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Money May 23, 2013

Ranbaxy, Fortis slump as Daiichi may sue Singh brothers: All you need to know

By Firstbiz Staff

Shares of Ranbaxy Laboratories and Fortis Healthcare crashed in morning trade today after pharma major Daiichi Sankyo indicated it may initiate legal steps against the former promoters of India's biggest drug maker Ranbaxy Laboratories -Malvinder Mohan Singh and family - saying the former shareholders of the company "concealed and misrepresented critical information concerning the US department of justice and Food and Drug Administration investigations"

The Singh brothers are the current owners of Fortis Healthcare which was down 1.20 percent at Rs 94.90 on the BSE.

Shares of Ranbaxy Laboratoriesslumped by over 9 percent in the morning trade, after itsJapanese promoters blamed the company's former Indian ownersfor concealing and misrepresenting critical information aboutUS investigation into sale of adulterated drugs.

Reuters

Reuters

Following the news, shares of the company opened the dayon a weak note and further tanked 9.3 per cent to Rs 391 on the BSE.At NSE, the stock tumbled 9.37 per cent to Rs 390.65.

Majority shareholder Daiichi Sankyo believes former shareholders of the Indian company hid information regarding US regulatory probes but it did not name the shareholders.

"Daiichi Sankyo believes that certain former shareholdersof Ranbaxy concealed and misrepresented critical information concerning the US Department of Justice (DOJ) and FDAinvestigations. Daiichi Sankyo is currently pursuing its available legal remedies," Daiichi Sankyo had said in astatement.

The Japanese drug maker added that it continues to supportRanbaxy in its efforts to address and correct the conduct of the past which led to the investigations.

Ranbaxy became a part of the Daiichi Sankyo Group in 2008after Japan's third largest drug-maker bought a majority stakein the Indian firm. Daiichi had bought 34.82 percent stake inthe Gurgaon-based firm from its promoters, Malvinder Singh andfamily.

Last week, Ranbaxy pleaded guilty to felony charges related to drug safety and agreed to pay $500 million in civil and criminal fines under a settlement with the US Department of Justice.

Meanwhile, India's Ministry of Health & Family Welfare is also planning to ask India's drug regulator, the Drugs Controller General of India (DCGI), to examine court documents filed in the US lawsuit in which the company admitted to selling subpar medicines and concocting data.

India's drug regulator will pore over drug applications on the basis of which Ranbaxy received approvals.

An official in DCGI told Business StandardthatIndia's drug regulator would study the report on Ranbaxy by the US Food and Drug Administration (FDA) and scrutinize the drug-maker's approval records starting from 2005 to the present.

One week after Ranbaxy pleaded guilty to US federal drug safety violations and agreed to pay $500 million in fines to resolve claims it sold sub-par meds and made false statements to the FDA about its manufacturing practices at two factories in India, Ranbaxy has embarked on concerted damage control, reported Firstpost today.

Ranbaxy CEO Arun Sawhney said in a statement,"In recent years, we have made significant improvements in the way we conduct our business to ensure greater quality control and have made investments of over US$ 300 million in our manufacturing facilities...We have also instituted a rigorous new code of conduct for all Ranbaxy employees, with clear accountability for compliance."

Ranbaxy had already set aside $500 million in anticipation of the penalties so the settlement actually gave shares of the company a pop last week before declining on Wednesday.

But industry experts say Ranbaxy will do everything to press for big cost savings by moving drug production from its US subsidiary Ohm Laboratories Inc back to India.

With agency inputs

by Firstbiz Staff

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