Leiner Health Products expects to lose business to competing private-labeler Perrigo following the voluntary suspension of its U.S. OTC operations.

CEO Robert Kaminski said in a March 30 conference call for U.S. retailers and other businesses, "there's only one place to go, essentially, today" for private label products.

A Perrigo spokesperson says in an e-mail it is "too early" to calculate how Leiner's shutdown will impact Allegan, Mich.-based Perrigo's sales.

In a March 22 filing with the Securities and Exchange Commission, Leiner says a March 16 inspection at its Fort Mill, S.C., facility by FDA officials generated questions about quality control and compliance with good manufacturing practices at the site.

As of March 20, "Leiner voluntarily suspended the production and distribution of all OTC products manufactured, packaged or tested in our U.S. facilities," President and COO Robert Reynolds said.

Like Kaminski, Reynolds emphasized he believes Leiner's OTC products do not pose safety risks.

Leiner is determining whether voluntary recalls for OTC products are necessary "out of an abundance of caution," Reynolds said.

The suspension does not include the firm's vitamin, mineral and supplement product manufacturing.

Supplement manufacturing is not yet covered by GMPs, but trade groups press for their adoption (¹ Also see "A Democratic Congress, IP Reform, Amending DSHEA? – Leaders Look To 2007" - Pink Sheet, 5 March, 2007., p. 10).

Kaminski reminded analysts that OTC sales account for about 25 percent of Carson, Calif.-based Leiner's business, with the remainder from sales of supplement products. The firm's customers "may help us out with perhaps even more vitamin business until things can be re-stabilized," he said.

In February the company said its net U.S. third-quarter sales grew 9.3 percent to $198.1, million, driven by demand for multivitamins and heart health products (² Also see "Sales & Earnings In Brief" - Pink Sheet, 12 February, 2007., p. 5).

Reynolds said Leiner's U.S. OTC business generated about $184 million in net revenue in the 12-month period prior to December 2006.

"Our current finished goods OTC inventory that we hold in our facilities is approximately $19 million," Reynolds added.

The company already has a plan to address FDA's concerns, though it has yet to address the agency's specific observations, Kaminski said.

Leiner says it will submit a detailed response to FDA's observations by April 9. The firm did not state when it expects to restart U.S. OTC production.

"This inspection had observations related to product quality and deficiencies in compliance with good manufacturing practices for OTC products" in the Fort Mill facility, Reynolds said.

Leiner is retesting the remaining samples of all unexpired OTC products, he said. In addition, the firm hired Lachman Consultant Services to "oversee and support our compliance remediation," Reynolds said.

Lachman will first evaluate unexpired new products already in distribution. It will also assist in "objective reviews to provide basis for recall decisions," review the "adequacy" of Leiner's controls, assess quality systems, organization and management oversight, as well as provide "an interim third party oversight of [quality assurance and quality control] manufacturing and packaging operations," Reynolds said.

Leiner senior management and an FDA consultant from Lachman, Paul Vogel, on March 26 conducted a follow-up meeting with the FDA officials. "Objectives and priorities were discussed," Reynolds said.

"The company is in the process of addressing our sustainable, foundational [GMPs] and making the proper modifications," he said. "The company believes this foundation, with Lachman assistance, will be in place in several months."

Leiner's OTC operations "will not resume unless there is an alignment" with FDA, Reynolds said.

"We're deeply embarrassed by this situation," Kaminski said. But the company is "committed to not over promising, committed to continuing to do the right thing and committed to do it together as a team."

- Rebekah Moan (r.moan@elsevier.com)

Leiner Suspends U.S. OTC Operations, Expects Perrigo To Meet Demand

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