Ranbaxy Laboratories on Thursday shocked the Street with a net loss of Rs 586 crore in the quarter ended June, compared with a net profit of Rs 243 crore in the corresponding period last year.
The pharmaceutical company’s results were primarily hit by foreign exchange losses, even as the company’s net sales rose 54.5 per cent year-on-year to Rs 3,174 crore. Growth in North America boosted revenue.
Though depreciation in the rupee against the dollar is seen as favourable for pharmaceutical companies with a focus on exports, Ranbaxy is vulnerable to the volatility because of its high level of hedged positions on foreign-currency billings and large foreign loans. In the quarter ended June, the rupee fell sharply against the dollar. Due to this, Ranbaxy recorded mark-to-market losses on its foreign currency exposure.
The company, owned by Japan’s Daiichi Sankyo, recorded a loss of Rs 599 crore on foreign currency derivatives, compared with a gain of Rs 112 crore a year ago. “There was a net charge of $160 million (Rs 875.9 crore) on the P&L (profit and loss) on account of foreign exchange items,” the company said.
During the quarter, sales in North America rose two-fold to Rs 1,471 crore. The strong revenue expansion in the region was due to growth in sales of existing products, as well as sales exclusivity on a generic version of Pfizer’s cholesterol-lowering drug Lipitor. “USA sales were robust, helped by strong base business and exclusivity sales,” CEO Arun Sawhney told investors. He added the company had a market share of about 50 per cent on the Lipitor generic during the exclusivity period. It maintained a 40 per cent market share even after the entry of multiple generic players, after exclusivity. However, the company did not provide details on generic Lipitor sales.
Ranbaxy’s ability to launch the Lipitor generic had been doubted, as the US Food and Drug Administration (US FDA) had alleged the company had violated manufacturing practices in the last few years.
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Products from Ranbaxy’s key facilities like Dewas and Paonta Sahib were under US FDA’s import ban since 2008. However, following a settlement with the US regulator and the department of justice (DoJ) in that country, Ranbaxy succeeded in launching the drug last November, in line with its schedule.
Under the consent decree signed with US authorities, Ranbaxy had agreed to improve quality-control and data-reporting practices and set aside $500 million to settle any potential liability from DoJ investigations. Sawhney said the company had recorded satisfactory progress in upgrading and enhancing the quality of its business and manufacturing processes.
Though he said he was confident the issues with US authorities would be resolved, he refrained from specifying a timeline for this. The company was holding discussions with US FDA and DoJ, negotiating the settlement amount, Sawhney said. He added Ranbaxy expected an assessment report from US FDA by the end of September was hopeful of launching more products in the US from its recently-approved Mohali facility.
Sawhney also indicated a shift of focus from Ranbaxy’s much talked about Project Viraat for the domestic market. “Project Viraat has outlived, and we have to go beyond it,” he said adding the company would now focus on improved productivity, instead of recruiting more medical representatives, to gain penetration.
During the quarter ended June, Ranbaxy’s sales in India and Sri Lanka rose 13 per cent year-on-year to Rs 554 crore. The company did not disclose the standalone numbers for the domestic market.
On Thursday, Ranbaxy shares closed at Rs 501.8, 2.6 per cent lower on the Bombay Stock Exchange, underpeforming the benchmark Sensex, which closed 0.2 per cent compared to the previous close.
For this year, the company has lined up at least there product launches in the US markets. Anti-diabetic product Actos and chloresterol-lowering drug Tricor generics are likely to be launched during the year. Actos generic may be launched by September, while Tricor generics are likely to be launched by December. Patents for cardiovascular drug Diovan are set to expire in September, and Ranbaxy is likely to launch the product on exclusivity. Deepak Malik at Emkay said considering the launches planned during the year, the prospects for Ranbaxy seemed strong.