The Hindu Business Line : Ranbaxy: Uncertainty about USFDA investigation

Ranbaxy’s stock fell close to 11 per cent after a US legal investigation sparked concerns on the company’s American business as well as the takeover planned by Daiichi Sankyo Company.

The US Food and Drug Administration filed a motion against Ranbaxy in the beginning of July on some vital documents related to manufacturing and quality control procedures and protocols, relating to drugs.

The availability of details on the above investigation has led to concerns about loss of business.

The sheer quantum of the US business and also its profit contribution to Ranbaxy’s business (over 25 per cent sales last year) makes any negative news on this front destabilising for the stock.

Not new

The current investigation and legal cases are not new as in February 2006, the US FDA had inspected one of Ranbaxy’s Himachal Pradesh facilities and alleged inconsistencies. Again in February 2007, the US Department of Justice had raided the Ranbaxy’s offices in US.

With a view to address the developments emanating over the week, Ranbaxy will be filing a response on Monday in the US District Court for the District of Maryland.

Clarity awaited

While the plant in question has not applied for any new approvals, a drug recall episode could cause damage to India’s largest pharma company both business and reputation-wise.

A case in point is Ranbaxy’s voluntary recall of 73 million doses of a generic version of the pain pill Neurontin from the US.

While the outcome from this case would be closely watched for business implications, it also raises concerns about its impact on the takeover move by Daiichi Sankyo, though Ranbaxy insists that the agreement is ‘final and binding.’

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