Daiichi to suffer loss on Ranbaxy writedown

Could Daiichi Sankyo be suffering from buyer's remorse? Yesterday, we noted that the Japanese drugmaker was already taking a writedown on its buyout of India's Ranbaxy Laboratories. A $3.8 billion writedown, to be specific. Now, more details are emerging: the 50 percent drop in Ranbaxy's stock price will amount to a big hit to Daiichi's bottom line for its full-year results. The company had forecast a profit of ¥65 billion ($69 million). Now, the company "is unlikely to be able to avoid" ending up with a net loss," a Credit Suisse analyst told the Financial Times.

Ranbaxy's had a tough several months since the Daiichi deal was announced. There's the global economic slowdown, which is hitting all drugmakers. And then there's Ranbaxy's wrangling with the FDA, which temporarily banned imports of all its drugs because of concerns about quality audits at two of its Indian factories.

Why didn't Daiichi renegotiate its deal with Ranbaxy at the time? After all, the FDA troubles were bound to hit Ranbaxy's sales. The FT speculates that the Daiichi buyout has a political component, and that it will get paid back for its steadfastness via a better relationship with the Indian government, and between India and Japan. We'll have to see how that goes.

- read the FT story

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