Shares in Ranbaxy plunged Thursday after its Japanese parent accused former owners of the Indian firm of hiding key details about a US probe into the safety of drugs made by the generics giant.
Ranbaxy’s shares slid by over 10 percent before recovering some losses to close down 8.80 percent at 393.15 rupees.
Its Japanese parent Daiichi Sankyo said Wednesday it was pursuing “available legal remedies” against the company’s former shareholders for allegedly concealing vital information.
“There has been a continuous flow of negative news about this company — that’s something shareholders don’t like,” Sarabjit Kour Nangra, pharmaceutical research vice-president at Mumbai’s Angel Broking, told AFP.
Last week New Delhi-based Ranbaxy Laboratories, India’s largest drug company by sales, pleaded guilty in the United States to charges of making adulterated medicines at two Indian plants and agreed to a $500 million settlement.
Daiichi alleged the ex-shareholders hid “critical information” about the US inquiries when it bought a controlling stake in the drugmaker in 2008, in a $4.6 billion deal to gain entry to the growing global copycat drugs market.
Daiichi, Japan’s third-largest drugmaker, did not name the shareholders.
But it bought its majority stake from the controlling shareholders led by Indian brothers Malvinder Singh and Shivinder Singh as well as through an open offer to investors not involved in running the firm.
There was no immediate comment by the Singh family in response to emails. But shares of India’s Fortis Healthcare, owned by the Singh brothers, fell 1.46 percent to 94.66 rupees.
Daiichi did not reply to an email seeking more information but analysts said its legal options could include seeking monetary damages.
The Economic Times, quoting a person it described as familiar with the situation, said on its website Daiichi was examining suing the Singhs for “reputational damage” and to reclaim the $500 million penalty Ranbaxy paid.
Analysts have said Ranbaxy and other Indian drugmakers may find it tough to win new contracts in their main US market, with the Ranbaxy case raising questions about safety standards of Indian-made drugs.
The fraud, investigated over eight years by US authorities, was brought to light by a whistle-blowing ex-employee who said Ranbaxy created “a complicated trail of falsified records and dangerous manufacturing practices”.
India’s drug regulator — the Drugs Controller General of India — is examining legal documents filed in the United States to see whether Ranbaxy violated any Indian safety norms.
The Japanese firm has seen the value of its Ranbaxy purchase plummet since it bought the firm, which earlier this month reported a 90 percent drop in quarterly net profit to 1.26 billion rupees ($23.3 million) from a year earlier.
Ranbaxy’s shares were trading Thursday at just over half the price Daiichi paid in 2008.
Ranbaxy shares fall after Japan parent says was misled
