Several financially distressed, small pharma companies can become easy prey to the underworld controlled drugs business. The recent seizure of drugs worth Rs2,000 crore from a loss-making Avon’s plant may be just tip of an iceberg 
The recent case of seizing a whopping 18.5 tonnes of banned drug Ephedrine, worth over Rs2,000 crore from Avon Lifesciences a company listed in the Bombay Stock Exchange, should ring alarm bells for authorities. While Thane Police, which conducted the raids at Solapur, found no records of the drugs seized, Avon Lifesciences Ltd, which owns the facility, claims the materials may be stolen from its plant. After the announcement, Avon Lifesciences closed on Monday at its 52-week low or 19.97% down at Rs23.05 on the BSE.
According to market participants, the seizure of drugs from a pharma company premises may be just a tip of an iceberg, as there may be hundreds of small pharma companies either involved or thinking to get involved in similar practices due to financial distress.
The sale of ephedrine is banned in India. However, controlled manufacturing as a bulk drug for pharmaceutical use is legal in India. The abuse of the drug, popularly in the powder form, is known to cause euphoria, hallucinations, delusions, hypertension and nausea. It is synthesised to produce the narcotic methamphetamine.
In a regulatory filing, the company said, “…we have all valid licenses and statutory registrations for manufacturing, stocking and sale of all products manufactured at our Solapur site. Also all the material has been accounted for and stocked with due notice to concerned statutory authorities. The concerned matter revolves around theft of some material and we are ascertaining the same in active cooperation with the investigating authorities.”
According to reports, the drug was being diverted for unauthorised sale in Thane city. Thane Police Commissioner Parambir Singh is quoted in reports as saying, “The Ephedrine we found was completely off the books. It was not mentioned in the company’s quarterly and half-yearly audits.”
Earlier, in Solapur, the police caught a 28-year-old man called Dhaneshwar Swami, who worked in Maharashtra Industrial Development Corporation (MIDC) campus. The police seized 5.5 kg of Ephedrine from him. Swami allegedly told the police that a large quantity of the drug was stored in the offices of Avon Lifesciences, also located in MIDC. Based on Swami’s information, the police searched the company godown and found 10,071.5kgs of Ephedrine and 8,541 kg of pseudoephedrine.
Hyderabad-based Avon Lifesciences manufactures a range of pesticides, pharmaceuticals and dyes. Incorporated in 1993 as Avon Organics Ltd, it changed to its present name in 2011. For the quarter to end-December 2015, Avon Lifesciences, narrowed its net loss to Rs7.42 crore from Rs7.85 crore on higher expenses, despite recording total revenues of Rs5.56 crore as compared to Rs23.36 lakh in the same period previous year.
Another pharma company that is in financial distress is Dr Datson’s Labs Ltd. The company shares were suspended on 21 May 2015 due to procedural reasons. In Dr Datson’s case, one fine day, the lenders invoked all shared pledged by promoters. Other lenders had moved court and the official liquidator had taken possession of the company and its registered office on 30 April 2015. A month later, the stock exchanges suspended trading in the company, although its shares continued to be manipulated right until 23 April 2015, when they had shot up 183%, to Rs17 from Rs6.
Dr Datson’s Labs started operations in 2006, incorporated as a private company called Aanjaneya Biotech which later became Aanjenaya Lifecare. It claimed to be making salts of quinine, a second-generation anti-malarial. Aanjaneya Lifecare’s promoters are Aasda Life Care Limited and Dr Kannan K Vishwanath. In 2009, Aanjaneya Lifecare became a wholly owned subsidiary of Aasda Life Care Ltd.
Last month, the Jammu and Kashmir High Court, while dismissing a habeas corpus petition by a ‘drugs trafficker’, had said that due to India’s close proximity to the major opium-growing regions, the country is facing the menace of drug trafficking and drug abuse among the youth is increasing, which is a matter of concern. “The drug problem is a serious threat to the public health, safety and well-being of humanity. Besides, it is considered to be the originator of petty offences as well as heinous crimes like smuggling of arms and ammunition and money laundering,” the single bench of Justice Tashi Rabstan noted in its orders.