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Ranbaxy Laboratories' shares tanked 6 per cent on the Bombay Stock Exchange on Thursday.
This follows a report by Fortune Magazine that the company may have to pay a penalty of over a billion dollars for allegedly violating manufacturing norms laid down by the US drug regulator. The report said the pharmaceutical major was negotiating with US authorities to lift a three-year-old ban. Ranbaxy's share price fell to Rs 426.40 at close on Thursday, the biggest drop in six weeks.
Analysts at Goldman Sachs Group, however, said the reported settlement amount was too high as it was disproportionate to the profitability of Ranbaxy's drug pipeline over the next three years. The penalty amount, post-negotiations, could settle at $400-500 million, according to market watchers.
The dispute dates back to September 2008 when the US Food and Drug Administration (USFDA) imposed a ban on about 30 generic drugs manufactured by Ranbaxy at its Dewas and Paonta Sahib plants. The US drug regulator said it had taken the decision after the two units failed to meet the standards specified under the current Good Manufacturing Practice (cGMP) requirements of the US Government.
The US Department of Justice also filed a motion alleging that Ranbaxy submitted false and fabricated information to the USFDA. Though the Department of Justice later withdrew the motion after Ranbaxy submitted the relevant documents, the ban imposed by the USFDA remains in force. Settling the issue with the USFDA is important to Ranbaxy as the ban on drugs has weighed heavily on its US strategy. Apart from getting full access to the US market for the banned drugs, Ranbaxy awaits approval from the drug regulator to launch a generic version of the world's largest selling drug — Lipitor — in the US.
Ranbaxy, 64 per cent owned by Tokyo-based Daiichi Sankyo Co, reached an agreement with Pfizer in 2008 to sell copies of Lipitor with a six-month exclusivity period starting November 2011. The anti-cholesterol drug, to be manufactured at the Paonta Sahib plant, was one the reasons for the Japanese firm paying a premium to acquire majority stake in Ranbaxy.
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