Karma for big pharma? Sanofi-Aventis caught out by Inyx collapse

Some may say the pharma heavyweight is experiencing a dose of karma, after it sold the business in question, situated in Manati, Puerto Rico, to Inyx Inc in March 2005, after which point it became Inyx USA - an unpopular move with many of those affected at the time. Since then Inyx Inc. has run aground and Inyx USA is now under Chapter 11 bankruptcy protection, being run by administrator Stephen Gray of CRG Partners Group, and the site is the centre of a fierce ongoing court battle over its future, much to the dismay of its customers, suppliers, employees and investors. When Sanofi-Aventis' subsidiary Aventis-Puerto Rico sold the site to Inyx Inc the new owners also took over a number of Aventis' manufacturing contracts, with a valuation at the time of $4.7m (€3.3m) and three years remaining useful life. Inyx USA has since been manufacturing 15 different variations of five Aventis products: the topical acne drugs Sulfacet (sodium sulfacetamide), Benzagel (benzoyl peroxide) and Klaron (sodium sulfacetamide); Hytone (hydrocortisone), a topical treatment for skin irritations; and Vytone (hydrocortisone-iodoquinol) a drug for skin infections. Left in the lurch​ Now, with the site's ability to operate very much stunted, Aventis, along with many others, has been left in the lurch, and has been trying to get out of the supply agreement, which was due to end on 31 March, 2008, while at the same time force Inyx USA to uphold a technical agreement that it has tried to abandon - even though Aventis has revealed "serious concerns over Inyx's continued performance"​. According to court documents, Aventis said that Inyx USA breached its contractual obligations in two major ways, firstly by failing to deliver previously accepted and paid-for purchase orders to manufacture and deliver products under the supply agreement: It was stated that Aventis had ordered and paid for 30,000 units of Sulfacet-R in August 2006 and a further 30,000 units in January 2007 but between February and August this year Inyx USA "presented Aventis with numerous reasons why the delivery of the Sulfacet-R orders were delayed, including Inyx's ability to acquire raw materials, credit issues with its vendors and the need to perform roof repairs."​ On 28 August 2007, Aventis was finally informed by Inyx USA that it "would not be filling the Sulfacet orders",​ according to an affidavit filed by Nora Poliakoff, vice president of Quality and Compliance in North America for Sanofi-Aventis. It is believed that Inyx USA was the sole manufacturer of the 15 Aventis products, although it is uncertain as to whether any significant supply issues resulted out of its failure to deliver the orders, and its entry into Chapter 11. A Sanofi-Aventis spokesperson told Outsourcing-Pharma.com that all the products have now been either moved back to a Sanofi-Aventis plant or had been previously discontinued in the US market. Meanwhile, the second major breach of contract, according to Aventis, was in regard to a technical agreement signed by the two firms as part of the supply agreement, which required that Inyx USA, as the manufacturer, retain a sufficient quantity of Aventis' product samples in a controlled area, in accordance with cGMP guidelines, for the longest available shelf life of the Aventis product, plus one year. This was to facilitate all the routine, analytical, microbiological, postmarketing and stability tests that are required under the US Federal Food, Drug and Cosmetic Act. Similar requirements applied to the retention of production, control, distribution and testing records for the Aventis products. However, in an e-mail on 7 September 2007, Heriberto Martinez, the director of Quality Control Laboratories and Product Development at Inyx USA, advised Aventis of its inability to satisfy its obligations to Aventis relating to the (already paid for) periodic stability tests: "Inyx is not in a position to continue to support the Sanofi-Aventis stabilities. The court appointed trustee has asked me to start the process of transferring the stability pulls back to Sanofi-Aventis …. Please advise to which site we will transfer the stability pulls".​ The US Food and Drug Administration (FDA) requires this stability testing to ensure that drugs on the market meet the applicable standards of identity, strength, quality and purity at the time of their use, including an appropriate expiration date. The results of these tests may be required to be reported, either upon testing or annually, to the FDA and other applicable regulatory authorities where the drug is sold. The court documents state that: "While Aventis has serious concerns about Inyx' continued performance of the contractually and federally-mandated product testing required with respect to the Aventis products heretofore manufactured by Inyx, Aventis needs a reasonable period of time [between 90 and 120 days] (a) to make arrangements with another equipped site for the performance of such testing, and (b) to arrange for the safe and secure transportation of the stability samples and all related records to such alternative location".​ The firm requested that "because of the potentially serious regulatory prejudice to Aventis,"​ the trustee should be compelled to provide assurance of compliance with all regulatory requirements relating to Aventis products through 31 December, 2007. ​ Aventis said its "interests will be seriously harmed" if Inyx is not required to (a) preserve and maintain the stability samples and the books and records relating to the manufacture, testing and storage of the Aventis products, and (b) timely perform the periodic stability tests… as mandated by applicable law..." ​Aventis was also seeking permission to access the Inyx site and inspect the stability samples, the books and records related to its products, as well as access to Inyx' electronic databases, warehouse, and off-site storage systems. Questions of quality?​ It is understood by Outsourcing-Pharma.com that a hearing was held on 3 October granting Aventis permission to terminate its manufacturing and supply agreement with Inyx USA and to transfer the stability samples, the related books and records and the periodic stability tests to a site designated by Aventis. In the meantime through to 31 December 2007 the trustee is obliged to timely perform all of Inyx' contractual duties in regard to the stability tests and also preserve all the abovementioned items according to regulatory standards, assist in the transfer process. Meanwhile, since the date that Inyx USA indicated it would no longer be performing the stability tests, it appears from the court documents that three stability tests scheduled for three Aventis products (10-Benzagel [lot number ACWO1R]; 5-Benzagel [lot number ACGO1R]; and Lozol [TDOO12]) have already been missed. This of course raises questions as to the legal and regulatory implications of not having these tests performed and how the quality of the batches in question, which are on the market, are being ensured, and if not, whether Aventis has initiated a recall. Furthermore, at the time of going to court, five more stability tests were scheduled until 31 December 2007 for: Hytone cream 1%, 2.5% (1 oz) and 2.5% (2 oz) [lot numbers HDOO1R, MN6219 and MN6218]; two for Sulfacet-R for sale in Canada [lot number ACSO12]; two for Sulfacet-R for sale in US [lot number ACSO11]; and Vytone cream 1% [lot number MN6220]. This raises further questions as to the quality of the product testing that Inyx USA has been ordered by the court to carry out during this period, particularly in light of the fact that by its own admission in court documents, Aventis said it "has serious concerns over Inyx' continued performance".​ Furthermore, under their agreement, Inyx USA was required to defend and indemnify Aventis against any claims resulting from Inyx' negligent acts, misconduct, or breach of obligations in connection with the performance of the services. However, considering that Inyx' responsibilities in this regard will soon end, it is also uncertain as to where the responsibility will lie should any problems arise at a later date? A Sanofi-Aventis spokesperson told Outsourcing-Pharma.com that the firm does not usually comment much on court cases, but did say that the company filed the court motion, in part, to obtain assurances from Inyx that it had continued to perform all stability studies on the products it had manufactured. "​As a result... Sanofi-Aventis received oral assurances that all stability studies have been performed and will be continued to be performed until arrangements can be made to transition those studies to another facility."​ The motion has now been adjourned so that the parties can continue to resolve outstanding issues. Should the matter not be resolved amicably, another hearing may take place on 6 December, the spokesperson said. Meanwhile, the fate of the Inyx USA site continues to hang in the balance. There is much speculation over whether the business will be sold to a third party intact or placed under Chapter 7 and subsequently liquidated. There has been talk of Abbott being interested in buying the facility, although an Abbott spokesperson told Outsourcing-Pharma.com: "We do not comment on rumours".​ Lessons learned...​ Meanwhile, there may be important lessons to be learned for all of big pharma from this situation, many of whom are increasingly selling off their manufacturing facilities and contracting the production of their products out to the new owners in a bid to strip down assets and save cash. Earlier in the year AstraZeneca entered the latest in a string of such arrangements, selling its sterile manufacturing site located in Monts, France to Swedish firm Recip Pharma, who is now contracted to continue making AstraZeneca's products at the site. In the past week both Pfizer and GlaxoSmithKline (GSK) have announced plans to hive off numerous plants in the coming years and more of these arrangements can be expected to follow, however, firms engaging in such activities would be wise to ensure their cost-cutting decisions don't come back to haunt them.