>RANBAXY (CITI)

■ A Dampener — The US FDA’s warning letter to one of Ranbaxy’s plants in Ohm Labs does not appear material from a financial perspective – we see a worst case impact at c.2%-3% and c.5% of core sales and EPS respectively, and believe the FTF pipeline appears secure. However, it will likely affect confidence w.r.t. the stock, given Ranbaxy’s history with the FDA. While the stock could trade weaker next week, we would view any dip as an enhanced buying opportunity.

■ Warning Letter at Ohm Labs — The FDA has issued a warning letter to Ranbaxy's liquid manufacturing plant at Gloversville (NY), citing cGMP violations (inspected in Jul/Aug 2009). It is one of the three plants in Ohm Labs; the others did not have any material deviations. Ranbaxy has engaged a consulting firm (PRTM Inc) to address the issues.

BUY: A Dampener But Negligible Financial Impact

■ Small Unit; Negligible Financial Impact — Ranbaxy has indicated the plant accounts for under 10% of US (c.2%-3% of total) sales. Sales would continue and while approvals are likely to be on hold, there are not too many major filings pending approval from this plant. We leave our estimates unchanged. In a worst case scenario, where the issue escalates and the plant is closed down, this could affect c.2%-3% and c.5% of our CY11E recurring sales and recurring EPS
respectively.

■ FTF Pipeline Appears Secure — The major FTFs (where site transfers have / are being effected) appear to be filed from the other Ohm Labs plants. We therefore do not see any fresh risk to this pipeline or its valuation from this development.

■ Could Impact Sentiment — While this development, by itself, does not appear to have a material impact on financials or the key drivers, it is likely to affect recently rising confidence levels w.r.t. the stock among investors, given its past issues with the FDA. We would view any share price weakness as an enhanced buying opportunity, given limited fundamental impact and also potential catalysts over the next one to three months (integration plan with Daiichi, strong earnings, Flomax launch).

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