As highlighted in our downgrade note (January 13), the issuance of Form 483 had brought forth a potential event risk, which has now materialised as a worst case outcome. A significant portion of the US sales currently could be vertically integrated to the API from Toansa facility, based on our current estimates. Typically firms tend to have a second source for API for major products. We envisage two scenarios.
In case there is no second source in place. If the entire formulations vertically integrated get impacted (assuming no second site) this could hit our CY15 Ebitda estimates by ~30-35%.
If a second source arrangement is already present for key products, the impact would be significantly lower as Ranbaxy could source API and manufacture it at the OHM formulation plant, which recently received full compliance clearance from the US FDA.
We expect management to provide some clarity on alternate API arrangements for products manufactured at the Ohm facility and we would get back with the exact impact post that.