Ranbaxy Down 6.62 Per Cent Over Settlement Filling

Ranbaxy has filed consent of decree with the United States District Court (Maryland) that was signed in the last month with USFDA (US Food and Drugs Administration). The company now will have to wait till the court hearing on the settlement issue regarding three of its plants located in India. The stock, after the announcement, fell by 6.62 per cent to Rs 443.75 by the end of the day.

In 2008, USFDA had banned the import of more than 30 products manufactured by Ranbaxy after it found significant deviation from the US Good Manufacturing Practice in Ranbaxy’s manufacturing facilities located in Dewas (Madhya Pradesh) and Paonta Sahib (Himachal Pradesh). (Source: USFDA website).

We would like to remind our readers that the company launched a generic version of the anti-cholesterol drug Lipitor in the US market in the month of December post the patent expiry. By the last week of December Ranbaxy had gained 35 per cent market share of this product according to IMS Health, which we believe is very positive and above our expectation. We now feel that the company may be able to collect more than USD 300-400 million (Rs 1,500-2,000 crore) in earnings during the period of exclusivity for the first six months.

The earnings from Lipitor however will be under stress as the company will be expecting a settlement fee from the court. Ranbaxy has already set aside USD 500 million (Rs 2,500-2,600 crore) as settlement fee. The provision of USD 500 million is quite huge compared to the market expectation of USD 250 – 300 (Rs 1,300-1,500 crore). The market will favour a settlement fee in the range of USD 250-300 million and anything above it will not be seen as positive.