(AFP) – Sep 23, 2008
NEW DELHI (AFP) — Shares of Indian generics giant Ranbaxy hit an 18-month low Tuesday on reports Canada was looking into the safety of the firm's drugs as well as on fears about its revenue outlook, analysts said.
Ranbaxy shares have been under pressure since the US Food and Drug Administration blocked imports of over 30 of the New Delhi-based company's drugs last week, saying they failed to meet manufacturing standards.
On Tuesday, India's business daily Mint quoted the Canadian health ministry as saying a "regulatory letter" was sent to Ranbaxy Pharmaceuticals Canada requesting an action plan and a response to the FDA's move.
The company, which is being bought by Japan's Daiichi Sankyo in a deal valued at up to 4.6 billion dollars, closed down 11.05 percent or 38.35 rupees at 308.85 rupees, its lowest level since March 2007.
"We're not responding to any media reports," said a spokesman for Ranbaxy when asked about the Canadian letter.
The company has said it is committed to "work cooperatively" with the FDA.
Mint reported Germany's drug regulator was scrutinising the company's drugs as well.
The share fall also came after Citigroup cut its rating on the stock to "sell" from "buy," saying in a client note the company could lose as much as 140 million dollars in revenue in 2009 due to the FDA decision.
"The biggest hit would be on (acne drug) Sotret, a branded product with estimated sales of 60 million dollars," said Citigroup analyst Prashant Nair.
The company has global sales of 1.6 billion dollars.
Sarabjit Kour Nangra, pharmaceutical analyst at Angel Broking, said Ranbaxy shares were "being dragged down by a lot of negative reports."
"It's a serious issue," said Nangra, who has retained a "buy" rating on the share. "But the comforting thing is that the FDA concern is more to do with process issues rather than quality issues."
The FDA issued the ban after discovering alleged "deficiencies in its drug-manufacturing process."
Ranbaxy, which copies blockbuster drugs and sells them for a fraction of the price around the world, has signed up ex-New York mayor Rudy Giuliani as a lobbyist to "provide advice and review compliance issues" in its fight to overturn the import ban.
Meanwhile, Daiichi, which is seeking entry into the generic drug market, has received over 20 percent of Ranbaxy shares it offered to buy, the Japanese drugmaker's offer manager ICICI Securities said in a notice.
Daiichi, Japan's third-biggest drugmaker, bought the 34.8 percent stake held by Ranbaxy's chief executive Malvinder Singh and his family.
It offered to buy an additional 20 percent from other shareholders as required by Indian takeover law. Those shares that exceeded requirements would be returned to the shareholders, ICICI said.
Ranbaxy's shares have tumbled 58 percent from the 737 rupees a share offered by the Japanese company in June.
Daiichi, which has until now focused on marketing patented drugs in developed markets where the pace of growth is slowing, has said it aims to finalise the deal by March.
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