Shares in Ranbaxy climbed on Tuesday after US authorities slapped a $500 million fine on India's biggest drugmaker to settle a lengthy lawsuit over the sale of adulterated drugs in the United States.
The case -- the largest-ever US drug safety settlement with a generic manufacturer -- ended eight years of criminal and civil investigations into the company, which is now majority-owned by Japan's Daiichi Sankyo.
After opening down over four percent, Ranbaxy shares closed up 3.63 percent at 455.5 rupees as analysts said the decision would allow the firm to focus on the future.
"The image destruction has already happened, now it can take steps to repair the damage. The resolution enables Ranbaxy to continue with business," said Daljeet S. Kohli, head of research with the IndiaNivesh brokerage.
The US subsidiary of New Delhi-based Ranbaxy Laboratories pleaded guilty to seven counts of felony after it distributed several India-produced adulterated generic drugs in the United States in 2005 and 2006.
They were all made in a facility near Chandigarh city in northern India, which US Food and Drug Administration inspectors cited for poor record keeping and inadequate testing for the stability of the drugs over time.
The company also admitted making false and fraudulent statements to the FDA in 2006-2007 on stability tests conducted on several other export drugs.
Ranbaxy agreed to pay a criminal fine and forfeiture of $150 million and another $350 million to settle civil charges, according to a statement from the US Justice Department.
"This decision brings finality to the issue. In that sense it's... positive," said Ajay Bodke, head of investment strategy at Mumbai's Prabhudas Lilladher brokerage.
In 2008 the FDA had banned more than 30 drugs manufactured at Ranbaxy's plants in India due to concerns about the production process.
The settlement has been in the works for some time.
Ranbaxy's financial results will not be affected by the fine announced late Monday as the company set aside $500 million in December 2011 to cover costs from the dispute, analysts noted.
Ranbaxy has grown by selling cheap copies of branded drugs that have gone off-patent, and through challenges to patents owned by Western companies.
But US authorities alleged the firm took short cuts along the way, falsifying data, failing to prevent contamination of medicines, keeping inadequate records and not making sure drugs remained potent until their expiry.
After the US decision, Ranbaxy chief executive Arun Sawhney said in a statement the company was "disappointed by the conduct of the past that led to this investigation".
But he added, "we strongly believe that settling this matter now is in the best interest of all of Ranbaxy's stakeholders".
Pharmaceutical analyst Sarabjit Nangra at Angel Broking called the end to the legal battle a "huge relief" for the firm and its shareholders.