Now, Ranbaxy's Mohali unit under FDA cloud

This story first appeared in DNA Money edition on Tuesday, June 25, 2013

Ranbaxy Laboratories seemed to be getting into more trouble on Monday after its stock tanked 6.8% to a almost 4-year low following reports that the US drug regulator had issued Form 483 to the pharma company’s drug manufacturing unit at Mohali in Punjab. 

Responding to queries on the US Food and Drug Administration (FDA) issuance, a Ranbaxy spokesperson said, “We continue to make regulatory submissions from Mohali and as and when we get approvals we will commercialise products from Mohali.”

A Form 483 is issued by the FDA at the conclusion of an inspection to notify the company of objectionable conditions that might be in violation of the US Food, Drug and Cosmetic Act and related laws. However, it does not prevent a company from making regulatory filings from that unit.

Analysts said the implication of the fresh development on the business was not clear.  

“There is no clarity from the Ranbaxy management on Form 483. We don’t know if the US FDA has actually issued anything like that,” said an analyst with a domestic brokerage.

“The stock has fallen almost 20% in the last four weeks owing to various negative developments. I think the Ranbaxy management doesn’t want the stock to go into a free-fall by acknowledging the US FDA move,” said another analyst, adding that development may not impact the stock significantly if the situation is not so critical. 

“The management will, however, have to clarify the situation and its magnitude to avoid further damage,” the analyst said.

Earlier in April, the US FDA has issued a similar Form 483 to one of Wockhardt’s facilities at Aurangabad in Maharashtra. This led to the FDA issuing an import alert on that plant just last month. The Wockhardt stock had fallen 20% on both occasions and is currently trading at Rs 1,004.55, down 2.54% from Friday’s close of Rs 1,030.70. The stock was trading at Rs 1,229.7 a month ago.

Ranbaxy has been going through a tough phase for sometime.  Last week, the EU antitrust regulators fined Ranbaxy to the tune of euros 10.3 million (the company management plans to appeal against the decision).