Shares in Ranbaxy, the Indian generic drugs group, fell sharply on Thursday after its owners threatened to take legal action against some of the company’s former shareholders over a $500m regulatory fine.
Last week, the US Department of Justice announced a settlement with Ranbaxy, including $150m in criminal and $350m in civil fines and penalties for distributing adulterated medicines.
Daiichi Sankyo of Japan, which acquired a majority stake in Ranbaxy for $4.7bn in 2008, said it “believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US DOJ and FDA investigations.
“Daiichi Sankyo is currently pursuing its available legal remedies,” it added
Ranbaxy was previously owned by the Indian entrepreneur Malvinder Singh and members of his family, although they were not named by Daiichi.
The Singh family said in a statement: “The belated suggestion, made years after the fact, that information was concealed from and/or misrepresented to Daiichi Sankyo is false and designed to divert attention away from Daiichi Sankyo’s own failures to protect itself and its shareholders in the negotiations and agreement with the Singh family shareholders of Ranbaxy.”
Last week, the company pleaded guilty to making material false statements, following revelations by a former employee turned whistleblower who highlighted widespread abuses and manipulations of data that bypassed “good manufacturing practice” standards.
It sold in the US adulterated batches of drugs including isotretinoin for acne, gabapentin for epilepsy and the antibiotic ciprofloxacin. Inspectors also identified incomplete testing procedures at its Dewas plant during 2005 and 2006.
The case is the largest yet involving tough regulatory measures against a foreign generic drug company and highlights growing concerns over the level of scrutiny of the quality of drug manufacture. The US is importing a growing proportion of its generic medicines from other countries.
Arun Sawhney, chief executive of Ranbaxy, said in a statement this week: “Ranbaxy is a different company today. The steps we have taken over the recent years reflect the wide-ranging efforts of the current board and management to address certain conduct of the past and ensure that Ranbaxy moves forward with integrity and professionalism in everything we do. We are fully committed to upholding the high standards that patients, prescribers and all other stakeholders expect.”
He said the company had imposed a new code of conduct for staff and invested more than $300m in new manufacturing facilities. Daiichi has named a number of its senior executives to top positions including as head of quality. In agreement with the US regulators, it has also appointed a chief data reliability officer.
Ranbaxy shares closed 8.53 per cent lower at 394.30 rupees. (FT)
