The problems for Ranbaxy do not seem to be coming to an end. In fact, newer and newer issues continue to crop up day by day. The company saw its stock lose almost seven per cent on the bourses on Monday, closing at Rs 32.5.50 levels as news of its Mohali facility, too, coming under the US Food and Drug Administration (USFDA) lens broke out. The company’s Mohali facility was issued a form 483 by the USFDA, after the drug regulator found deviations from norms during an inspection of the plant a few months ago. Although the issuance of Form 483 does not prevent the company from making drug filings from this facility, Ranbaxy’s future hinges a lot on exports to the US from this facility. That the USFDA was inspecting the Mohali facility for supplies of anti-hypertensive drug Valsartan generics makes the matter worse. Ranbaxy’s US sales growth has generally been driven by launches of generics on exclusivity. The generics of the above-mentioned drug were expected to Garner $187 million during the first six months of exclusivity, had the company been able to launch it in September 2012. However, approvals for the launch have been pending for the past nine months.
The fact that a combination of the same drug with another anti-hypertensive drug was launched a few months ago is likely to dent the expected revenues from this generic launch. Ranjit Kapadia at Centrum Broking feels that revenue expectations from the generic launch have already been halved and there still exists an uncertainty on when the drug will be launched. Further delays will lead to other launched drugs eating into the expected market share and revenues. Further, the company had derivative exposure of around $962 million at the end of the March quarter. With rupee depreciation, the mark-to-market losses are bound to increase further adding to woes. With so many uncertainties and newer issues erupting day after day, it is difficult to predict where the stock prices will bottom. The stock hit a four-year low on June 18 and ever since, it has been declining to new lows. The underperformance in the past month has been attributed to Indian drug regulator, the Drug Controller General of India (DCGI) deciding to review Ranbaxy’s past dossiers and applications. A public interest litigation (PIL) is also pending for hearing. According to media reports, the PIL alleges that the company has been fined $500 million by the USFDA for making and selling “adulterated” drugs and therefore all the manufacturing units of the company here, including those in Paonta Sahib in Himachal Pradesh and Dewas in Madhya Pradesh, should be sealed. Last week, Ranbaxy, along with eight other drug makers, was fined a total of Euro146 million by the European Union’s antitrust regulators on charges of blocking the supply of cheaper medicines.