The Telegraph
Tuesday , April 8 , 2014
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Ranbaxy bathes in Sunshine
Experts bet on Shanghvi magic touch

Mumbai, April 7: Anlysts believe Sun Pharma owner Dilip Shanghvi possesses the Midas touch to turn around Ranbaxy, especially its travails in the US on quality issues.

“Acquisitions are not new to Dilipbhai (Dilip Shanghvi as he is popularly known). But more importantly, he has developed a knack of turning them around,” says an analyst.

As many as four of Ranbaxy’s facilities in the country have been barred from exporting drugs to the US — the world’s largest pharmaceutical market.

The US Food and Drug Administration (FDA) has banned imports from the Paonta Sahib, Dewas and Mohali facilities as well as the Toansa unit in Punjab, which makes active pharmaceutical ingredients.

It was only Sun Pharma that made the disclosure today about Ranbaxy recently receiving a subpoena from the United States Attorney for the District of New Jersey.

The attorney asked Sun Pharma to produce certain documents relating to issues previously raised by the FDA with respect to Toansa.

Daiichi Sankyo — Ranbaxy’s Japanese owner, having taken over the company in 2008 — has agreed to indemnify Sun Pharma and Ranbaxy for certain costs and expenses that may arise from the subpoena.

The FDA had first imposed an import alert on two of Ranbaxy’s facilities way back in 2008. Though the company has been aggressively working on addressing the concerns raised by the drug regulator, it has faced other setbacks as well.

In March this year, it had to withdraw 64,000 bottles of the atorvastatin calcium tablets, a generic version of cholesterol-lowering drug Lipitor, after a complaint of wrong dosage.

It was the second recall by Ranbaxy of this popular drug, done after a complaint by a pharmacist who discovered a 20mg tablet inside a sealed bottle of 10mg tablets. Earlier, in 2012, Ranbaxy had recalled certain lots of the drug after it discovered contamination with tiny glass particles.

Moreover, Ranbaxy is a loss-making company.

During the October-December 2013 quarter, the company suffered a net loss of Rs 158 crore. This was, however, much lower than the Rs 492-crore loss reported in the corresponding period of the previous year.

“The main question is how will Sun Pharma deal with regulatory and other quality issues at Ranbaxy,” a minority shareholder of the latter asked. Incidentally, Sun Pharma’s Karkhadi plant is also barred from shipping products to the US for violation of good manufacturing norms.

However, analysts expect that based on Sun Pharma’s work in the past, it will be able to turn around Ranbaxy and address these issues.

For instance, it acquired the generics business of URL Pharmaceuticals in 2013 for around $80 million and then ramped up URL’s revenues to around $110 million.

Further, it has been successful in not only raising the revenues but also the margins at Caraco Pharma, where the initial stake was purchased in 1997 and raised to 100 per cent in 2010. Analysts added that while tackling the manufacturing issues at Ranbaxy was perhaps a first-time experience, Sun was likely to handle it in a better manner.

“Sun Pharma has got a good track record (when it comes to improving the performance of its acquired companies,’’ Sarabjit Kour Nangra, VP research (pharma) at Angel Broking, told The Telegraph.

At a conference call, Dilip Shanghhvi, founder and managing director of Sun Pharma, said the company expected to realise revenues and operating synergies of $250 million by the third year after closing the deal.