Ranbaxy plunges 10% on reports Indian govt orders probe
Ranbaxy slumped on Thursday after some reports said the Indian government too has initiated an investigation into its past documents and applications and it may face a huge penalty, if found guilty under the Drugs and Cosmetics Act.
Moneycontrol Bureau
Shares of Ranbaxy Labs tanked more than 10 percent on Thursday amid reports that the Indian Health Ministry has ordered a probe of its own into past dossiers and drug applications on the basis of which approvals were granted to the drug major. The news if true could mean more trouble for Ranbaxy, which recently settled long running issues with the US Food and Drugs Administration. The company, which is now owned by Japan's Daiichi Sankyo, earlier this month, agreed to settle all alleged civil violations of the False Claims Act with the US and pleaded guilty to felony charges relating to manufacturing at its plants in Paonta Sahib, Himachal Pradesh and Dewas in Madhya Pradesh. It also agreed to pay USD 500 million to resolve the cases."This is the largest false claims case involving a generics drugs manufacturer in the US. Ranbaxy, in papers filed in Federal court in Baltimore, admitted it had sold batches of drugs that were improperly manufactured, stored and tested," according to a report by Angel Broking.Now the Health Ministry has ordered the Drugs Controller General of India to go through the US order in detail and then examine the documents and approvals to Ranbaxy in India, the Business Standard paper reported quoting a ministry source. The regulator will evaluate all the documents to see if any compromise was made in safety, quality and submitting data for product approvals, and if found guilty there could be a severe penalty on Ranbaxy under the Drugs and Cosmetics act, the report added."While the impact of the probe is not certain and will be certain only after the final verdict on the issues, however the news will continue to be an overhang for the stock," the brokerage added.Parent Daiichi Sankyo has already said Ranbaxy's earlier promoters misrepresented critical information about US Department of Justice and US FDA probes and it was exploring legal options against some of them.There is already a concern in the street that admitting to criminal charges will hurt its reputation and hamper future product approvals in the US market. Also some feel some more skeletons could tumble out of the closet if Daiichi Sankyo sues Ranbaxy's ex promoters. However, some analysts feel, the street reaction is overdone. Hitesh Mahida of Fortune Equity Brokers feels recent market share data shows Ranbaxy is still among the top in most products, launched in the US market. Its Absorica, for instance, has a 11 percent market share, Caduet close to 54 percent and Actos has a little over 23 percent share.He also doesn't expect any legal action against ex-promoters to have any impact on the company's business now.Mahida says the stock is a good "buy" post today's fall. Angel Broking, meanwhile, is "neutral," saying the legal overhang on the stock continues and its outcome will decide the future growth strategy of the company.Ranbaxy was down 9.50 percent at Rs 390 on NSE in late afternoon trade. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
