Daiichi pursuing legal action on ex-shareholders

Says former Ranbaxy owners concealed critical information on probe by US agencies

Daiichi Sankyo, the Japanese parent of Ranbaxy Laboratories, today said it believes that certain shareholders of the Indian company concealed and misrepresented critical information. The company is now pursuing legal remedies.

“Daiichi Sankyo believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US DOJ (Department of Justice) and FDA investigations.  Daiichi Sankyo is currently pursuing its available legal remedies and cannot comment further on the subject at this time,” Daiichi Sankyo said in a statement posted on its website.

Early last week, Ranbaxy pleaded guilty of making fraudulent statements to the US Food and Drugs Administration (US FDA) about how it tested drugs at two of its Indian plants and agreed to pay $500 million as penalty.

The US FDA, during its 2006 and 2008 inspection of Ranbaxy’s manufacturing facilities in India, had found violations, incomplete testing records and an inadequate stability programme, and manufacturing practices that did not follow regulations.

Ranbaxy, which was then a promoter-run company with majority stake owned by Malvinder Mohan Singh and family, was later acquired by Japanese drug major Daiichi Sankyo in June 2008.

The regulator imposed an import alert on Ranbaxy three key facilities in India – in Poanta Sahib, Dewas and Batamandi- in September 2008, immediately after Daiichi Sankyo signed the initial agreement with the then promoters of the company.

However, amidst much speculation that the deal may not see the light of the day, in November 2008 Daiichi Sankyo concluded the deal. Singh, who continued as the CEO and MD of the company even after the acquisition, finally stepped down in May 2009.

The latest statement from the Japanese drug major may mean the previous promoters and other shareholders may have to face legal hurdles going forward.

In a separate statement from Ranbaxy, its CEO & Managing Director Arun Sawhney said, “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 added the company has made an investment of $300 million in recent years in manufacturing facilities.

According to legal experts there are various options available to Daiichi Sankyo and previous shareholders including ex-promoters of the company can be challenged in various courts if they concealed facts at the time of selling their stake in Ranbaxy.

“There are various options available to Daiichi Sankyo under the law. It depends on the contract, what are the loopholes and gaps. Details of criminal cases pending against the company should have been disclosed by then promoters to the Japanese company,” a renowned pharma counsel said.