Ranbaxy vs Dr. Reddy's: Which one is better? - Views on News from Equitymaster

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Ranbaxy vs Dr. Reddy's: Which one is better?

Mar 23, 2011

Evaluating pharma companies is quite a difficult task. From a distance, pharma companies may look more or less similar, but that is not the truth. The companies not only sell their products in India but across the globe. Also, the type of the products can vary depending on the company's strategy. Plus, the need to understand the regulatory aspects is very important.

In a series of articles starting with this one, we will try and make it easier for you to understand the pharma business. In this article we will compare Ranbaxy and Dr Reddy’s, two major pharma companies.

Brief History

Founded in 1961, Ranbaxy is one of India's largest and oldest pharma companies. It manufactures branded generic pharmaceuticals and Active Pharmaceutical Ingredients (APIs) and markets the same across different parts of the world. The company was founded by the Singh family, who later sold their entire stake to the Japanese innovator pharma company -Daiichi Sankyo in the financial year 2008. Currently, Ranbaxy has presence in 46 countries and serves customers in 125 countries.

Dr Reddy's was founded by Dr Anji Reddy in 1984. It has become one of the largest pharmaceutical companies in India and one of the leading global generic players. This company began its operations by supplying to the Indian drug manufacturers and soon started exporting to less regulated markets. After achieving critical mass, it entered into the regulated markets of the US and Europe. The company management is very proactive and this can be evinced from the fact that it was the first Indian generics company to garner the 180-day exclusivity period for the drug 'Fluoxetine' in 2002. It was also the first Indian company to launch an authorized generic in partnership with Merck for 'Simvastatin' and 'Finasteride'.

Business Segments

The segments in which both the companies exist are listed in the table below.

Business Segments
Segments Dr Reddy Ranbaxy
APIs YES YES (Small Presence)
Generics YES YES (Large Presence)
Branded Generics YES YES
CRAMS YES NO
Research activities YES NO
*Ranbaxy will continue to independently develop and later commercialize
the anti-malarial new drug which is currently in Phase III trials.

Active pharmaceutical ingredients (APIs) are the main substance used to make the final formulations. Many global pharma firms source the APIs from Indian manufacturers. In this business, Dr Reddy's has a strong footing as compared to that of Ranbaxy.

The focus for Ranbaxy has always been on the generics business and it has aggressively pursued the same. Dr Reddy's is more diversified as compared to Ranbaxy in terms of business segments. It also has a division which takes care of the contract manufacturing and research business.

After Daiichi Sankyo acquired Ranbaxy towards the end of 2007, the new drug discovery division of Ranbaxy was hived off from the company in July 2010, thereby making Ranbaxy an even more focused generics player. Dr Reddy's boasts a spending of about 6% of its annual income on new drug R&D. But on the other hand, the cost of new drug discovery research (NDDR) will not have to be borne by Ranbaxy any more.

In the next article we will focus on the revenue segmentation and a few other financial parameters.

Ranbaxy vs Dr Reddy's Which one is better? - Series - Next | All Articles

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