UPDATE 2-India's Ranbaxy shares fall 10.5 pct on U.S. probe
(Recasts with latest Ranbaxy statement, share close)
NEW DELHI, July 14 (Reuters) - Shares in India's Ranbaxy Laboratories Ltd (RANB.BO) fell more than 10 percent on Monday, their biggest drop in seven years, on concerns a U.S. probe may hit its U.S. sales and hamper a takeover by Japanese drug maker Daiichi Sankyo (4568.T).
Ranbaxy, India's top drug maker by sales, said the deal with Daiichi Sankyo, which is set to take control of the Indian firm for up to $4.6 billion, remained on track, while the Japanese company said it had been aware an inspection was underway.
Ranbaxy did not specify the nature of the probe, which it said had been going on for three years, but Indian newspapers reported U.S. authorities have been carrying out an investigation related to sub-standard drug sales in the United States.
Ranbaxy said the U.S. government had filed a motion in a U.S. district court seeking documents from it which it had agreed to produce. It strongly denied allegations in the motion and said no legal proceedings in the sense of a prosecution had been started.
It said it continued to cooperate with the authorities and planned to file a response on Monday in the Maryland district court.
Analysts said Ranbaxy shares fell on concern the investigation may affect sales in the U.S. market, which is responsible for 24 percent of its revenue.
"U.S. is one of their key markets. So if they are asked to stop sales there it will affect their revenue growth," said Ketan Dedhia, managing director of Nalanda Securities.
"The concern is that FDA (the Food and Drug Administration) would have done its homework quite well before all these things. Also people are thinking something should not go wrong with the (Daiichi) deal because of this."
Shares in Ranbaxy closed 10.5 percent weaker at 475.90 rupees in a Mumbai market that ended 1 percent down. The stock fell as much as 11.5 percent in the session, its biggest one-day drop since 2001. In Tokyo, shares in Daiichi Sankyo fell 5.5 percent.
KEEPING A CLOSE EYE
Credit Suisse analysts wrote in a note that Daiichi Sankyo "may seek to re-look" at the acquisition.
Others said however the probe was unlikely to affect the deal and the Japanese firm would have been aware of it when it conducted due diligence before the deal was signed.
The Japanese drug maker said it was keenly watching the development.
Spokesman Mamoru Tsunoda said in Tokyo the company knew the Food and Drug Administration was conducting an inspection but had no idea of the latest development.
"We would like to continue our work until the deal is closed while also keeping close eyes on what's going on between Ranbaxy and FDA," he said.
In a statement to the Indian stock market, Ranbaxy said it had been asked to produce reports and documents related to an audit conducted by Parexel Consulting.
"The company's business in the U.S. continues as normal," it said in a separate press statement.
Sarabjit Kaur Nangra, analyst at Angel Broking, said the investigation had been known about for a while.
"I don't think in the short term it raises any alarm bells. This has been there for some time, still they have posted good revenue growth in the U.S.," Nangra said.
"Only if the judgement goes in favour of FDA, there could be long-term implications." (Additional reporting by Mariko Katsumura in Tokyo; Editing by Charlotte Cooper and David Cowell)
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