Mar 26, 2011|
Ranbaxy vs Dr. Reddy's: Which one is better? - II
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.
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.
More Views on News
Aug 14, 2017
A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.
Aug 14, 2017
GST impact coupled with price erosion in US leads to lower profits for the quarter.
Aug 8, 2017
Profits plunge due to higher raw material costs.
Jun 16, 2017
Here's what you can expect from The 5 Minute Wrapup in the coming months and years.
Jun 23, 2017
Net Profit lower due to exceptional items in the previous year.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407