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Ranbaxy: US operations zoom

Apr 29, 2002

Ranbaxy has reported a 24% jump in sales and 72% growth in bottomline for 1QFY03. Operating margins improved by 240 basis points. Though results on a standalone basis are below market expectations, the highlight of the performance is strong sales growth posted by its US subsidiaries.

(Rs m) 1QFY02 1QFY03 % change
Net Sales 4,457 5,529 24.1%
Other Income 166 214 28.9%
Expenditure 3,940 4,757 20.7%
Operating Profit (EBDIT) 517 772 49.3%
Operating Profit Margin (%) 11.6% 14.0%  
Interest 133 131 -1.5%
Depreciation 169 198 17.2%
Profit before Tax 381 657 72.4%
Extraordinary Income/Provisions 233 564  
Provisions/Contigencies 0 0  
Tax 57 272 377.2%
Profit after Tax/(Loss) 557 949 70.4%
Net profit margin (%) 12.5% 17.2%  
No. of Shares (eoy) (m) 116 116  
Diluted Earnings per share* 19.2 32.7  
P/E (at current price)   25.7  
(*- annualised)      

On a consolidated basis, Global sales stood at US$ 159 m, recording a 25% growth. This was driven primarily by growth in sales of dosage forms, comprising 80% of global sales, which grew by 48%. International operations accounted for 68% of the global sales. The US operations achieved impressive sales of US$ 51 m during the quarter, reflecting a growth of 158%. In the process, USA became the largest market of the company for the first time, overtaking India which recorded sales of US$ 40 m.

Ranbaxy 1QFY03- On a standalone basis
(Rs m) 1QFY02 1QFY03 % change
Exports 2,273 3,176 39.7%
Domestic 2,184 2,353 7.7%
Total 4,457 5,529 24.1%

It may be recalled that the company recently received FDA approval for marketing Cefuroxime Axetil tablets in the US markets after a prolonged legal battle. Ceftum (generic Cefuroxime) is a molecule with a market size of US$ 400 m. Though the approval doesn’t ensure six-month marketing exclusivity for Ranbaxy, the only generic competitor (Apotex) is atleast 3-4 months away. The market for the drug is expected to be a duopoly atleast for a year.The company has already launched the drug at about 30% price discount to GSK's Ceftin and has captured more than 50% market share in the last month.

Besides Cefuroxime, Ranbaxy received three more approvals during the quarter from the US FDA bringing the cumulative approvals to 43. There are 29 more generics awaiting approvals.

The Company's domestic pharmaceutical business during the quarter outpaced the market, growing at 14%. The new introductions, Cifran OD, Zanocin OD (anti-bacterials) and Pioglar (anti-diabetic), which are brand leaders in their respective segments, performed well. The Company continued to strengthen its chronic therapy segment for the Indian market with the launch of new products in the anti-hypertensive, anti-diabetic and anti-asthma segments. Introduction of Romilast (Montelukast) heralded the Company's entry into the important anti-asthma segment. However, overall the domestic market sales recorded a growth of 7.7%, implying a lower sales growth in bulk segment.

On the research front, the 500 mg Cipro-D molecule licensed to Bayer AG has completed its clinical trials and the Bayer has filed an NDA (New Drug Application). It may be noted that following approval from the authorities, it would reach the commercialisation stage. This could trigger a considerable milestone payment for Ranbaxy. Considering the time taken by regulatory authorities for approval we expect launch of Cipro-D by mid-2003, ahead of original Ciprofloxacin patent expiry in 2003 end. There is also a possibility for licensing deal of its BPH molecule, RBX-2258 (Phase II in India) in the current quarter given that the company is in advanced negotiations stage with several MNCs.

At the current market price of Rs 840, the stock trades at 24x its consolidated expected earnings for FY03 (Dec'02).

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