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Ranbaxy: Riding high on exports - Views on News from Equitymaster
 
 
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  • Dec 8, 2001

    Ranbaxy: Riding high on exports

    Ranbaxy reserves the distinction of being among the first Indian companies to explore opportunities beyond the domestic shores. It has functioned as one of the torchbearers for the Indian pharma industry by being the leader in identifying generic export opportunity way back in early 90’s. A decade of hard work and company’s export strategy is about to pay off rich dividends. In this report we focus on the company’s export business, which would be the key for the company in time to come.

    From modest export revenues of Rs 942 m (US $ 20 m) in 1991, Ranbaxy’s export revenues have touched Rs 8.1 bn in Dec’00, clocking a CAGR growth of more than 28% in last ten years.

    The company is confident of crossing US $ 100 m mark from exports to US alone this financial year. And that’s not all. Over the years, it has taken pains to create its direct presence in 25 countries across several continents, with exports to over 50 countries.

    Ranbaxy’s strategy for the generics market was different from Reddy’s and Cipla in the sense it created its proprietary presence in the overseas market. Though it took time to pay off, the benefit for the company is that it is now not at the mercy of marketing tie-ups for selling its products in the overseas market. The table below shows a comparative strategy of leading players to penetrate the generic markets.

    Indian Pharma Giants - Generic Strategy
    Company
    Ranbaxy Create a broad basket of products with a mix of commodity, difficult to
    manufacture generics and bulk drugs. Focus on both Para III and Para IV filings.
    Simultaneously, targeting multiple export markets with huge investments in
    creating own marketing infrastructure to penetrate export markets. A broad basket
    of products ensures better bargaining power and back up for any
    disappointments.
    Dr. Reddy’s Comparatively focused approach with emphasis on Para IV filings, which is a
    high-risk high return proposition. The approach is characterized by high earnings
    volatility. Marketing taken care of through tie-ups, marketing partners ensuring
    low investment in marketing infrastructure.
    Cipla Low risk return approach ensuring relatively stable earnings flow. The generic
    strategy of the company is to enter into bulk drug supply arrangements with
    companies filing Para III and Para IV application.
    Wockhardt The company intends to partner with different players for different molecules. It
    conservatively targets to enter only specialty generics and intends to partner with
    players who can share development costs as well as potential profits.

    Besides the domestic market, the company has identified US, UK, Germany, Brazil as key target markets. Going forward, Ranbaxy has an ambitious plan to be present in all top pharma markets (except Japan) in the world as shown in the table below. Considering that most of the identified markets are logging healthy growth rates, the company should continue to log 16-18% CAGR growth over 2005 in exports. Further, presence in developed markets would help the company in penetrating other developing economies.

    Countries Strategic importance
    India, USA, UK, China,
    Germany and Brazil
    Core Markets
    France, Mexico The company is exploring possibilities for independent
    penetration in these markets. Currently, has supply
    arrangements with leading players.
    Italy, Canada, Spain Ranbaxy has supply arrangements with leading
    players in these countries.

    In the US, the company has a product basket of more than 41 approved products, the highest among Indian companies operating in the US generics. Though each individual product filing is not big, collectively they would help the company sustain revenue momentum in the coming years. The basket also includes some difficult to manufacture products for which the competition for the company would be limited. The basket would also ensure better bargaining power for the company. Over a longer period the company also plans to introduce a portfolio of branded products in the US markets.

    To secure its position in one of the world’s largest pharma market, Germany, Ranbaxy acquired the generic business of Bayer last year. Ranbaxy is considering Brazil as another key market with the opening of generics drugs. Ranbaxy is targeting a basket of 50 product approvals by the end of current financial year.

    Considering that Ranbaxy is expected to achieve total sales in excess of US$ 425 m in the current year, the company has already critical mass in the International pharma business. If Ranbaxy is successful in its ambitious foray in to the global markets, it would truly be a multinational giant from India. However, it has still a long way to go when compared to other International generic majors.

     

     

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