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Journalism of Courage
Pharma major Ranbaxy Laboratories Ltd on Friday reported a 91 per cent fall in its third-quarter profits to Rs 18.4 crore. While the company8217;s profits had dipped in the previous three quarters too, this was by far the sharpest fall.
A drop in generic sales in the US and higher spend on litigation and research and development further squeezed the margins. But for a tax write back of Rs 34.56 crore, India8217;s largest drug company would have posted a loss in the quarter.
A Bloomberg poll of analysts had pegged profits at Rs 125 crore. Overall revenues for the quarter-ended September were down 3 per cent to Rs 1,304 crore despite higher sales in regions other than the US. The company announced an interim dividend of Rs 2.5 per share.
The Ranbaxy scrip, which was trading at Rs 404-levels, plunged to Rs 386.9 after the results were announced on Friday. It closed the day at Rs 389.6, down Rs 12.5 from the previous close.
The scrip has lost almost 37 per cent since January 3 this year, when it was hovering around the Rs 625-levels. The company also got shareholder approval to raise up to 1.5 billion to fund acquisitions.
The company will also begin talks with Roche next week on licensing antiviral drug Tamilflu, as the latter prepares to increase production to prepare for a possible bird flu pandemic.
The continuous pricing pressure in the US generic market, Ranbaxy8217;s single largest market, saw Q3 sales in the US decline 25 per cent to Rs 332.8 crore.
The US market, which accounts for 25-30 per cent of the company8217;s revenues, has been witness to intense competition due to the entry of new players and a drying pipeline of new generic products.
Ranbaxy8217;s major competitors like Teva Pharmaceutical Industries and Barr Laboratories Inc too have taken a hit in recent times. In the April-June quarter, generic drug revenues in the US for Teva fell 8 per cent to 624 million and for Barr, 26 per cent to 190 million.
8220;Pricing pressures have accelerated in the third quarter and are expected to continue well into 2006. However, our share in the prescriptions market has gone up by 26 and product flow too will improve next year,8221; said CEO Brian Tempest. Ranbaxy has around 45 products awaiting approval from USFDA.
Research and development spend during the period rose 71 per cent to Rs 153 crore from Rs 89.6 crore in the corresponding quarter as the company spent more on developing its generic pipeline. Ranbaxy, which spent Rs 106 crore on litigation last year, is spending more on legal fees this year as it challenges patents on drugs like Lipitor and Nexium in the US and European markets.
