Ranbaxy plunges 20% on USFDA ban on Toansa API plant

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Shares of Ranbaxy tanked nearly 20 percent in early morning trade on Friday as it got another blow by US Food and Drug Administration (USFDA). The drug regulator has banned Ranbaxy’s Punjab-based Toansa Active Pharmaceutical Ingredients (API) plant.

Toansa is the fourth unit of the company which is banned and added to consent decree. With this, all of the company's India-based plants supplying to US are banned. Its Ohm Laboratories, the only plant which has USFDA approval, manufactures drugs using API from Toansa.

"Ranbaxy Laboratories is prohibited from manufacturing and distributing active pharmaceutical ingredients (APIs) from its facility in Toansa, India, for FDA-regulated drug products. The Toansa facility is now subject to certain terms of a consent decree of permanent injunction entered against Ranbaxy in January 2012," USFDA in its release said.

US FDA has found major current good manufacturing practice (cGMP) violation in Toansa inspection. It was inspected on January 11, 2014.

After the ban, the company cannot sell drugs manufactured in Toansa unit in the US and cannot export API for any purpose. Ranbaxy also will not be able to provide API from Toansa to other companies’ making products for US.

Analysts' view

Prabhudas Lilladher feels the ban on API may result in the company reporting negative EBITDA.

"Toansa unit accounts for 70 percent API for company's US business. So the prospect is bleak for the company in near to mid-term. I think this 8-10 percent of core business margin will easily slip into negative zone,” says Surajit Pal, Pharma Analyst at Prabhudas Lilladher

Pal advises to buy the stock in Rs 200-250 per share range in long-term.

Chirag Talati, Pharma Analyst at Espirito Santo Securities suggests to avoid it. He feels that Diovon launch may benefit the company, if the FDA agrees for somebody else to manufacture API, but Ranbaxy’s overall ability to get in control of its quality issues is under scanner.

“That could materialise if the FDA agrees for somebody else to manufacture the API. There could be profit share scenario like what we saw in Lipitor, there are various possibilities. I think fundamentally there is a big question mark that is now raised on Ranbaxy’s overall ability to get in control of its quality issues. So we would completely stay away from this stock,” he said.

At 09:50 hrs Ranbaxy Laboratories was quoting at Rs 348.30, down Rs 68.85, or 16.50 percent.