Ranbaxy Laboratories has voluntarily recalled a single batch of skin infection drugs, Sotret Isotretinoin capsules of 40mg strength, from the US market.
The company said that the move to withdraw this lot of medicines fell under the US FDA Class III recall.
Such a recall implies that the use of or exposure to the product is not likely to cause adverse health consequences.
While Ranbaxy tested the lot in question and found it to be in conformity with the requisite product specifications, it is at the behest of the US FDA’s testing and recommendation that the company has recalled the product batch.
The company added that the recall was being conducted with the full knowledge of the US FDA.
We believe the resultant loss from the recall would be limited as the product is among the 30 drugs banned by the US FDA in September 2008, with the company allowed to sell those drugs which were already in the market, since they was not found to be unsafe.
At current valuations the stock is trading at 1.5 EV/Sales CY2010E, which we believe is fair and, hence, remain NEUTRAL on the stock.