Ranbaxy shares fall again on US probe fears (Lead)July 17th, 2008 - 8:36 pm ICT by IANS
New Delhi/Mumbai, July 17 (IANS) Share price of top Indian drug maker Ranbaxy Laboratories once again headed south Thursday, falling 3.87 percent or Rs.18.20 to close at Rs.452.50 on the Bombay Stock Exchange (BSE), despite the company filing two regulatory statements during the day to allay investors’ fears over a US probe into the quality of its drugs. In the first statement, Ranbaxy together with Japan’s Daiichi Sankyo jointly said once again that their consolidation deal struck last month was “binding and final”.
In the second statement issued by Ranbaxy alone, the company denied reports of an US Congressional Committee probe into its US drug sales.
In the first statement, the two companies said the agreement struck by Daiichi Sankyo to buy the entire stake of Ranbaxy’s promoters, Malvinder Mohan Singh and family, in the Indian company was binding despite intense media speculation over the past few days.
“Daiichi Sankyo, Ranbaxy and the Singh family, remain committed to the transaction and to the vision of creating a complementary business combination that provides sustainable growth by diversification and an enhanced global reach,” their statement said.
“All the synergies expected to accrue to the combine remain intact as before,” the statement said.
“The share purchase and share subscription agreement has already been unanimously approved by the boards of directors of both companies. Coupled with the approval now in place from the shareholders, this clears the decks for the deal to proceed as planned.”
The statement came in the wake of fears that the deal may get derailed following a case filed by the US Justice Department in a Maryland federal court alleging Ranbaxy had forged documents relating to a probe into the quality of its drugs.
The United States Food and Drug Administration (USFDA) is expected to launch a probe into these allegations.
Later in the day, reacting to news reports that there would also be a US Congressional Committee enquiry, Ranbaxy filed another regulatory statement, saying “the company is not aware of any Congressional Committee inquiry and have not received any communication in this regard.”
“Ranbaxy is a highly regarded company that has always believed in upholding the highest standards of quality. All the company’s plants are CGMP compliant and produce medicines that meet global norms,” the statement added.
“During the past three years, the FDA has gathered over 200 random samples of various products marketed by the company in the US. These products have been independently tested by the USFDA and were found to be complying with all the specifications.
“Ranbaxy is in the process of submitting supporting documentation for its ANDA applications (abbreviated new drug applications) to DOJ (US department of justice) and believes that this will demonstrate no wrong doing on its part.”
“Ranbaxy remains committed to providing high quality generic medicines at affordable prices to its customers and patients throughout the world including in the United States,” the statement said, adding, “The company will continue to fully cooperate with the USFDA and the DOJ in all respects.”
With about 23 percent of Ranbaxy’s $1.6 billion revenues last year coming from the US, investors are naturally wary of any probe as such an enquiry can affect the company’s US business in a big way, analysts said.
“Rumours about the impending offer of Japan’s Daiichi as well as news of the USFDA investigation against the company is causing the gyration in stock price,” said Ashok Jainani, research head of Khandwal Securities.
This resulted in the Ranbaxy stock dropping by 3.87 percent, or Rs.18.20, to close at Rs.452.50 Thursday on the BSE after opening buoyant at Rs.477, up from the previous day’s close of Rs.470.70.
The scrip tumbled 23 percent Monday and Tuesday after charges against the Indian drug maker became known during the weekend.
The scrip bounced back Wednesday and vaulted 15.02 percent to end the day at Rs.470.70.
But Thursday saw investors still quite jittery about the probe into Ranbaxy’s drug sales in the US despite two clarifications from the company on the issue during the day.
The mega deal - the largest in India’s $7.3 billion pharmaceutical industry - was announced last month and was estimated to value Ranbaxy at $8.9 billion and catapult the combined entity as the world’s 15th biggest drugs maker.
The promoters of the group, led by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, hold a 34.8-percent stake and will get Rs.95.76 billion ($2.4 billion) for their stake.
Along with open offer for 20 percent stake, which Daiichi Sankyo will make soon, the Japanese company will spend an estimated $4.6 billion for the controlling stake.
Tags: boards of directors, bombay stock exchange, bse, business combination, congressional committee, daiichi sankyo, diversification, food and drug administration, intense media, media speculation, mohan singh, promoters, ranbaxy shares, share price, share purchase, subscription agreement, sustainable growth, synergies, us justice department, usfda