Pharama analyst, Anmol Ganjoo beleives that acceptence of this felony charges will not only be sentiment negative for Ranbaxy but it will hit their brand name too.
Acceptance of felony charges will make it tougher for pharma major Ranbaxy Laboratories to revive their already struggling US business, pharama analyst, Anmol Ganjoo, Antique Stock Broking said.
Ranbaxy has agreed to pay USD 500 million as settlement against the felony charges related to drug safety. Out of the USD 500 million, it will pay USD 150 million as criminal fine and forfeiture and USD 350 million to settle civil claims.
"It will be a sentiment negative for Ranbaxy. The new management has been able to mend relations with US FDA, which the erstwhile management had not taken care to preserve, he added.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: What have you made of the fact that Ranbaxy has chosen to plead guilty to the felony charges and has had to pay a USD 500 million claim?
A: If you look at the exact financial impact of the charge, it is something which was already provided for in December 2011.
However, the language and the specifics will not be good for Ranbaxy; primarily on two accounts, one because of fact that Ranbaxy has pleaded guilty and second, now that the felony charges have been accepted, it makes the task of reviving an already struggling US business even tougher for Ranbaxy.
There will be a brand hit as far as the US market is concerned. In case of Ranbaxy, we have seen that typically, there are spillovers in other markets as well. So, while the financial impact was already provided for and does not come as a surprise from a perception standpoint but this is one more hit as far as Ranbaxy’s US business case is concerned.
Q: Because of an award to a whistleblower are your concerns more to do with corporate governance at Ranbaxy or are they to do with an already strained relationship with the US Food and Drugs Administration (USFDA) which might get worse after this development?
A: One has to remember that corporate governance does come into sharp focus as a consequence of that. It obviously does not speak very highly of the processes that were followed by Ranbaxy. However, a lot of water has flowed since then and the management in charge is not the same. So, there has been some change of sentiment and relationship as far as USFDA and Ranbaxy is concerned.
The new management has been working harder and has been able to mend a lot of bridges, which the erstwhile management had obviously not taken care to preserve. However, the fact remains that now we are in the middle of remediation and corrective processes, historically there is, which the then management has a lot to answer for.