Daiichi pursuing legal action on ex-shareholders

Daiichi Sankyo, the Japanese parent of Ranbaxy Laboratories, said on Wednesday it believed certain former shareholders of the Indian company had concealed critical information.

It was now pursuing legal remedies, Daiichi added.

“Daiichi Sankyo believes certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US DOJ (Department of Justice) and Food and Drug Administration investigation.

"Daiichi Sankyo is currently pursuing its available legal remedies and cannot comment further on the subject at this time,” Daiichi Sankyo said in a statement posted on its website.

Early last week, pleading guilty of making fraudulent statements to US FDA about how it had tested drugs at two of its Indian plants, Ranbaxy agreed to pay $500-million penalty.

During its inspection of Ranbaxy’s manufacturing facilities in India, between 2006 and 2008, US FDA had found violations, incomplete testing records and an inadequate stability programme, besides manufacturing practices that did not follow regulations.

Ranbaxy, then a promoter-run company with a majority stake owned by Malvinder Mohan Singh and family, was later acquired by Japan’s Daiichi Sankyo in June 2008.

The regulator had imposed an import alert on three of Ranbaxy’s key facilities in India -- at Paonta Sahib, Dewas and Batamandi -- in September 2008, immediately after Daiichi signed the initial agreement with the then promoters of the company.

However, amid much speculation that the deal might not see the light of day, Daiichi concluded the deal in November 2008.

Singh, who continued as the CEO & MD of the company even after the acquisition, finally stepped down in May 2009.

The latest statement from the Japanese drug major suggests the previous promoters and other shareholders of Ranbaxy might have to face legal action in future.

An email query and phone calls to Singh remained unanswered at the time of going to press.

In a separate statement, Ranbaxy CEO & Managing Director Arun Sawhney said: “Ranbaxy is a different company today.

"The steps we have taken over the recent years reflect the wide-ranging efforts of the current board and management to address certain conduct of the past and ensure Ranbaxy moves forward with integrity and professionalism in everything it does.

"We are fully committed to upholding the high standards that patients, prescribers and all other stakeholders expect.”

He added the company had invested $300 million in manufacturing facilities in recent years.

According to experts, there are various legal options available to Daiichi. The company’s ex-promoters can be challenged in various courts, if they had concealed facts at the time of selling stake.

“It depends on the contract, what are the loopholes and gaps.

"Details of criminal cases pending against the company should have been disclosed by the then promoters to the Japanese company,” a renowned pharma counsel said.

Photograph: Handout/Reuters