Ranbaxy Settles The Case, To Pay USD 500 Million

Generic drug maker Ranbaxy has pleaded guilty to the criminal charges related to the drugs supplied from its 2 manufacturing plants located in Panota Sahib and Devas in India. In the latest press release, the company has said that it has concluded the previous investigation of the US Department of Justice of data integrity and manufacturing processes. Eventually the company will pay USD 500 million as a settlement fee with the US Department of Justice (DOJ).

The US FDA had banned the aforementioned manufacturing facilities in 2008 after former Ranbaxy director Dinesh Thakur brought to the notice of the US drug regulator the false claims the company had made about the manufacturing process.

In December 2011, Ranbaxy signed a consent decree with US DOJ and made a provision of USD 500 million as a settlement fee towards this case. According to Reuters, the company will pay USD 350 million for civil claims and USD 150 million in payments for criminal fine and forfeiture. This is the largest penalty that any pharma company will be paying due to the irregularity in the manufacturing processes so far.

Ranbaxy's CEO and MD Arun Sawhney has said that the announcement has resolved the past issues. He also said, “We strongly believe that settling this matter now is in the best interest of all of Ranbaxy's stakeholders; the conclusion of DOJ investigation does not materially impact our current financial situation or performance”.

Ranbay's stock has remained highly volatile in the last few years whereas the other pharma stocks have shown a fantastic price appreciation. With this settlement the major burden on the stock has gone and the stock may now show some rise in valuation. Investors willing to take risk may buy this stock with a tiem horizon of about 2 years. For the risk averse, it is advisable to avoid the scrip.