Ranbaxy US settlement positive, but penalty high: Analysts

Moneycontrol Bureau

Ranbaxy's consent decree with the US Food and Drugs Administration [FDA] to resolve its long pending issue related to the drug regulator blacklisting its plants in Dewas and Paonta Sahib is a positive step analysts say. However, most contend that the USD 500 million it has provisioned towards a potential penalty from an investigation by the US Justice Department is higher than expected and will hurt the pharma major's earnings in 2012. Here's what some analysts had to say after Ranbaxy's announcement on Wednesday: IIFL Institutional Equities: Ranbaxy's provision significantly exceeds our expectation and given the poor market share gains in generic Lipitor, will be a major drag on the company. It has separately signed a consent decree with US FDA; going by peer experience, it could take at least 8-12 months before product approvals start coming in, that too in small batches. This could mean significant downside to our estimates for the US business. Rating: Reduce Edelweiss Securities: The resolution is positive and gives a clarity on resumption of manufacturing at Dewas and Paonta Sahib facility. However, we don