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Ranbaxy shares dive after Japan parent says was misled

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(Globalpost/GlobalPost)

Shares of Ranbaxy plunged Thursday after its Japanese parent accused former owners of the Indian firm of hiding key details about a US probe into the safety of drugs made by the generics giant.

Last week, Ranbaxy Laboratories pleaded guilty in the United States to charges of making and distributing adulterated drugs at two Indian plants and agreed to a $500 million settlement.

Shares in New Delhi-based Ranbaxy slid nearly seven percent before retracing slightly to trade down 6.47 percent at 403.20 rupees, a day after its Japanese parent Daiichi Sankyo said it was pursuing "available legal remedies".

It alleged Ranbaxy's former owners hid "critical information" concerning the US inquiries when it bought a controlling stake in India's largest drugmaker by sales in 2008, in a $4.6 billion transaction to gain entry into the fast-expanding global copycat drugs market.

Daiichi did not name the shareholders in its statement.

But it bought its majority stake from the controlling shareholders led by Indian brothers Malvinder Singh and Shivinder Singh as well as through an open offer to shareholders not involved in running the company.

Daiichi did not reply to an email from AFP requesting further information.

Legal options could include seeking monetary damages, analysts said.

There was no immediate comment by the Singh family in response to emails.

Analysts have warned that Ranbaxy and other Indian drugmakers may find it tough to win new contracts in their main US market, with the Ranbaxy case raising questions about safety standards of Indian-made drugs.

The US settlement ended eight years of US investigations into Ranbaxy. The fraud was brought to light by an ex-employee who said Ranbaxy had created "a complicated trail of falsified records and dangerous manufacturing practices".

India's drug authorities are now examining the matter to see whether Ranbaxy violated any Indian safety norms.

"The market is unsure of what could emerge from the (Indian) probe," said an analyst at a Mumbai brokerage, asking not to be named in line with company policy.

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http://www.globalpost.com/dispatch/news/afp/130523/ranbaxy-shares-dive-after-japan-parent-says-was-misled