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Daiichi may initiate legal action against former Ranbaxy shareholders

Daiichi says former shareholders concealed, misrepresented critical information on US investigations
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First Published: Wed, May 22 2013. 09 11 PM IST
Ranbaxy CEO and managing director Arun Sawhney. Photo: Prashanth Vishwanathan/Bloomberg
Ranbaxy CEO and managing director Arun Sawhney. Photo: Prashanth Vishwanathan/Bloomberg
Updated: Thu, May 23 2013. 09 36 AM IST
Mumbai/New Delhi: Daiichi Sankyo Co. Ltd, the Japanese parent of Ranbaxy Laboratories Ltd, said on Wednesday that it may initiate legal action against certain former shareholders of the Indian generic drug maker for concealing and misrepresenting critical information related to investigations by US agencies.
“Daiichi Sankyo believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US DoJ (department of justice) and FDA (Food and Drug Administration) investigations. Daiichi Sankyo is currently pursuing its available legal remedies,” the company said.
The Japanese drug maker added that it was making significant changes to Ranbaxy’s management, culture, operations and compliance to correct its past conduct. Daiichi didn’t identify any of the former shareholders that it was thinking of taking action against.
Although the company didn’t identify the former shareholders, it is a likely reference to the Singh family from whom it bought a 34.8% stake in a 2008 deal. The Japanese company also acquired 20% in an open offer to other shareholders, who, by virtue of not being involved in the company’s operations, are unlikely to be the shareholders referred to in the statement.
A spokesman for the Singhs, who owned and ran Ranbaxy then, said they had no immediate statement to make.
The statement comes after Ranbaxy, India’s largest generic drug maker, pleaded guilty to charges relating to manufacture and distribution of certain adulterated drugs made at its plants in Dewas (Madhya Pradesh) and Paonta Sahib (Himachal Pradesh). The company settled the case by agreeing to pay $500 million.
Although Daiichi has the option of taking legal action against the original promoters and former management on grounds that they didn’t share vital information, what it will gain from such action is uncertain, said a legal consultant who didn’t want to be named. The consultant also noted that the first phase of the FDA’s
investigations had started long before Daiichi’s purchase of Ranbaxy.
The recent revelations have prompted Indian drug regulator Central Drugs Standard and Control Organization (CDSCO) to look into the documents filed by the company concerning drugs sold in the local market. Drug controller general of India G.N. Singh was not available for comment.
In a separate statement, Ranbaxy said it had taken several steps in recent years, including investment of $300 million across manufacturing facilities, to ensure safety and efficacy of its products in the global market.
“In recent years, we have made significant improvements in the way we conduct our business to ensure greater quality control and have made investments of over $300 million in our manufacturing facilities to install state-of-the-art technologies,” Ranbaxy CEO and managing director Arun Sawhney said in a statement.
“The steps we have taken over the recent years reflect the wide-ranging efforts of the current board and management to address certain conduct of the past and ensure that Ranbaxy moves forward with integrity and professionalism in everything we do,” he said.
Sawhney added that Ranbaxy had instituted a rigorous new code of conduct for all employees, with clear accountability for compliance.
Following the investigation by the US department of justice, Ranbaxy has taken several actions, including upgrading its business and manufacturing processes, and building a culture of accountability, and has reconstituted the board of directors and executive management team since the acquisition of a majority stake in Ranbaxy by Daiichi Sankyo in 2008, it said.
Shares of Ranbaxy fell 1.2% to Rs.431.10 on the BSE on Wednesday, while the exchange’s benchmark Sensex fell 0.25% to 20,062.24 points.
PTI contributed to this story.
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First Published: Wed, May 22 2013. 09 11 PM IST