Ranbaxy crashes 35% on USFDA import alert for Mohali unit

Moneycontrol Bureau

Shares of Ranbaxy Laboratories lost 35 percent in early trade to fall below Rs 300 Monday as US Food & Drug Administration (USFDA) issued an import alert on the company's Mohali unit on September 13.

The import alert was due to non compliance with drug good manufacturing practices (GMPs).

After the problems at Paonta Sahib and Dewas, the USFDA now has a problem per se with its unit at Mohali.

Mohali being a new plant, manufacturing wasn't at full scale there but most of the new drugs by the company were slated to be actually manufactured there. More clarity is required from the company itself in terms of what will happen to all of their big ticket drugs, which were expected to be launched especially in Q4 CY13. 

There was already Form 483 in May 2012, which was issued for Mohali. This means there were certain manufacturing practices which the US FDA had already pointed out and the company had time to comply to the problems US FDA had brought up.

However, since Ranbaxy could not comply to with those issues the 483 has now converted to an import alert.

Houseviews

Brokerage houses downgraded the stock and also reduced price targets.

HSBC downgraded the stock to underweight and cut its target price for the stock to Rs 421 apiece from Rs 440 apiece.

"There is no financial impact, but setback for new approvals," HSBC report said.

According to Citi, such import alerts take two years to get resolved. Ranbaxy's margins will get suppressed," Citi adds.

OHM Labs is the only facility (onshore facility) supplying to the US as of now after its offshore plants - Poanta, Dewas and Mohali - have USFDA issues.

IIFL feels an import alert will likely impact exclusivity status of generic Diovan. "US base business could be impacted, but we do not see significant value in that shares now," the brokerage house adds.

The launch of Diovan (anti-hypertension drug) and Valcyte generics may be delayed. Experts feel the launch may take place in Q4CY13.

Ranbaxy has tentative approval from USFDA for Valcyte (anti-viral drug) that has 180 days exclusivity. Its exclusivity was expected to start in September 2013.

Antique Institutional Equities said it would be cautious on Ranbaxy hereon.

At 09:43 hours IST, the stock was down 26.4 percent to Rs 336.55 amid hefty volumes on the Bombay Stock Exchange.