Ranbaxy net loss rises to Rs.1,030 cr in Q3

Ranbaxy Laboratories has reported heavy consolidated net loss of Rs.1,030 crore during the third quarter ended December 2014 due to higher provision for taxation, lower sales and forex loss as against Rs.159 crore in the similar period of last year. The company provided Rs.888.19 crore for taxation as compared to Rs.98.14 crore in the same quarter of last year. Further, it incurred a forex loss of Rs.15.28 crore as against forex gain of Rs.103.57 crore. EPS worked out to negative Rs.24.26 as compared to negative Rs.3.76 in the last period.

With poor performance, Ranbaxy scrip declined sharply to 702.40 in the afternoon session on BSE. The scrip touched to its yearly highest level at Rs 724.95 in the morning session today.

Its consolidated net sales declined by 9.5 per cent to Rs.2,588 crore from Rs.2,859 crore. Its US sale touched to Rs.896 crore and that in West Europe reached at Rs.208 crore. Its sales in India increased by 2 per cent to Rs.591 crore. Its sales in East Europe and CIS amounted to Rs 373 crore due to currency depreciation in Russia and Ukraine. Its sales in Africa and Middle East reached at Rs.224 crore. Sales in Asia Pacific and LATAM (including Sri Lanka improved sharply by 46 per cent to Rs.218 crore. Its API sales declined to Rs.71 crore primarily impacted by supply issues at Toansa and Dewas.

Ranbaxy's domestic business improved by 12 per cent. It launched India's first biosimilar of infliximab, Infimab through a licensing partnership with EPIRUS Biopharmaceuticals, Inc. It is indicated for the treatment of inflammatory diseases including rheumatoid arthritis, Crohn's Disease, ankylosing spondylitis, ulcerative colitis, psoriatic arthritis and psoriasis.

The company received the regulatory approval to launch India's first NCE Synriam in seven African countries viz., Nigeria, Uganda, Senegal, Cameroon, Guinea, Kenya and Ivory Coast. The product has since been launched in Uganda and will be made available in other countries towards end of January 2015.

Contract manufacturing - India

With contract manufacturing business losing sheen, greener pastures like Sikkim emerging as better options for many, increased regulatory scrutiny putting pressure on biggies and financial crises engulfing the established firms, the North Indian pharmaceutical industry is facing rough weather.

The so-called excise free zones of Himachal Pradesh and Uttarakhand, the two major hubs of North India, have become less attractive for the pharmaceutical units, portending woes for the entire industry in the region. Now the only remaining hub is the Jammu region.

`In 1970 and 80s, Delhi and outskirts were leading hubs for the pharmaceutical industry, mostly led by small scale and medium players. Then slowly biggies emerged and captured the ground while some existing units diversified. It is learnt that 30-40 per cent of the units in the excise-free zones are ready to sell their business,” according to industry leader Nipun Jain.

The major pharmaceutical units in the region are Ranbaxy, Panacea Biotec, Venus Remedies, Ind-Swift, Ind-Swift Laboratories, Surya Pharma, Dabur Pharma, Jubilant Organosys, Nectar Lifesciences, IOL Chemicals and Pharma. Over the years, unlike Gujarat of Maharashtra, the region has not witnessed the rise of any new player to reckon with, other than Mankind Pharma.

RANBAXY BURDEN

Sun Pharma’s seemingly bold acquisition of Ranbaxy was hailed by several analysts and some of the corporate heads as they think Mr. Dilip Shanghvi’s strategy of acquiring poorly performing companies and turning them around may work this time also. Between 1997 and 2012 Sun Pharma made 13 acquisitions starting with the purchase of Caraco Pharmaceuticals. That was the year in which it also bought stakes in two Indian pharma firms namely Tamilnadu Dadha Pharmaceuticals Ltd and MJ Pharmaceuticals Ltd. But in the case of Ranbaxy take over, Sun is facing a different type of hurdle. A belligerent US FDA taking a tough stand on Ranbaxy’s exports from most of its Indian plants to the US market.

 Ranbaxy has been confronting serious issues with regard to exports to the US, its most important market, since 2009. All its Indian facilities exporting drugs to the US have been barred from doing so by the US drug regulator for failing to comply with manufacturing standards. Last year, Ranbaxy also pleaded guilty to felony charges related to drug safety in the US and paid $500 million in civil and criminal fines under a settlement with the department of justice. And its balance sheet has been disappointing for some time. Ranbaxy's consolidated net sales for the year ended December 2013 declined to Rs. 10,604 crore from Rs. 12,253 crore in the previous year and EBDITA to Rs. 1,066 crore from Rs. 2,211 crore. EBDITA

The company's net loss amounted to Rs. 1,012 crore in 2013 as against a net profit of Rs. 923 crore in 2012. The company skipped dividend and its share price declined steadily during this period. Another area of concern for the Sun management will be the handling of huge sales force of the two companies. Sun and Ranbaxy have a combined field staff of about 9,000. Once the merger is completed, many of the sales personnel will end up covering the same doctors, especially in the speciality areas. For Sun Pharma’s plan to turn around Ranbaxy with the operating synergy will have to trim the field force and integrate its supply chain.


Layoffs in the sales force can only help to save on salaries and overheads by way of lower cost of travel, prescription promotion and administration costs. To address all these adverse and sensitive issues may not be that easy for the company management for some years.