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Ranbaxy Shares Slip After FDA Settlement

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Shares in Ranbaxy Laboratories Ltd fell more than 3 per cent on Wednesday after the Indian drugmaker said it had reached an agreement with the US Food and Drug Administration to comply with US manufacturing practices.

The deal, which needs a court approval, potentially will allow the company to boost generic sales in the US market.

Ranbaxy, whose shares initially rose 2 per cent on the announcement, said it would make a $500 million provision to resolve potential criminal and civil liabilities arising from an investigation by the US Department of Justice.

"This is an incremental negative as the penalty is on the higher end of our expected range of $200 million to $500 million," Nomura said in a note.

The FDA accused Ranbaxy in 2009 of falsifying data and test results in drug applications, and it halted reviews of drugs made at the company's plant in northern India.

The FDA banned the import of Ranbaxy's various generic formulations in 2008, citing compliance issues.


Angel Broking said in a note that while it was unclear whether the deal represented a full and final settlement with the FDA, "it is a positive development towards a resolution."

Ranbaxy, majority owned by Japan's Daiichi Sankyo Co, said it had committed to further strengthen its procedures and policies to ensure data integrity and to comply with good manufacturing practices.

Daiichi Sankyo, Japan's No.3 drugmaker, cut its annual net profit forecast by almost half as a result of the settlement.

Other Indian companies including Aurobindo Pharma, Sun Pharmaceutical Industries and Cadila Healthcare have been struggling to get FDA approval for one plant each over compliance issues.

At 10.25 a.m (0455 GMT), Ranbaxy shares were down 3.2 percent at 382 rupees in a Mumbai market that was up 1.65 percent.

(Reuters)