Ranbaxy stock price falls on news of FDA probe

7/15/2008

NEW DELHI, India Ranbaxy Laboratories stock fell by 10.5 percent due to concerns that a probe by the Food and Drug Administration may lead to harming both sales in the U.S. and the takeover by Daiichi Sankyo, according to published reports.

The three-year-old probe alleges Ranbaxy has violated federal laws that have resulted in its introduction of “adulterated and misbranded generic drugs” in the United States. A letter from the FDA's in 2006 said that there were “significant violations” at the company's Paonta Sahib plant.

The U.S. Attorney's Office for the District of Maryland and the Department of Justice's Office of Consumer Litigation earlier this month filed a motion seeking enforcement of previous subpoenas for Ranbaxy documents. The motion said Ranbaxy had failed to produce the subpoenaed documents, claiming they were protected by attorney-client and work-product privileges with the firm Parexel Consulting.

The United States has alleged that Ranbaxy used ingredients from unapproved sources and blended approved and unapproved substances, sometimes using less of the active drug than was mandated by the FDA, the court papers said. “Any of these conditions would cause a drug to be subpotent, superpotent or adulterated,” the government said in its July 3 filing to force the company and its consulting firm to comply with the subpoenas.

The FDA put a hold on Ranbaxy's applications for new drugs from the Paonta Sahib plant, the government said. As Ranbaxy attempted to get the hold lifted, it released parts of the audit, which, according to the court papers, caused the company to waive any privilege attached to Parexel's report.

Ranbaxy said yesterday that no charges have been filed against the company and Daiichi Sankyo said that it was aware of the investigation and would continue on closing the deal while watching to see what happens.

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