Ranbaxy Chief Executive Resigns In Daiichi Sankyo Turnaround Policy
Ranbaxy, whose exports face a ban by U.S. regulators, said yesterday Chief Operating Officer Atul Sobti has replaced Singh. Sobti said the company, in which Daiichi Sankyo paid about $5 billion for a 64 percent stake last year, has submitted a plan to the U.S. Food and Drug Administration in efforts to resume sales of some drugs to that country.
Shares of Ranbaxy, Indias largest drugmaker, jumped as much as 23 percent, the most since at least 1991. Sobti, who was responsible for global operations at Ranbaxy, has been tasked by the Japanese company headed by Takashi Shoda to restore investor confidence in a stock thats the worst performer on Indias Sensex index this year.
“It was necessary for Mr. Singh to go,” said Fumiyoshi Sakai, an analyst at Credit Suisse Group AG, who rates Daiichi Sankyo shares “neutral.” “Mr. Sobti seems to have a good reputation, and I expect the new appointment will do well for Ranbaxys business going forward.”
Ranbaxy soared 19 percent to 262.90 rupees as of 1:01 p.m. in Mumbai trading, valuing the company at 110.5 billion rupees ($2.3 billion). The stock had fallen 13 percent this year as of the last trading session, while Indias benchmark Sensitive index jumped 44 percent.
Among 32 analysts tracked by Bloomberg, 23 recommend investors sell Ranbaxy shares.
Daiichi Sankyo paid 488.3 billion yen ($5.1 billion) for a controlling stake in the Indian drugmaker last year.
Rich Experience
“Mr. Sobti has rich experience in managing companies and a high reputation internally and externally,” Mamoru Tsunoda, a spokesman at Daiichi Sankyo, said by telephone from Tokyo today. “He is also on the frontline to solve the issue with the FDA.”
“The management change reflects what Shoda said earlier that we get more involved with Ranbaxys management,” the spokesman said. Daiichi Sankyo may assign more employees to its Indian operations, he said.
Daiichi Sankyo climbed 4.2 percent to close at 1,748 yen on the Tokyo Stock Exchange. Shares of the drugmaker have fallen 17 percent this year, valuing the company at 1.24 trillion yen ($13 billion).
Difficult Decision
“Its all in the papers. Ive nothing more to add,” Singh said by phone today, when asked about why he was stepping down early and his plans after resigning.
The former chief executive said he quit in a “mutually arrived decision” after a board meeting yesterday, the Economic Times newspaper reported. Singh told the newspaper he will focus on his familys financial and health-care services businesses.
Singh and his family previously held a 34.8 percent stake in Ranbaxy. They sold the shares for 95.8 billion rupees as part of the 64 percent bought by Daiichi Sankyo, the Japanese drugmaker said in a Nov. 7 statement.
Ranbaxy started life in 1939 as a distributor of drugs from Japans Shionogi & Co., according to “The Ranbaxy Story” written by Bhupesh Bhandari. The company was bought by Bhai Mohan Singh, grandfather of Malvinder, in 1952, according to the book.
Losses Mount
Ranbaxy on April 24 forecast a net loss of 8 billion rupees this year, compared with a deficit of 9.5 billion rupees in 2008. Thats wider than analysts expectations of 3 billion rupees, based on the median of four estimates compiled by Bloomberg in the past four weeks.
Its first-quarter sales in the U.S., the worlds largest drug market, dropped 14 percent after regulators there barred imports of some of its medicines made in India. The U.S. FDA on Sept. 16 blocked the import of more than 30 generic medicines made in two factories by Ranbaxy because of deficiencies in production processes.