Ranbaxy's rocky road ahead after $500M settlement

How will Ranbaxy Laboratories' $500 million manufacturing settlement affect its business in the U.S.? Take your pick: It will either revive the company's exports to the States, or it will drag down its U.S. reputation, adding insult to the injury of $500 million in already-lost sales.

Those are the contradictory opinions of analysts who weighed in after the settlement was announced. On the positive side, market-watchers told Bloomberg that wrapping up the federal probe removes a cloud that's been hanging over Ranbaxy for years. Once Ranbaxy fixes problems at the two Indian plants referenced in the settlement, it can cut production costs and increase volumes.

"It's better to shift to India, low-cost, high-volume products," Centrum Broking analyst Ranjit Kapadia told the news service. "They will be able to restart production for the U.S. market from both these facilities and that will improve revenue."

India Infoline's Bino Pathiparampil agreed--to a point. "Some of the products they may decide to shift are high volume and where margins will make big, big impact, but it's not a quick, straightforward shift," he said.

Like the company itself, Pathiparampil pointed out that Ranbaxy still needs inspections and sign-off from the FDA before it can export products from those plants to the U.S. And the FDA's approval for moving production won't be easy to pull off. In fact, it's a long process that could take years, the analyst said.

And that's basically what the India Times is saying, with the added negative effects of the settlement on Ranbaxy's reputation. Already, the company has lost $500 million in sales to its FDA problems, analysts tell the Indian newspaper, bringing the total cost of its lax operations to at least $1 billion.

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