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No end in sight for Ranbaxy’s regulatory woes

Ranbaxy’s troubles in the US market continue. The US Food and Drug Administration issued a fresh import alert on the drug maker’s products sending its stock tumbling down more than 30 percent on Monday.

The new import alert was published on the US drug regulator’s website on Friday and is related to the import of products from Ranbaxy’s plant at Mohali in India’s Punjab state.

The US FDA usually issues import alerts after inspecting foreign manufacturing plants of companies. An import alert can lead to detention of products without physical examination when an FDA inspection has revealed that a firm is not confirming to current good manufacturing practices.

Ranbaxy, which is now owned by Japan’s Daiichi Sankyo, had already pleaded guilty to felony charges in the US earlier this year. That case was related to drug safety related issues at its two other plants — Dewas (Madhya Pradesh) and Paonta Saheb (HImachal Pradesh) and the company had agreed to pay USD 500 million in fines.

The Mohali plant and US-based Ohm Labs are Ranbaxy’s two formulations facilities approved by the US FDA. 

Brokerage HSBC downgraded its rating on Ranbaxy’s shares to “underweight” from “overweight” on Monday, saying the latest import alert was not in-line with expectations.

While HSBC Is not expecting any financial impact from the import alert at this point, it feels “delay in new product approvals will hit long-term road to recovery.”

Another brokerage also felt that the import alert on its Mohali plant was a “significant negative” for the stock.

“With the import alert on Mohali, there is limited visibility on the resolution of US FDA issues. There is only one product which is approved from Mohali (cholesterol lowering drug Atorvastatin) but the import alert will delay the approval for pending filings from this facility (the company had stated there are 34 filings pending approval from the Mohali and Ohm labs facilities),” it said.

Ranbaxy’s shares have taken a beating in the wake of the regulatory hurdles. So far this calendar year the stock is down more than 9 percent. In comparison, the wider Nifty index is down just about 1 percent, while the CNX pharma index has gained more than 20 percent.

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Author:

I am a business journalist by profession and have close watch on equity markets and developments across FMCG, Retail, real estate, auto and information technology sectors in India. When not writing, I am an avid photographer (instagram.com/nachiket.kelkar) and Arsenal FC fan. I also love train spotting.

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