Ranbaxy Labs - Under Drugs Controller General of India (DCGI) probe - Angel Broking

After the USFDA issue, Drug Controller General of India (DCGI) had been ordered to examine all the dossiers and drug applications on the basis of which approvals had been granted to Ranbaxy in the past. The future course of action would be decided after DCGI's report, expected to come within a month.

According to the reports, DCGI has been asked to go through the US order in detail and then examine the documents, dossiers and approvals to Ranbaxy in India. The regulator will evaluate all documents to see whether there has been any compromise in safety, quality, efficacy, or even in submitting data for seeking approvals. It's understood that Ranbaxy could face severe penalty under the Drugs and Cosmetics Act if it was found guilty of violation of any provision under Indian law. According to the health ministry source, the drug regulator will initially study the US court's order and the report of the US Food and Drug Administration (FDA) and examine the period under their review — primarily pre-2005 — in the Indian context.

Early last week, Ranbaxy, which pleaded guilty to making fraudulent statements to the US FDA about how it tested drugs at two of its Indian plants, agreed to pay a criminal fine and forfeiture totaling US $150mn and to settle civil claims for US $350mn in order to resolve fraud allegations made in a whistle-blower's lawsuit and federal criminal charges. This is the largest false claims case involving a generics drugs manufacturer in the US. Ranbaxy, in papers filed in Federal court in Baltimore, admitted it had sold batches of drugs that were improperly manufactured, stored and tested.

While, the impact of the probe is not certain and will be certain only after the final verdict on the issues, however the news will continue to be an overhang for the stock. On the positive side the company has announced some of the major specific actions the Company has been taking in recent years to address certain conduct of the past and to ensure the safety and efficacy of all Ranbaxy products currently available in the global market. These actions include:

- Enhancing its compliance procedures and policies
- Upgrading its business and manufacturing processes
- Building a culture of accountability and excellence across all levels of the organization
- Complete reconstitution of the Board of Directors and Executive Management team

With this development, the legal overhang on the stock continues and the outcome of which will decide the future growth of the company. We maintain our neutral on the stock.

Source : Equity Bulls

Keywords