 million at the end of August 2016.

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Both Uber and Ola claim market leadership in India; analysts say the two are running neck and neck with each other.

Ola, run by Bhavish Aggarwal, has mopped up about $350 million in fresh funding over the past six months led by existing investor SoftBank Group Corp. While the company had to raise funds in a so-called down round that valued the company at $3-3.5 billion as against $5 billion in 2015, analysts believe Ola chances of keeping its position as market leader have improved after Kalanick’s resignation; so have its chances of attracting more cash.

“When top management changes, two things happen. One, immediate funding may get slower. Second, international level changes in policies may not happen for some time. Companies don’t resort to transformational changes in the initial three to six months. Instead, there will be local decisions in countries in line with the risk appetite of the company. When a company is in stabilizing mode, the competition tries to win the war. Given that there is uncertainty with the biggest competitor, rivals can benefit and there is a possibility that if they are raising funds, they might get an edge,” said Sreedhar Prasad, partner (e-commerce and start-ups) for KPMG in India.

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