Issue Date: January 2, 2012
India’s Ranbaxy Reaches Agreement With the U.S. Food & Drug Administration
Ranbaxy Laboratories, a subsidiary of Japan’s Daiichi Sankyo, has settled with FDA over the agency’s critical assessment of two of its generic drug plants in India. Ranbaxy has signed a consent decree committing it to rectify poor manufacturing practices at the two plants. The company has also set aside $500 million to cover civil and criminal liabilities associated with a related investigation by the U.S. Department of Justice.
In 2008, FDA found Ranbaxy’s facilities in Paonta Sahib and Dewas, India, not in compliance with current Good Manufacturing Practices, a set of standards that firms selling drugs in the U.S. must follow. FDA blocked imports from the plants, although it did not find evidence that the Indian firm had shipped defective products.
The signing of the consent decree should allow Ranbaxy to resume U.S. exports of products made at the facilities, provided that the firm complies with the terms. In the 12 months to Sept. 30, 2011, Ranbaxy’s sales in the U.S. were $334 million, a third less than a year earlier.
Daiichi Sankyo, which owns about 60% of Ranbaxy, issued a profit warning as a result of the $500 million provision. Yet investors and financial analysts seem willing to put the matter behind them. On Dec. 22, 2011, the day after the announcement of the consent decree, Daiichi’s stock opened higher in Tokyo before settling unchanged from the day before. Ranbaxy’s stock, listed on the National Stock Exchange of India, closed slightly higher on the same day.
Also after the news, Naomi Kumagai, a stock analyst with the investment firm Jefferies, reaffirmed her recommendation to buy Daiichi’s stock. According to market rumors, she noted, Ranbaxy was going to have to pay as much as $1 billion to U.S. authorities.
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