Top Ranbaxy executives resign in US

US country head, key departmental heads leave; more likely to follow

Ranbaxy’s US office is faced with an exodus. At least five top executives including country head Venkatachalam Krishnan and heads of various key departments such as finance, legal, and sales and distribution resigned together last week, two persons in the know of the development said. This is the first time that Ranbaxy Inc, the American subsidiary, is witnessing such large-scale attrition. The development comes months after the company was acquired by rival drug maker Sun Pharmaceuticals Industries in April this year.

Both Ranbaxy Laboratories and Sun Pharma declined to comment.

The latest exodus also assumes significance because the US is the largest market for the company, contributing almost 45 per cent to its consolidated global revenue annually. Besides, Ohm Laboratories, Ranbaxy’s manufacturing plant in the US, is considered the most stable factory since it has not faced enforcements so far and it is the only one supplying to the American market at present.

“The core team of Ranbaxy in the US, which was running the show so far, resigned in one go last week. This has created a lot of anxiety among other employees and internally everyone is in an exit mode. More heads might roll very soon,” a company executive, who did not wish to be identified, told Business Standard.

According to another source, Venkatachalam had joined Ranbaxy as a management trainee and spent over 20 years serving in various regions including in India. He is seen by insiders as a key executive, who played an important role in turning around Ranbaxy’s US business’ even after the company’s India plants continued to face enforcements and bans by the US Food and Drug Administration (US FDA). Venkatachalam’s name also appears in the consent decree filed by the US department of justice in 2012 to address outstanding good manufacturing practice and data integrity issues at various facilities.

The other executives who resigned last week include Ranbaxy Inc’s vice-president for finance Gaurav Mehrotra, vice-president and head (legal) Lavesh Samtani, and the company’s national head for sales, sources said. According to a company executive, most of these officials were veterans in Ranbaxy having spent five to 10 years in the company.

“The development could be highly demotivating for other employees as it will create discomfort and a sense of uncertainty because no one knows what will be the outcome,” said a senior executive with another domestic pharma company.

Industry officials said such exits at the top management level could lead to serious consequences because employees working under them would now be uncertain about their future, role in the company and aspirations. Besides, as the company gets merged with Sun Pharma, there will be new people taking over and significant restructuring is expected. “This is a very difficult situation for those working in the company. Even if one is retained, Ranbaxy and Sun Pharma have very different cultures. In such a scenario, people would always like to look for better opportunity and leave with a good deal. Why would anyone wait for uncertainty to prevail,” asked another industry executive.

Over the past year, other markets of Ranbaxy, including India, have witnessed huge attrition. Many top executives from its India team, including global quality head Dale Adkinson and global human resources head Sandeep Girotra, quit recently. There are also unconfirmed reports of other key executives such as Rajiv Gulati, president (global pharmaceutical business), being in the process of leaving.

Sun Pharma, which bought Ranbaxy in a $4 billion deal, is still waiting for regulatory approvals, mainly from the Competition Commission of India (CCI) as there are concerns raised that the deal may impact competition and promote monopoly in various product segments. While announcing the deal, Sun Pharma had indicated it expects to close the transaction by December.

On Monday, shares of Ranbaxy Laboratories closed at Rs 598.25 on the Bombay Stock Exchange, down 1.7 per cent. Sun Pharmaceutical Industries closed at Rs 803.55, down 1.86 per cent from their previous close.

CIRCUMSTANTIAL CHANGES?

• At least five top executives have quit the firm
   
• Country head Venkatachalam Krishnan and heads of various key departments such as finance, legal, and sales & distribution resigned together last week
   
• The development comes months after the company was acquired by rival drug maker Sun Pharma in April
   
• US is the largest market for the company, contributing almost 45 per cent to its consolidated global revenue annually