Ranbaxy down 3% after recall of cholesterol drug from US market

Shares in Ranbaxy Laboratories declined by 3.27 per cent from its previous closing price to end the day on the BSE at Rs 495.95 per scrip after India's top drugmaker by sales recalled its cholesterol lowering drug atorvastatin from the United States.

The management has not commented on the nature of the problem.

Atorvastatin, a high margin product with a dominant market share, is the generic drug of Lipitor.

The recall will temporarily disrupt supplies of the generic Lipitor to the US, Ranbaxy, a unit of Japan's Daiichi Sankyo, said in a statement to the Bombay Stock Exchange today.

The investigation in this regard is expected to be completed within two weeks, after which the company expects to resume supplies, it added.

Brokerage Nomura said, "We believe this disruption in supply may lead to a market share  loss for Ranbaxy." The drugmaker has a 45 per cent share in this market and derives a value of Rs. 35 per share  from this product, it added.

This is a negative for the company and will depend on how quickly the issue is resolved, Nomura said.

"The development will impact the company's credibility to an extent," according to Bhagwan Singh Chaudhary, a research associate at the brokerage IndiaNivesh, cited in a Reuters report. "There have been issues in the past (about compliance) and a recall suggests, corrective measures suggested by the US FDA (Food and Drug Administration ) are not being implemented."

The US FDA had banned shipments from some of Ranbaxy's manufacturing plants over compliance issues in 2009. Early this year, Ranbaxy agreed to make broader changes at it plants and agreed to appoint an external auditor to resolve the matter.

Ranbaxy was the first company to launch generic Lipitor in the United States after Pfizer's patent expired on November 30 last year.

The Indian company enjoyed marketing exclusivity for the first six months to May 2012 along with US-based Watson Pharmaceuticals.

Generic Lipitor generated nearly $600 million (Rs 3,326.30 crore) in sales for Ranbaxy for the first six months, when it had exclusive marketing rights, IndiaNivesh's Chaudhary said.

(With inputs from Thomson Reuters)