Ranbaxy Laboratories Recall Brings Back Painful Memories

Memories of Ranbaxy Laboratories Ltd’s long-drawn effort to end compliance-related issues with the US Food and Drug Administration (FDA) at some of its plants appear to be still fresh in investors’ minds. The company is complying with the terms of a consent decree signed with the US regulator to settle these issues and a formal closure is still awaited. But, something else grabbed investor attention on Friday, when the Ranbaxy stock fell by 3.3%. The scrip fell when Ranbaxy said it was recalling certain batches of cholesterol-lowering drug atorvastatin, or generic Lipitor, from the US market, and this would temporarily disrupt sales. Investigations will take about two weeks, after which supplies are expected to resume. Now, drug recalls are not unusual in the US market, and companies are known to voluntarily do a recall, while keeping the FDA informed. If prompt preventive and remedial action is taken, and no harm to patients is found, then it should be possible to resume supplies. Also, atorvastatin is no more a key driver of Ranbaxy’s sales, as it was when the company had exclusive sales and marketing rights in the US for six months that began in end-November 2011.