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LYPHOMED/NOVOPHARM CEPHALEXIN WILL BE SUBJECT OF ITC INVESTIGATION

Executive Summary

LYPHOMED/NOVOPHARM CEPHALEXIN WILL BE SUBJECT OF ITC INVESTIGATION in response to a petition filed by Biocraft Laboratories. Imports of generic cephalexin (Lilly's brand product is Keflex) from Canada "have been a primary cause of a depression of domestic prices for the third quarter of 1988 compared with the first quarter of 1988," Biocraft maintains, naming Novopharm as the only Canadian exporter of cephalexin capsules. On Oct. 27, Biocraft filed a petition with the International Trade Commission alleging that generic cephalexin capsules from Canada are being sold at "less than fair value" and that "an industry in the U.S. is being materially injured." The petition requests an investigation and the imposition of an "antidumping duty" on the imported cephalexin "in an amount equal to the amount by which the foreign market value exceeds the U.S. price." The preliminary investigation under section 733 (a) of the Tariff Act, announced in a Nov. 4 Federal Register notice, is expected to be completed by Dec. 12. In addition, a conference has been scheduled for Nov. 16 to hear oral arguments for and against the imposition of antidumping duties. Hearings will begin within four months from December if the ITC staff decides that further investigation is warranted. In March 1987, LyphoMed, entered into a joint venture agreement with Novopharm under which LyphoMed would distribute Novopharm's oral products in the U.S. with Novopharm selling LyphoMed injectable products in Canada. Novopharm obtained ANDA approval for its cephalexin product April 24, 1987. Biocraft had received ANDA approval of its cephalexin capsules in February 1987. Among the parties named in the petition are the three other domestic producers of generic cephalexin capsules -- Barr, Vitarine and Zenith. All generic cephalexin producers currently use imported bulk cephalexin. Biocraft plans to become the first domestic generic producer of bulk cephalexin by the end of March 1989. The petition claims that LyphoMed and Novopharm have undercut Biocraft with more than 180 bids, forcing Biocraft to cut prices significantly to compete. Based on LyphoMed bids to Biocraft customers, Biocraft maintains that LyphoMed has exercised dumping margins of up to 61% for bottles (100 capsules) of 250 mg cephalexin and up to 91% for 500 mg cephalexin. In a comparison of 1988 first quarter prices and beginning fourth quarter prices announced by LyphoMed, Biocraft found that LyphoMed's prices dropped 22% from $ 11.93 to $ 9.36 for the 250 mg size and decreased 24%, from $ 23.38 to $ 17.80 for the 500 mg product. Although Biocraft "concedes that it knows of no antidumping investigation in which the commission has found material injury to an industry consisting only of producers of a product physically indistinguishable" and intended for the same use, the company believes that the 1988 Omnibus Trade Bill's amended "material injury" provisions will provide support for its case. "Congress fully intended that antidumping injury determinations be based upon a more realistic examination of the competitive market factors," the company maintains.
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