|Daiichi Sankyo CEO Joji Nakayama|
Think Daiichi Sankyo set itself free of Ranbaxy Laboratories when it sold its stock in Sun Pharmaceutical? Think again. It remains possibly liable until 2022 for another $325 million as the Ranbaxy mess is cleaned up in the United States.
The Japan-based drugmaker, which bought Ranbaxy in 2008 for $4.6 billion, may have a counter to that liability. It reportedly has taken legal actions against the founders of Ranbaxy on grounds they misrepresented the company's state of affairs, the Financial Express reports.
Nonetheless, Daiichi Sankyo could face legal action by its own investors who already expressed their anger at the company's lack of due diligence before investing in a Ranbaxy that apparently already was having legal and compliance problems.
When the Japan company sold Ranbaxy to Sun in exchange for stock, the contract included a clause Daiichi Sankyo revealed in its just-filed earnings report. Among the company's remaining risks from its association with Ranbaxy is the liability for more U.S. fines resulting from Ranbaxy operations while it was a Daiichi Sankyo subsidiary.
"As per the contract between Sun Pharma and Daiichi Sankyo regarding the merger of Ranbaxy into Sun Pharma, Daiichi Sankyo could be required to indemnify Sun Pharma for 63.5% of penalties and damages, etc., arising from quality issues of Ranbaxy prior to the closing date, which are paid to U.S. federal or state governmental authorities by Sun Pharma or Ranbaxy, with a maximum cap amount of $325 million. This obligation lasts for seven years from the closing date" in March, Daiichi Sankyo said.
Otherwise, the filing said, Daiichi Sankyo emerged from the fiscal year with "a gain on the merger" with Sun, since it sold the Sun shares it received in return for Ranbaxy for $3.2 billion one month into the new fiscal year.