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

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

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

Mar 26, 2011

In the previous article, we compared Ranbaxy and Dr Reddy's on their business segments. Moving a step ahead, let us now focus on the revenues segmentation and some other financial parameters.

Revenue Segmentation

The revenue of Ranbaxy was about Rs 70 bn in CY09, while that of Dr Reddy's was about Rs 75 bn FY10. Even though, Ranbaxy and Dr Reddy are Indian companies, the revenue for both comes from diverse geographies. 67% of Dr Reddy's total revenues come from North America, Europe, Russia and the CIS while that from Ranbaxy is 50%. India's contribution to the top line of both companies is around 20% only.


Revenue growth and EBITDA margins

The total revenue growth for pharma companies year after year cannot give us a true picture as there are times when generic pharma companies reap benefits of the 180 day exclusivity period. The company getting this exclusivity will gain higher volumes and margins only for the period of 180 days. Post which the competition will hamper prices as well as revenues.


In CY07, Ranbaxy's global sales recorded a robust growth leading to a 10% increase in total revenues. But for CY08 and CY09, the revenue growth was muted. This impact on the business could be attributed to the financial crises of 2008 and the US FDA imposing a ban on two of its manufacturing facilities at Dewas and Poanta Sahib. However in CY09, the company was able to launch three First-To-File (FTF) products from its US facilities and one authorized generic.


Ranbaxy has a strong FTF pipeline but is unable to grab the opportunities due to its issues regarding the manufacturing facilities. But, a point to be noted is that the FDA issue is now two years old and the chances of success are better. Though, as of now, this issue is draining the margins.

The revenue for Dr Reddy's decreased by more than 20% in FY08 as compared to the previous year. This was because there were no new authorized generics or 180 day exclusivity drugs launched in that year, whereas, there were four such successful US generic launches in FY07. The steep rise in revenues in FY09 can be majorly attributed to the launch of Sumatriptan - the authorized generic version of Imitrex in the USA ahead of other competitors. This alone had contributed about 10% tototal revenues in FY09.

EBITDA margin impact in FY08 can be attributed to the difficulties in the change in the structure of the German market after the acquisition of Betapharm in Germany. The new tender based system increased the generic competition drastically and the realizations fell steeply too.


R&D costs for both the companies are almost in a similar range. But recently, Daiichi Sankyo hived off the new drug discovery research (NDDR) unit from Ranbaxy. This will bring down the research cost quite substantially in the next few years. Dr Reddy's consistently is investing 6% plus of revenues in R&D activities. One of its new chemical entities (NCE) is currently in late phase-III clinical trials.

We can conclude that the revenue contribution for both the companies is quite diverse. The revenue growth in the North American market will be a crucial parameter for Dr Reddy. The margins for Ranbaxy should improve once the issues regarding two of its manufacturing facilities are resolved.

In the next article we will take the comparison further to understand both the companies' balance sheet ratios and price performance.

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

Equitymaster requests your view! Post a comment on "Ranbaxy vs Dr. Reddy's: Which one is better? - II". Click here!

7 Responses to "Ranbaxy vs Dr. Reddy's: Which one is better? - II"

C N BHATIA

Apr 7, 2011

BOTH THE COMPANIES ARE BETTER DUE TO THEIR MANAGEMENT

Like 

DEV RAINA

Apr 4, 2011

the analysis may be less elaborate than the given but please make the picture clear and emphatic as to which is better nad why ,may be in a snippet.

Like 

Ramlal mundhra

Apr 3, 2011

I agree with the views of Mr Aditya. When U reaserch why cant the full article be posted on one go.

Like 

ADITYA

Apr 1, 2011

Where is the 3rd part of the comparision? Part 2 was posted on 26th march, today it is 1st April, the 3rd part is yet to be published. It would have been better to post it as a single article.....

Like 

KRISHNA TUMKUR

Mar 28, 2011

Both the companies are strong indian pharmaceutical companies.Tomorrow as equtymaster keeps harping on CRAMS and it's impact on the pharma sector is going to be crucial ,i do feel Drreddy's has the edge due to it's
superior R&D facilities located in india vis a vis ranbaxy which has to rely on daiichi sankyo.Bulk drug manufacturing will be the key and i do feel drreddy's has the advantage.

Like 

karan

Mar 27, 2011

this comparison does not give any idea. there is lack of substance in this.

Like 

Dr Dilip

Mar 26, 2011

it will b better to give all the details about both companies in one go rather than spreading in many parts and giving them at different time.then we can compare in abetter way.

Like 
  
Equitymaster requests your view! Post a comment on "Ranbaxy vs Dr. Reddy's: Which one is better? - II". Click here!

More Views on News

3 Indian Pharma Companies that are Investing Big Time for the Future (Views On News)

Nov 9, 2021

In 2021, R&D of pharma companies roared to life in a never-before-seen way.

Demerger of Financial & Pharma Businesses puts Piramal Enterprises in Limelight (Views On News)

Oct 8, 2021

The company's shareholders will be issued 4 shares in the demerged entity for every 1 held in Piramal Enterprises.

Block Deal Disappoints Max Healthcare Shareholders. Stock Falls 6% (Views On News)

Sep 30, 2021

The divestment of 6.6% stake by the promoter is considered to be one of the largest block deals of the market.

This Stock Just Made a Historical Debut on the Exchanges (Views On News)

Nov 15, 2021

Shares of the company listed at premium of 253% from its IPO price, the highest ever.

Krsnaa Diagnostics IPO Opens Tomorrow: Key Points to Consider (Views On News)

Aug 3, 2021

Krsnaa Diagnostics grey market premium is at around Rs 440 from its issue price of Rs 933-954.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE HEALTHCARE


Nov 26, 2021 (Close)

S&P BSE HEALTHCARE 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS