Daiichi accuses Ranbaxy shareholders of hiding info before buyout

Ranbaxy Laboratories' FDA woes may soon be over now that the drugmaker has forked over a $500 million settlement to the federal government. It seems owner Daiichi Sankyo's Ranbaxy woes, however, are anything but. The Japanese company now believes former Ranbaxy shareholders withheld key info when negotiating to sell Daiichi its majority stake in the Indian drugmaker.

Those shareholders "concealed and misrepresented critical information concerning the U.S. [Justice Department] and FDA investigations," the company said in a statement yesterday. "Daiichi Sankyo is currently pursuing its available legal remedies and cannot comment further on the subject at this time."

The company did not name the shareholders or release any other details of its allegations. Daiichi bought much of its stake from brothers Malvinder and Shivinder Singh, members of Ranbaxy's founding family.

The news comes on the heels of Ranbaxy's guilty plea last week to felony charges of manufacturing adulterated drugs and lying to the FDA, for which it agreed to pay the largest-ever drug safety settlement for a generic manufacturer. Ranbaxy hopes the settlement will shut the door on what has amounted to 7 years of investigations, exposure and litigation. Just yesterday, Ranbaxy released a statement highlighting the actions it has taken to address "certain conduct of the past," with CEO Arun Sawhney stressing that "Ranbaxy is a different company today."

But a second wave of investigations may just be beginning. Some state regulators in the U.S. now say they plan to investigate, and India's own drug watchdogs are planning their own probe.

And for Daiichi Sankyo, its allegations will start a new chapter in the nightmare tale that has followed its Ranbaxy purchase. Problems hit just days after an announced merger deal that saw Daiichi shell out $4.6 billion to become Ranbaxy's majority stakeholder, with the government alleging that Ranbaxy officials used ingredients from unapproved sources and fabricated in-house testing data to meet FDA standards. As a result, 30 Ranbaxy products were banned from the U.S., two of its facilities were closed, Daiichi execs took sizable pay cuts to account for ongoing Ranbaxy losses and, finally, a consent decree required its manufacturing to shape up.

Daiichi originally made the acquisition in hopes of diversifying into generics, getting its foot in the door with a quickly expanding emerging market and saving on R&D and manufacturing through the use of affordable Indian facilities. For now, all it can do is support Ranbaxy's turnaround efforts while it searches for a light at the end of the tunnel.

"Daiichi Sankyo continues to support Ranbaxy in its efforts to address and correct the conduct of the past which led to the investigations by the U.S. Department of Justice and the U.S. Food and Drug Administration," it said. 

- see the release
- read Reuters' take