A series of positive moves by Ranbaxy Laboratories Ltd, after years of dispute with the US drug regulator, has triggered an air of optimism around the pharma company. But, there are still some voices of caution that say it might be too early to declare Ranbaxy has turned the corner.
Among other steps, the company has managed to cash in on key opportunities like the launch of a Lipitor generic with 180 days of marketing exclusivity and secured the US Food and Drug Administration (USFDA)’s approval for its new unit in Mohali, Punjab. In addition, it is poised to restore its position in the domestic space, while starting on the emerging market foray, analysts said. Experts pointed at the “crucial” role of Arun Sawhney, chief executive officer of Ranbaxy, for getting things back on track.
As for investor sentiment, the shares of the company have risen 33 per cent on the BSE from its 52-week low on December 19. The stock closed at Rs 487.95 on Thursday, one per cent down from the previous close, while the benchmark Sensex shed 1.47 per cent to close at 17,233 points. Most brokerages have now put shares of the company on “hold”, in contrast from “sell” some months ago.
| GOOD NEW FROM THE US |
|
| KEY BENEFITS OF MOHALI PLANT APPROVAL |
(Source: IDFC Securities Research) |
“It was vital for Ranbaxy to resolve the regulatory issues in the US, as that was taking a lot of management involvement. In 2011, with the consent decree, the company was able to put the regulatory problems behind. It has also strengthened systems and processes. Now, there are various plans and Ranbaxy will have a new face,” a person close to the company told Business Standard, requesting anonymity.
In December last year, the company signed an agreement ending its three-year regulatory tussle with the USFDA. The settlement allowed the company to resume drug imports from India.
Also Read
According to the head of another major domestic pharmaceutical company, Sawhney, who found acceptance among the Japanese owners of the company, has been instrumental in getting back everything together. “He (Sawhney) came from Dr Reddy’s and is extremely competent. He not only was able to accept the mistakes, but also gained confidence of the Japanese management and his own team. This was very important to make things work,” said the executive, who also did not want to be named.
At present, the company’s strategy is to focus on three key areas — monetising significant first-to-file opportunities in the US, re-establishing itself in the domestic market through project Viraat, and restoring its brand equity globally.
“Ranbaxy has emerged strongly over the last few years. We have put behind us our regulatory problems, strengthened our processes, restructured our business operations, re-evaluated our marketing strategy and are working towards improving manufacturing efficiencies and costs,” said CEO Sawhney. “A clear strategy has emerged and now is the time to unleash our true potential.”
Others agree. With drugs worth around $60 billion set to go off patent between 2012 and 2015 in the US, there is a lot of opportunity in the market globally, as well as in the domestic pharma space, said Ashish Mehra, managing director, India and Asia Pacific practice at US-based consultancy Strategic Decision Group.
“With the patent cliff, Ranbaxy is very well-placed to cash in on the 180-day exclusivity. It might have to share some profit or enter litigation, but the gains are better,” Mehra said. However, Sarabjit Kaur Nangra, an analyst at Angel Broking, says one must wait and watch for a while to assess which way Ranbaxy is going.
She cited Ranbaxy’s current focus on acute therapy as a weak point. However, it is learnt that Ranbaxy is readying to launch products in other segments like chronic therapy, too. Another analyst argued the US decree would take time, so it might be early to say Ranbaxy’s rough patch had come to an end.
According to estimates of IDFC Securities, Ranbaxy’s US sales are expected to grow more than two times by 2013, as growth is likely to be driven by the company’s earnings from 180 days of exclusive marketing rights on various products.
“Backed by one of the strongest FTF (first-to-file) pipelines among Indian pharma players in the US for the next 18 months, Ranbaxy’s US-based business is set for significant expansion as it benefits from substantial and recurring post-exclusivity sales of these products,” Nitin Agarwal and Vineet Chandak of IDFC Securities said.
The USFDA nod to Ranbaxy’s new facility in Mohali in 2011-end sets the pace. This was significant as Ranbaxy’s three key Indian facilities at Paonta Sahib and Batamandi (both in Himachal Pradesh) and Dewas (in Madhya Pradesh) have been on the US regulator’s import alert since 2008. The USFDA had banned 30 generic drugs produced by Ranbaxy at these three units, citing gross violation of approved manufacturing norms.
“Post the US import alert, Ranbaxy had to shift products to its Ohm facility (in the US), creating capacity constraint,” a sector analyst said. He added the Mohali approval would provide the company a low-cost India-based manufacturing source to supply formulations to the US.
The company has already started planning expansion in the US. Despite problems in the US for the last few years, Ranbaxy has retained majority of its sales force in that country, which it may use now to get back its hold in the market. The company employs around 600-650 people in the US. Ranbaxy is focused on other geographies, too. The company has already stepped into key new markets like Malaysia, Venezuela and Romania. It is also planning a manufacturing unit in Morocco.