Company update: Ranbaxy’s French unit raided

Company update: Ranbaxy’s French unit raided

Ranbaxy’s French unit was raided by European antitrust officials, as part of a probe on cozy drug settlements, which allegedly delay the launch of low-cost generic drugs.

The European Commission (EC) said that there was reason to believe that certain companies may have infringed EU competition rules prohibiting restrictive business practices and abuse of a dominant market position.

EC officials also inspected the French businesses of Ratiopharm, Sanofi-Aventis, Novartis and Teva Pharmaceuticals.

In the recent past, the EC has been proactive in taking action on companies that delay the launch of low-cost drugs. According to EC estimates, delays in the entry of generics increased the patients’ spending on treatment by 20% between CY2000 and CY2007.

On the bourses the stock is up 22.1% in the last one month, and is trading at 2.3x its CY2010E sales. We recommend a SELL on the stock, with a target price of Rs251.