Japan’s Daiichi Sankyo-owned drug maker Ranbaxy Laboratories Ltd has reached an agreement to settle its three-year-old regulatory tussle with the US Food and Drug Administration (FDA). The settlement will allow it to access the world’s biggest drug market for marketing and selling the products manufactured in its two plants based in India.

Ranbaxy, which saw a string of top management shuffles over the past two years, said that it had set aside $500 million to meet any potential civil or criminal liability in connection with the FDA’s investigation.

The company also signed a consent decree with the US drug regulator but this would be subject to approval by the United States District Court for Maryland.

Three years ago, the US drug regulator had banned the sale of 30 drugs made at Ranbaxy’s Dewas (Madhya Pradesh) and Poanta Sahib (Himachal Pradesh) manufacturing facilities and also put a pause to marketing approval for new products after it found that the firm was not conforming to US drug manufacturing norms. This took place two years after the FDA had reportedly warned the company regarding these problems.

The USFDA ban came months after Ranbaxy’s previous promoters Malvinder & Shivinder Singh sold their stake in the company to Japan’s Daiichi Sankyo in a $2.4 billion deal. Although seen as a big catch in one of the fastest growing pharmaceutical markets in the world, the deal proved to be an albatross around the neck of Japan’s third biggest drug maker.

While the previous promoter continued as the chief executive of Ranbaxy for almost a year after selling his family’s stake, the company saw swift changes in the top management between 2009 and 2010. Malvinder Singh stepped down as the CEO in May 2009 and his successor Atul Sobti resigned after spending a little over a year at the helm of affairs.

In August 2010, Arun Sawhney took over as the chief executive and presided over a change in strategy as the company essentially became a generic, low-cost drug maker. Last year, Ranbaxy sold its drug research activities to the Japanese parent and started ramping up its marketing presence.

“We are pleased to have resolved this legacy issue with the FDA as we begin the next chapter in Ranbaxy's history,” said Arun Sawhney, Ranbaxy CEO & managing director. He added that with greater clarity around the outlook for Ranbaxy’s business in the USA, it would allow the firm to focus its efforts on bringing high quality products to the market.

Ranbaxy scrip, which opened 2 per cent higher on Wednesday on the news of settlement, crashed almost 5 per cent in mid-day trade only to recover later in the afternoon and was trading at Rs 401 on the BSE, up 1.6 per cent from the closing price on Tuesday.

With the USFDA settlement, the company has cleaned up a long pending issue. Late last month, the company had started selling a low-cost version of Lipitor, a blockbuster cholesterol-lowering drug under the stable of Pfizer that rakes in multi-billion dollars in annual revenues for the world’s largest pharma company.

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