Ten days after the US Department of Justice (DoJ) announced a $500 million settlement with Ranbaxy over manufacturing violations and falsifying regulatory filings, Daiichi Sankyo, the controlling shareholder of the Indian drug maker, said it believed "certain former shareholders concealed and misrepresented critical information" concerning US investigations. The reference was to the Singh family, majority shareholders of Ranbaxy until June 2008, led by Malvinder Singh.
In an interview with Chaitanya Kalbag, a combative Singh, currently Executive Chairman, Fortis Healthcare, rebuts Daiichi Sankyo's charges saying the investigations by the DoJ and the US drugs regulator, Food and Drug Administration (FDA), were in the public domain. The Japanese company, he adds, has failed in growing the Ranbaxy business. Edited excerpts:
Q. Why was Daiichi Sankyo so keen on acquiring Ranbaxy?
A. They approached us in 2007, wanting the two companies to come together. We were not sellers, but they were very keen buyers. They explained to us the rationale, the logic, the emerging, developed (markets), innovation, generics... what they call the hybrid model. We as a business were anyway working with innovative companies in R&D and a series of things. So we engaged in a discussion.
From there they said they wanted a minority stake, then they wanted a strong minority stake, then they wanted a majority stake. They went from a partnership into a majority. And then they said look we need to -- after having worked on it for many months and done due diligence, and engaged with people and teams and negotiations and all of that -- they wanted to speed up the closure of the agreement because they had a blackout period after that and then an AGM (annual general meeting).
This was in 2008.
As word got out in the market that there was a potential alliance, others in Big Pharma also got interested. They also began to engage and talk.
By that time the FDA had already issued a warning.
There were some FDA issues and they were in all public domain, all out there publicly. Everybody knew them. They (Daiichi Sankyo) came, they discussed it, they went to the plant, they did all of that. We signed the deal.
Are you saying that by the time Daiichi Sankyo actually consummated this deal, all the issues that were causing a problem with the FDA had been sorted out?
No, they were all known.
Q. But had they been cleaned up?
A. No, that was work in progress. But it was all known. Even between the signing and the time the deal got closed, the FDA raised issues. They (Daiichi Sankyo) knew about it. They knew everything that was FDA-linked and DoJ-linked.
Q. Assuming the Daiichi Sankyo thing had never happened, were you concerned that these things were happening in Ranbaxy?
A. Let's step back. Other companies in India had had similar issues. People internationally had had similar issues. Many times different types of issues are cGMP-based. Which is continuous good manufacturing practices. Whatever those issues are, you work those out and improve on those.
Even in Ranbaxy it was not the first time it happened. There were probably other FDA issues. Ranbaxy is a global business built over decades and generations. The talent that Ranbaxy had was phenomenal. The capability was good. Unfortunately, there were certain issues but you address those.
When Daiichi Sankyo came, whatever issues were there were in the public domain. They had seen them. They also had conversations internally. There was no surprise. And then after that they have been involved in running the business.
For five years now. Yes. So they have now run the business. Ranbaxy was not only the crown jewel of the Indian pharma industry but as a company it was India's global face. My expectation was that they would build upon it. But obviously it has gone the reverse way. They have mismanaged it. They have not been able to deal with it. And now they are trying to put a blame for things of the past. For what? They did their due diligence. They bought a company but have not been able to run it. What they have agreed on with the FDA does not mean it is all right. They have come to a certain conclusion. I do not want to say they should have done this or that or why they did it. But they never spoke to me or anybody else.
Q. Were you aware they were going to make a settlement with the FDA?
A. After I left Ranbaxy, I have not had any interaction with them. Rather than focusing on whatever Dinesh Thakur may have said or not said, but just because he said that does not make it right.
Q. So quite a few of the things in that story in Fortune (http://bit.ly/frtnrnbxy) you think are untrue and biased?
A. Fortune's is a pretty sensational story. Let's stick to the facts. Just because it has come out in a story does not make it right. If you look at the issues that are raised, those are not right. And that is what is important. The kind of malignment, or whatever is the right word, the kind of perception getting created that the data was falsified is not correct. Secondly, if Daiichi Sankyo is saying they were not aware of whatever was linked to the FDA, that is not correct. Those are the two critical aspects.
Q. There is also the statement somewhere that there was a culture in Indian companies in general and in Ranbaxy also that if the bosses are saying something everybody tries to make it happen.
A. Let us look at the facts. You have a guy who has gone out and said a series of things. I do not know the guy.
Q. You never met him?
A. I probably met him but I was not dealing with him. He was dealing with his boss, who was dealing with the CEO. He was there for a short period. I did not have an involvement with him. But he was there in the system.
Q. What I am concerned about in this whole episode is that whoever runs Ranbaxy now it is still considered an Indian brand. Is there a risk that Indian brands in general will be looked upon more sceptically by customers in other countries?
A. Ranbaxy is a business that made all of us proud as Indians. It was India's flag bearer globally. I would have expected, as somebody who has grown up with the business, also as a family that has been involved in it, that they (Daiichi Sankyo) would be able to take it the next level. As it is when Ranbaxy was sold, people asked why we were selling it. It represented an Indian identity. But the way they (Daiichi Sankyo) have gone about running the business, or not running it in a particular way, is sad.
I hope you will grant that the timing of the sale could give rise to allegations that because there was a brewing storm it was felt that it was better to sell.
Q. How was it a brewing storm?
A. Because the FDA thing had already started.
Everybody knew that. It was already in the public domain.
Q. Now you say the brand has been degraded by the new owners.
A. It could have been taken to a higher level, but it has gone the other way.
Q. Did you make a mistake in selling it?
A. You cannot go and change what has happened. What you hoped for was to see Ranbaxy going from strength to strength. But after five years, after not being able to run it, they are trying to point a finger and make accusations. That is not fair and appropriate. And that is said.
Q. Do you plan to do anything beyond today's statement?
A. We are reviewing our options. We will do what we need to do.
Q. Are you liable at all, once you have sold the company?
A. No, nothing.
Q. So no one can say you sold a lemon?
A. It is not a lemon, it is a fantastic company. And whatever issues with the FDA were there were publicly there. It was public knowledge. I cannot question why they are doing it and how they are doing it.
Q. Have you been engaged in any dialogue with Indian authorities in any way on this?
A. For what? I am not in that business. It does not connect me. The only reason we issued a press release today is the press release that came from Daiichi Sankyo yesterday and talked about misconduct and misrepresentation. I want to focus on the issue.