Daiichi Sankyo Plunges After FDA Restricts Ranbaxy Exports

Daiichi Sankyo Co. fell the most in more than 2 1/2 years in Tokyo trading after U.S. regulators restricted imports from a production plant of its Indian unit Ranbaxy Laboratories Ltd.

Daiichi Sankyo declined 6.8 percent, the most since March 2011, to 1,772 yen at the close in Tokyo trading. It was the second-biggest drop among the 225 companies in the Nikkei 225 Stock Average, which fell 0.7 percent. The U.S. Food and Drug Administration issued an import alert dated Sept. 13 on a Ranbaxy facility in Mohali, Punjab state, causing shares of the Indian company to plunge 30 percent yesterday.

The plant would have been used to make a majority of generic drugs that Ranbaxy was filing for U.S. approval, including Diovan, according to Cantor Fitzgerald LP, referring to a blood-pressure pill that generated $4.4 billion in sales for Novartis AG last year. The Mohali factory is the third Ranbaxy facility to face U.S. limitations after regulators blocked products from its Dewas and Paonta Sahib plants in 2008.

“It is clear that Daiichi suffers from the continuing risks associated with the generic manufacturer,” Emilia Falcetti, an equities analyst at Cantor Fitzgerald in Hong Kong, wrote in a note yesterday. “The company will likely suffer a big reputational hit and concerns over management credibility will increase.”

Falcetti cut the rating on Daiichi Sankyo, which owns 64 percent of Ranbaxy, to sell from hold and reduced the stock price estimate by 5.9 percent to 1,600 yen. The brokerage trimmed its estimate for Ranbaxy’s earnings per share over the next three years by as much as 6 percent.

At least four brokerages, including HSBC Holdings Plc, cut their ratings on Ranbaxy after the import alert.

In September 2008, three months after Tokyo-based Daiichi Sankyo agreed to buy a controlling stake in Ranbaxy, the FDA barred imports of more than 30 generic drugs made at the Indian drugmaker’s Paonta Sahib and Dewas plants. FDA inspections of the two facilities found incomplete record-keeping and testing failures.

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