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| With blockbuster drugs, a market of around $ 60 billion, going off patent in the next 5-6 years, the overseas generics market promises exciting growth opportunities for Indian pharma companies. Having made substantial investments in its overseas subsidiaries, Ranbaxy laboratories is probably the best-placed company to capitalise on these emerging opportunities. |
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| Ranbaxy has identified six core markets that will drive its future business. The markets identified are India, USA, Brazil, UK, Germany and China. According to the company, these markets are likely to generate 80 per cent of formulations sales by 2005. |
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| Growth drivers |
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| Ranbaxy's investments in its international business have already started to pay off, with its overseas subsidiaries breaking even on an aggregate basis in 2001. Global sales nearly touched $600 million last year. |
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| The company expects global sales to touch $700-750 million in 2002 including the sales of the generic version of Glaxo's block buster drug Ceftin. Ranbaxy is so far the only company to have received US FDA approval to manufacture and market the product in the US. |
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| Analysts expect the drug to generate sales of around $50 million (Rs 250 crore) in the first year of its launch. Last year, sales in the US market alone was put at US $ 113 million and growing at an impressive 74 per cent. |
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| Ranbaxy has a very strong pipeline of abbreviated new drug applications (ANDA) filings. In 2001, the company filed for 17 ANDAs and received approval for seven products. About 27 products are in the pipeline awaiting approval. The company plans to have a total of 100 abbreviated new drug applications under its belt by 2005. |
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| Ranbaxy recently entered into a strategic alliance with Wockhardt to tap the multi-billion dollar US generics market. The alliance will cover product development and marketing. |
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| To begin with, the two companies will market Enalapril maleate, a cardiovascular drug and ulcer drug Ranitidine. While Wockhardt will manufacture these products, Ranbaxy's US subsidiary will take care of the marketing. |
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| Research initiatives |
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| The company hopes to launch its new chemical entity (NCE) Rbx 2258, used to treat benign prostate hyperplasia, by the end of this year. This product is currently undergoing phase II clinical trials in India. |
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| The company is hoping to out-license this molecule and is in talks with a couple of international firms. Also in the research pipeline are three anti-bacterial molecules and one anti-asthma molecule. |
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| Under the novel drug delivery systems (NDDS) programme, the focus is to widen technology platforms and create more prescription products. Ranbaxy has developed four technology platforms and is working on 15 products in five therapeutic areas. |
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| New initiatives |
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| As part of its new initiatives, the company is planning to foray into the herbal segment in 2002. For its foray into the herbal segment, it plan to tie-up with one or two companies which will supply both domain knowledge and products. |
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| The company plans to focus on biogenerics products. Ranbaxy will source these products from the international market and market them in India and in countries where the registration processes are not very stringent. |
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| India plans |
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| The company has been restructuring its product-mix for the domestic market with increasing focus on high growth chronic therapy segments while maintaining its leadership in anti-infectives. |
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| The company launched 21 new products in 2001 and garnered the highest market share of 5.8 per cent amongst the new products. Ranbaxy is planning to use co-marketing and co-branding as a strategy to improve on its marketshare in the domestic market. |
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| Financials |
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| Sales for the year at Rs 2,052.30 crore grew at 17.5 per cent over the previous year. Exports at Rs 1,034.40 crore grew at 27.5 per cent during the same period and overtook domestic sales for the first time. |
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| Profit before extra ordinary items increased 20.80 per cent to Rs 234.90 crore. Profits of Rs 72.70 crore from the sale of shares of Eli Lilly Ranbaxy, following the termination of the joint venture with Eli Lilly, not only helped set off losses incurred by its wholly owned subsidiary Vidyut Investments, but it also helped prop up the profits. Net profit increased 31.6 per cent to Rs 240.10 crore during the year. |
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| Valuations |
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| The company's strategy to focus on blockbuster generic drugs and the investments in its international business are beginning to pay off. Ranbaxy is poised for better growth in the future. If Ranbaxy is successful in licensing out its molecules, it will result in increasing cash flows for the company. |
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| Management perception of the company took a knock last year when links between its wholly owned subsidiary Vidyut Investments were traced to some of the scam tainted Ketan Parekh's firms. It also faced problems with its UK subsidiary where financial irregularities were unearthed. The stock price took a beating at the bourses. |
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| However, the company managed to restore investor's faith by phasing out all investments in the financial markets and replacing the top management of its UK subsidiary. The stock has gained a hefty 95 per cent since June last year. |
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| The stock currently trades around Rs 875 discounting its expected FY02 estimates earnings 29 times. Considering the company's growth prospects, investors can continue to hold on to the stock. |
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