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Bitter pill gets bitterer: Ranbaxy faces Rs 240-cr US fine

While specific details of the fine are still awaited, CNBC-TV18 reports the fine by the US Department of Justice could be possibly over violations in its Toansa facility.

The News International Team

Shares of pharma majors  Ranbaxy and Sun Pharma , which has agreed to buy out the former by year-end, are likely to be in focus today over a possible Rs 240 crore penalty imposed by US authorities. While specific details of the fine are still awaited, CNBC-TV18 reports the fine by the US Department of Justice could be possibly over violations in its Toansa facility.

In January 2014, the USFDA had barred supplies from Ranbaxy’s Toansa (API facility). The Toansa facility was issued an administrative summons by US attorney for New Jersey, which the pharma major talked about in its concall.

This was triggered apparently due to investigation into alleged violations of manufacturing norms and the company was asked to bring up issues previously raised by USFDA.  

According to an Economic Times report, which says the fine is imposed by the State of Texas, could be part over some dues claimed on account of Ranbaxy’s previous slippages from the US-prescribed manufacturing practices, which led to its earlier USD 500 million as fine in the US in May last year.

Another component of the settlement sum could be flowing from an assessment by the US state, which shows that the drugmaker has overcharged the state of Texas on one or more drugs under its public-funded Medicaid programme, ET quoted a source.

This Rs 240 crore penalty is likely to add on to the agony of Ranbaxy, which reported a drop (down 9.6 percent) in its Q1 consolidated revenues due to lower exports (down 13 percent), while domestic revenues increased by 11.8 percent. (More details on Q1 earnings)

In its statement to the BSE, Ranbaxy said it has made a provision of Rs 237.75 crore for on-going settlement discussions with certain government authorities in USA.

Meanwhile, Sun Pharma today has scheduled a meeting with its shareholders to seek approval on the Ranbaxy merger.

Morgan Stanley on Sun Pharma after the broking firm’s recent interaction with CFO Uday Baldota:

On Ranbaxy merger: The integration teams have been formed and are engaged in integration planning. The company remains confident of achieving USD 250 million synergy benefits in three years. As and when the four closed facilities fall back in compliance, the utilisation may be gradual and more dependent on new filings. Gains from these facilities will be incremental to USD 250m synergy benefits and will play out in the longer term.

MS has Sun as its top pick in the industry and part of the Asia-Pacific Best Idea list. “Ranbaxy’s potential launch of Nexium and SPARC’s potential Latanoprost BAK free approval are two key catalysts in the months ahead,” it said in its research note.

Ranbaxy Labs stock price

On August 22, 2014, at 09:15 hrs Ranbaxy Laboratories was quoting at Rs 628.00, down Rs 13.1, or 2.04 percent. The 52-week high of the share was Rs 648.55 and the 52-week low was Rs 297.25.


The company’s trailing 12-month (TTM) EPS was at Rs 9.78 per share as per the quarter ended June 2014. The stock’s price-to-earnings (P/E) ratio was 64.21. The latest book value of the company is Rs 25.87 per share. At current value, the price-to-book value of the company is 24.28.

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