Costs from FDA actions undermine Ranbaxy's earnings

Ranbaxy Laboratories continues to spend big as it tries to deal with regulatory issues at plants banned by the FDA, issues that pushed it into the arms of competitor Sun Pharmaceutical. The more than $20 million in write-downs on inventory and goodwill it had to take in the last quarter led to a loss, even as sales improved slightly.

The drugmaker reported a 736.54 million rupee ($12.3 million) loss on Friday for its quarter ended March 31. That compared to a profit of 1.26 billion rupees ($21 million) in the same quarter a year ago, Reuters reports. Sales grew just over 1% to 24.4 billion rupees ($406.8 million).

Ranbaxy took a $10.5 million hit in the most recent quarter for inventory it had to write off and costs tied to regulatory issues and a similar-sized write-off of its goodwill. The write-downs follow a ban by the FDA in January of Ranbaxy's active pharmaceutical plant in Toansa. Toansa was the second Ranbaxy plant in a year to be hit with an import alert and its fourth of 5 FDA-approved plants to be prevented from selling products in the U.S., its largest market.

Sun Pharma Managing Director Dilip Shanghvi

In April, India's Sun Pharma announced a deal with Daiichi Sankyo, majority owner of Ranbaxy, and other investors for its all-stock buyout of the long-troubled company. Sun's managing director, Dilip Shanghvi, said his top priority will be to get Ranbaxy's plants back into the good graces of the FDA but that he sees a big upside in combining the two. Their deal is slated to close by the end of the year.

Sun has had issues of its own. The FDA put an import alert on one of its Indian plants in March. Last week its Caraco Pharmaceutical Laboratories subsidiary recalled more than 175,000 bottles of allergy med cetirizine hydrochloride and almost 252,000 bottles of antidepressant venlafaxine hydrochloride.

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