Sunday, May 24, 2009

Ranbaxy CEO Malvinder Singh Steps Down, Atul Sobti Named New CEO

. Sunday, May 24, 2009

By stockOzone team

Ranbaxy Laboratories Ltd. CEO Malvinder Singh stepped down on Sunday, a month after India’s biggest drugmaker said that it expects a full-year loss. Singh, 37, had been appointed chief executive for a five- year term in 2008 after Daiichi Sankyo Co., the third-biggest Japanese drugmaker, agreed to pay $5 billion for a majority stake in Ranbaxy. A joint statement from the two companies yesterday didn’t specify a reason for Singh’s departure. Atul Sobti, now Ranbaxy’s chief operating officer, will become CEO.

“The board members and Mr. Singh came to an agreement that this is the way for Ranbaxy to grow as a part of Daiichi Sankyo,” said Satoru Ogawa, a Tokyo-based spokesman, in a phone interview.

Ranbaxy, based in Gurgaon, near New Delhi, forecasts a loss of about 8 billion rupees ($170 million) for the full year on sales of 70 billion rupees, the company said April 27. Sales have been hit by a U.S. import ban and investigation.

The last 12 months have seen Ranbaxy under severe operational pressure and the company has for the first time in its history recorded losses in three successive quarters. Following a two-year old investigation, the US Food & Drug Administration (USFDA) banned 30 drugs made at two company plants for fabricating test results. In addition, the company has been saddled by mark to market forex losses and its net loss in the quarter ended March ‘09 was in excess of Rs 750 cr.

The company’s sales in the U.S., the world’s largest drug market, dropped 14 percent in the three months ended March 31 after regulators there barred imports of some of its Indian- produced medicines, citing production deficiencies.

Daiichi Sankyo earlier this month had reported an annual net loss of $3.45 billion due to a write down of its $4 billion (Rs 20,000 cr) investment in Ranbaxy. The Japanese company also said it is taking the USFDA ban ‘very seriously’ and has constituted a team of experts to address the issue.

Mr Singh’s five-year term was to last till 2013 but people familiar with the situation say he is expected to step down soon. According to the Ranbaxy 2008 annual report, Mr Singh is entitled to a severance package of around Rs 45 cr if he leaves the company before finishing a five-year term.

Disclosure: Author does not own any of the stocks discussed here.

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