Mumbai: Japanese drug major Daiichi has lowered its profit forecast for the year ending March 2012, and slashed senior executive pay, to offset the impending loss arising out of its Indian subsidiary, Ranbaxy’s $500-million legal settlement in the US. After months of sticky negotiations, Ranbaxy finally announced on Wednesday that it had reached a settlement with the US Food and Drug Administration over manufacturing issues, and that, it is keeping aside $500 million to settle potential claims in the US court. Though the final approval from the US district court of Maryland will come over the next few weeks, the settlement is a huge upside for the company whose sales from US—the world’s largest market, have been languishing over the last three years. The “consent decree” signed with the FDA will pave the way to boost generic sales in the US, which contributes over a quarter of the company’s overall sales. In 2008, the company’s two key plants—Paonta Sahib (Himachal Pradesh) and Dewas (Madhya Pradesh)—came under the FDA scanner for quality and manufacturing issues, leading to an import ban on 30-odd drugs. Arun Sawhney, Ranbaxy CEO and MD, said in a statement: “While we were disappointed by the conduct that led to the FDA’s investigation, we are proud of the systematic corrective steps we have taken to upgrade and enhance the quality of our business and manufacturing processes”. TOI was the first to report on July 9 that the company would pay a penalty of around $300-400 million, and was nearing a settlement with the FDA. In another development, the company’s new facility at Mohali (Punjab) received approval from the US FDA. The Ranbaxy scrip after recording a fall, moved up marginally to close nearly 3% up at Rs 407 on BSE. Both approvals are significant for the company as it can resume plans to launch drugs, and improve sales in the US market. While some blockbuster drugs were facing a ban, there were some which had to be manufactured in other global facilities, like generic Lipitor, thus reducing the company’s margins. Now with the final approval coming in soon, the company can streamline its US plans, analysts say. Sarabjit Kaur Nagra, president research Angel Broking, said: “This is a huge positive as it provides some clarity and future to Ranbaxy’s US plans. CY12 will be stronger for the company.” Some analysts, however, say that the penalty is on the higher side and above the market’s expectations, and may wipe out Ranbaxy’s profits for sometime. The company’s US sales have moved up from $393 million in 2008 to $600 million recorded in 2010. For the period January-September this year, it stood at $334 million. But experts say much of the US sales were attributed to first-to-file earnings where the drugs had 180-day market exclusivity. SALES PUSH • Ranbaxy’s plants in Paonta Sahib (HP) and Dewas (MP) came under the FDA scanner for quality and manufacturing in 2008 • The US slapped an import ban on 30-odd drugs from these facilities in 2009 • Ranbaxy says its has taken corrective measures to upgrade and enhance quality