Ranbaxy loses over 6% after US files ‘ground-breaking’ consent decree in court

IndiaWorldBusinessSameepa Shetty, Bloomberg UTV, YourMoneySite.

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Ranbaxy toppled over 6 percent in trade today

Stock prices of Ranbaxy dropped nearly 7% on Friday after a consent decree was filed in a United States court that demands the drug company to make fundamental changes at its plants in the US and India.

The US Justice Department, which has accused the Indian drug-maker of producing adulterated & potentially unsafe drugs, filed a ‘ground-breaking’ consent decree in court on Thursday. The order states that Ranbaxy should adhere to US manufacturing standards and ensure integrity of data at its plants in the US and India.

Arun Sawhney, CEO & Managing Director, said, “….today’s announcement is the next step in the process of finalizing our agreement with the FDA to resolve this legacy issue. We are pleased with the progress we have made in upgrading and enhancing the quality of our business and manufacturing processes.”

Reacting to the development, a host of brokerages downgraded the stock. HSBC has downgraded to ‘underweight’; for a target of Rs 400. Meanwhile, Credit Suisse has maintained ‘underperform’ rating, but lowered the target to Rs 410 versus Rs 470.

Here’s a detailed recap on the latest development:

• USFDA versus Ranbaxy: Round II trouble over four plants now

• Ranbaxy’s banned plants: Paonta Sahib, Batamandi, Dewas and Gloversville

USFDA’s accusations?

• Indian drug-maker produced adulterated & potentially unsafe drugs

• To make significant changes at its manufacturing facilities

• To pay $15,000 for each day of violation at its facilities

• To pay additional $15,000 for each violation

• To relinquish any future 180 day exclusivity for 3 pending applications

• 3rd party expert to conduct audits

• Withdraw marketing applications

• To pay $3 mn for submitting false statement

• Ban on drugs from plants under question remain

And the worries lurking around the corner?

• May forgo at least $200 million in sales

• 66 generic-drug applications awaiting approval

• 13 applications first to file opportunities

• Has set aside $500mn for liabilities

• Complete resolution may take 2-3 years

At close, the company's stock was at Rs 443.75, down 6.62% on the BSE.