Ranbaxy CEO to ride out transformation under DOJ oversight

Arun Sawhney has signed a 5-year contract extension to bat cleanup for Ranbaxy Laboratories ($RANBXY.NS).

For those not versed in baseball parlance, the Ranbaxy CEO has agreed to stick around during the 5 years the Indian generics maker will labor under a U.S. Department of Justice settlement and perhaps restore some of the $13 billion in valuation lost by its parent Daiichi Sankyo since buying Ranbaxy.

Daiichi Sankyo ($D4S.BE) senior executive and Ranbaxy Chairman Tsutomu Une, in a conference call reported by Bloomberg on Wednesday, said Sawhney will stay until 2017. The commitment offers a strong element of stability in an investment that has been nothing short of a nightmare for the Tokyo-based company since buying controlling interest in 2008. Several months after the acquisition, regulators barred 30 Ranbaxy drugs from being sold in the U.S., the world's largest market, and then announced that the company had committed the ultimate sin, it had falsified data.

In January, the FDA, DoJ and Ranbaxy disclosed the settlement under which the company must continue sweeping changes to quality control at plants in the U.S. and India. Ranbaxy also has relinquished the coveted 180-day exclusivity for three unidentified drugs. The threat of losing the rights to three more drugs hangs over Ranbaxy as incentive to hit improvement milestones.

In his call, Daiichi Sankyo's Une laid much of the blame for the problems at the feet of the Singh family that once ran Ranbaxy, saying as a family-run company, communication was poor and resources often scarce.

"In a family-owned business, the company's direction can go left or right anytime depending on the decision of top family members, and that's not unique to Ranbaxy," Une said. "The point I have focused on the most since 2008 was how to weaken the legacy of the Singh family."

To break that link, in 2010 Daiichi made Sawhney a managing director and named Dale Adkisson from its U.S. operations to oversee product quality. Sawhney moved to CEO in 2011. The company also has infused Ranbaxy divisions with managers from the Japanese company, and has brought in consultants to oversee the establishment of quality controls.

Bloomberg reports that Une had this to say about the remaking of Ranbaxy: "Sawhney and I are leading the transformation of Ranbaxy into a professional company and we'll accelerate improvements at the company even further."

- here's the Bloomberg story