New Delhi: India’s biggest drug maker Ranbaxy Laboratories Ltd has been far more in news in the last two days than its management would have liked. After news broke on Saturday of a legal motion filed by US federal authorities asking courts to direct Ranbaxy to release documents pertaining to audits of its manufacturing plants and regulatory disclosures, the shares of the company went into a tailspin on Monday and Tuesday, losing nearly one-quarter in value.
In a phone interview with Mint on Wednesday, Ranbaxy managing director Malvinder M. Singh insisted most of the speculation around the case— whether it would affect Daiichi Sankyo Co. Ltd’s Rs10,000 crore buyout of his family’s stake in the firm, for instance —was without reason and why he believes the legal motion could have been avoided to begin with. His views, shared earlier in the day with TV news channels, seemed to have had a positive rub-off on the stock which gained 15.02% on the Bombay Stock Exchange to close at Rs470.70 each; the broader market remained almost flat. Edited excerpts:
If Ranbaxy has cooperated fully with FDA (Food and Drug Administration) and the US department of justice all through, why did the issue escalate to such an extent that “motion to compel” information was filed against you?
I don’t know but, usually, one gets an opportunity to clear things before a motion is filed. From our perspective, the filing of the motion could have been avoided.
Why were Indian stock exchanges not informed of the motion being filed on 3 July or shortly after?
There is so much business that happens everyday all over that one cannot inform stock exchanges on everything. We filed our response (to the US federal motion in the district court of Maryland) on 14 July, informed people about it and put the document in public domain...there is so much of information that we cannot possibly file millions of pages with the stock exchanges on everything we do. If a claim or case was filed, we would have come and disclosed it. But, when they (US authorities) want information, we are going to give it to them and there is no issue on that.
Legal woes: Malvinder Singh. (Harikrishna Katragadda / Mint)
You expect the motion to be withdrawn in a month since Ranbaxy has agreed to provide access?
Yes, I do. There is a lot of speculation arising from a lack of clarity and understanding on the issue. I am also given to understand that there are rumours in the market about a big MNC drug maker, an Indian firm and some stockbrokers engaged in a concerted effort to create uncertainty and confusion. (The Ranbaxy share) price has been hammered down and it is not reflective of what it should be. We are collecting information from the market and will give it over to the regulatory authorities concerned and the (Indian) government. I don’t want anybody to do things that will hurt Ranbaxy shareholders. These are wild swings and there are certain people behind it who are trying to play around, create panic so that they can enter.
What could be the motives behind this? Is someone trying to buy a chunk of equity in Ranbaxy?
There is a combination of things at work here and since there is enough speculation in the market already, I don’t want to add to it. People are trying to create sensational stories and destabilize the stock price and there is absolutely no reason for that. The firm, in fact, is getting stronger, there is a good amount of money coming into the firm and it will be far stronger globally by being part of Daiichi Sankyo and there is an open offer at Rs737 (per share).
The Daiichi Sankyo deal is absolutely on track and there is no change in it. There is speculation on whether there are clauses in it through which people can walk out, change the price etc...all that is baseless. The deal is binding on both of us. It is binding on us irrespective of whether the (share) price moves up or down. Daiichi had done a due diligence that involved looking into these issues (investigations by US FDA and department of justice) and everything is moving on track. Shareholders in our EGM (extra-ordinary general meeting) yesterday (on Tuesday) have approved it too. This deal is binding 100% on both sides.
Do you foresee reputational damage for Ranbaxy because of this probe no matter the findings at the end of it? What about US doctors and patients getting edgy?
We hope not. We have always been selling high quality products across geographies at affordable prices. We stand for quality, we are a reputed global company and we continue to serve all our stakeholders well. We intend to build on whatever we have done so far.
How supportive has Daiichi Sankyo been on this?
We are in constant touch. Both sides are 100% committed and bound. They were aware of these developments. From FDA, this is basically a motion for additional information. There is no case, nothing to say they are asking for damages or they are going to shut a plant and so on. We have given them (US authorities) information in the past and we will give them information in the future. They have millions of pages of documents and have tested 200 random samples of our medicines and everything is okay. US operations carry on as before from plants other than Paonta Sahib facility.