India's largest pharmaceutical company with presence in 23 of the top 25
pharmaceutical markets of the world
Global footprint in 46 countries, world-class manufacturing facilities in 7
countries and serves customers in over 125 countries
Focus on Anti-infective, Urology, Respiratory, Anti- inflammatory and
Metabolic disorders segments (acute segment contributes >70% to overall
domestic business)
Became subsidiary of Daiichi Sankyo (DS), one of the largest
pharmaceuticals companies in Japan, in 2008 (acquired Ranbaxy stake for
US$ 4 bn, at price of Rs 735 per share)
Pursuing Hybrid business model
In talks with USFDA to resolve issues surrounding its Dewas and Paonta
Sahib facilities (created US$ 500 mn provision towards settlement with
DOJ)
Entered into Vaccines/Biotech space with Biovel acquisition in 2010 in
India. Focusing on Hybrid model by launching Daiichi pipeline products in
key strategic markets (including India, Romania, Spain, Mexico)
Recently received USFDA clearance for its Mohali facility
Background
• USFDA finds cGMP violations at Paonta Sahib facility (issues warning letter on 15th June 2006)
• Daiichi Sankyo (DS) acquires Ranbaxy in US$ 4.6 bn deal – Jun 2008
• Post DS deal, USFDA alleges Ranbaxy of falsification of data wrt Paonta Sahib facility & cGMP violations at Dewas facility (both facility received import alert;
more than 30 products of Dewas banned by USFDA)
• All manufacturing for the US done from high cost manufacturing unit at Ohm (located in the US); no significant launches in to US due to want to space
• The company could not achieve that targeted revenues of US$ 800 mn from the US (base biz) by 2011 on account of the above (base revenues from US
stands at US$ 90 mn – 100 mn per quarter); with low EBITDA margins (Single Digit) .
Current Status – Consent decree signed with the USFDA and provided US$ 500 mn in Dec’11 quarter (taken in P&L)
Contours of the consent decree (CD) - Summary
• Ranbaxy must comply in detail with the data integrity issues provided by the USFDA before the USFDA starts resuming drug applications from 1) Pantos
Sahib, 2) Dewas Facility
• The CD will address the outstanding cGMP and Data integrity issues at Paonta Sahib units
• Ranbaxy has agreed to relinquish any 180-day exclusivity that it might have for three pending generic application and any 180 day marketing exclusivity
that it may have for several additional generic application
• RBXY must hire a 3rd party expert to conduct a thorough internal review at these facilities and audit applications containing data from the affected facilities
• Implement procedures and controls sufficient to ensure data integrity and withdraw any application found to contain untrue statement of material fact
that could affect approval
• The decree also permits FDA to order additional Ranbaxy facilities to be covered by the decree if the agency discovers through an inspection that the
facility is not operating in compliance with the law / practices
Penalties
• Ranbaxy will have to pay US$ 15,000 a day for violation of the decree at these facilities and additional sum of US$ 15,000 for each violation
• If RBXY distributes any drug from these facilities covered by the decree, it shall pay liquidated damages = twice the retail value of such drug
• If any statements submitted is found untrue, it would have to pay US$ 3 mn as liquidity charges
• Already provided US$ 500 mn towards DOJ for Dewas and Paonta Sahib, could be asked to provide more in case of violations / further investigation
• Ranbaxy has already provided US$ 500 mn as a provision towards penalties (with respect to DOJ, USFDA issues) in Dec’11 quarter in its
P&L statement.
• It has signed the consent decree with the USFDA and is currently working with the USFDA to get all outstanding issues sorted
• It has also appointed a third party consultant for the same
• The 2011 annual report clearly exhibit’s the management’s confidence in the prospects of the business (some excerpts from 2011
annual report)
• Since 2009 Ranbaxy has been taking systematic corrective steps to upgrade and enhance the quality of RBXY’s business and
manufacturing processes
• Regulatory issues are now almost through, RBXY has strengthened its processes, restructured its businesses and Ranbaxy today has a
new face
• You will see RBXY becoming more focused in execution of our global strategy and our thrust will be built upon Ranbaxy’s global strengths
in marketing, manufacturing and research activities
• Clear strategy has now emerged and it is the time to unleash RBXY + DS true potential
• Apart from these, the annual report clearly provides a distinct direction / strategy to each of its businesses and a lot more emphasis
seems to be given to the “HYBRID” business model
• It also talks about sustaining growth in the longer term with newer areas of business namely, Bio-technology and Vaccines to be the
vehicle of growth in the longer term (thru Zenotech & RBXY Biologics)
• Considering the above, we do get a sense that the worst is behind Ranbaxy and things are moving in the right direction.
• This presentation is made as an attempt to quantify (using various assumptions & sensitivity analysis) various benefits that Dewas &
Paonta could bring apart from impact of synergies from the much talked “HYBRID” business model
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