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WIKI ANALYSIS
Ranbaxy Laboratories Ltd. is the largest generic pharmaceutical company in India by sales and a top 10 generic company globally[1] [2].[3]For the year ended December 31, 2008, it's consolidated net sales were Rs. 72,507, a growth of 8% (USD 1,667 Mn) as compared to the previous year.[4]The results were significantly impacted by three factors -- the adoption of Indian Accounting Standards (on recognition of financial instruments) added an expense of USD 161 Mn, forex caused a loss of USD 179 Mn, and US related provisions caused a loss of USD 59 Mn. While these three items were non-cash in nature, they primarily contributed to the overall loss of Rs. 9,146 Mn (USD 198 Mn) for the year.[4]
In 2008, a majority stake in the company was acquired by Japanese Pharma Daiichi Sankyo Company (4568-TO)[5],the third largest pharmaceutical company in Japan.[4]Daiichi-Sankyo’s strength in proprietary medicine complements Ranbaxy’s leadership in the generics segment and both companies acquire a broader product base, therapeutic focus areas and well distributed risks.[6]
Ranbaxy also reached settlements with the makers of the world's two largest selling drugs -- Lipitor (with Pfizer (PFE) ) and nexium (with AstraZeneca (AZN) ).[7]This decision will allow for an earlier introduction of a generic formulation in several countries. Ranbaxy is also bringing out novel drug-delivery systems and was the first Indian company to licence a product in this field to Bayer AG.[2]
Business Overview
Ranbaxy Laboratories Limited encompasses the entire pharmaceutical value chain[8] from manufacturing to marketing generic pharmaceuticals, value added generic pharmaceuticals, branded generics, Active Pharmaceuticals Ingredients (API) and intermediates.[9] As a research driven company, over 6% of it's revenues are invested in R&D[10]Amongst the pharmaceutical companies in India, Ranbaxy has the largest R&D budget with an R&D spend of over US $ 100Mn[11]In 2008 it Demerged its New Drug Discovery Research division into a separate entity, Ranbaxy Life Science Research Limited (RLSRL).[2]
The company has manufacturing operations in eight countries with a ground presence in 49 countries, and its products are available in over 125 countries. It has been aggressively entering into joint ventures and strategically acquiring companies in past few years. Besides concluding its acquisition of Be-Tabs in South Africa, which makes Ranbaxy the 5th largest generic pharmaceutical company in South Africa, the Company acquired 13 Dermatalogy products from Bristol-Myers Squibb in the USA in 2007[2] Ranbaxy made an acquisition of RPG Aventis, France which has since been renamed as Ranbaxy Pharmacie Generiques SAS. It also has subsidiaries in Spain, Netherlands, Russia and Australia.
Anti-infectives amoxycillin, ciprofloxacin, and simvastatin are in Ranbaxy's top selling class of medications[12].In 2007, the company entered the specialty and niche therapeutic areas of Bio-generics, Oncology,Penems, Limuses, Peptides,etc.[2]The company also has a groundbreaking anti-malarial candidate in late-phase trials.[3]
Business and Financial Metrics
From FY2005 to FY2007, sales revenue grew from Rs. 35,366.5 millions to Rs.41,844.9 millions[2]. The net profit for the same period increased from Rs.2,237 millions to Rs.6,177.2 millions.[2] From FY2007 to FY2008 the sales revenue increased from Rs.41,844.9 millions to Rs.45857.80 million.[13] However, the company reported a net loss of Rs (10323.34) million for FY 2008 compared to net profit Rs 6177.20 million for FY2007.[13]
In Q3'08 Consolidated Revenue was Rs. 18,884 Mn (USD 431 Mn) against Rs.16,520 Mn in Q3'07, exhibiting a growth of 14.3%[14]. The growth was due to the weakening in Rupee against US Dollar and sales growth which was 6% in dollar terms at $428mn[15]. Sales were hindered by an import ban imposed by the U.S. Food and Drug Administration (FDA) on 30 different generic drugs imported from its Dewas and Batamandi (Paonta Sahib) Facilities[16]. With the import ban coupled and with a forex hedging loss worth Rs 900mn, their operating margin fell to 7.8% in Q3'08 from 16.0% in Q3'07[15]. The resultant operating profit stood at Rs 1440mn as against 2,831 mn in Q3'07, down by 49.1%.[14] The provision for inventory write offs due to the import alert issued by the US FDA and due to the forex translation loss have resulted in net loss of Rs 3945mn against a net profit of Rs 2074mn in Q3'07[15].
Shareholding Pattern
In November 2008, Japanese Pharma Daiichi Sankyo Company (4568-TO) completed the takeover of the company from the founding Singh family in a deal worth $4.6 billion[17] by acquiring 63.92% stake in Ranbaxy.[5]
| Ranbaxy Laboratories Limited share holding pattern [18] | |
| Entity | Percentage |
|---|---|
| Daiichi Sankyo Company (4568-TO) | 63.92% |
| General Public | 13.18% |
| Banks Fin. Inst. and Insurance | 9.57% |
| Private Corporate Bodies | 5.30% |
| FII's | 4.16% |
| Others | 1.72% |
| NRI's/OCB's/Foreign Others | 0.14% |
Business Segments
There are three basic business divisions: pharmaceutical dosage forms, active pharmaceuticals ingredients (API) and allied business which comprises of animal healthcare, diagnostics and a range of other products[19]. Of these, the pharmaceutical dosage forms division is the largest sector, accounting for two thirds of annual sales.[19].
Dosage Form Sales (94% of total revenue)[2] The dosage form sales grew from 91% of global sales in 2006 to 94% of global sales in 2007.[2]It comprises the majority of ranbaxy's sales, including sales of generic pharmaceuticals, value added generic pharmaceuticals and branded generics.[20]
API (Active Pharmaceutical Ingredients & Others) (6%)[2] Ranbaxy supplies API to leading generic companies in more than 50 countries.[21] The API division has in its portfolio over 50 products covering a wide therapeutic range such as Cardio-vasculars, Anti-infectives, Anti-ulcerants, Anti-diabetics, Anti-depressants, Anti-virals and others.[21] In 2001 Ranbaxy identified Consumer Healthcare as its new business area with the launch of 4 brands: Revital, Pepfiz, Gesdyp & Garlic Pearls.[22] During 2006, the business registered sales of US $ 19 Mn registering a growth of 19%.[22]
The product-wise gross revenue breakup for year ending December 2007 is as follows:
| Operating metrics [23] | ||||||
|---|---|---|---|---|---|---|
| Product Name | Installed Capacity in Cr | Production Quantity in Cr | Sales Quantity in Cr | Sales Value in Dec 2007 | ||
| Tablets | 9,424 | 6,413.29 | 7,901.19 | 2,015.44 | ||
| Bulk Drugs | 2,001 | 1,547.02 | 1,819.07 | 969.47 | ||
| Formulation (Capsules) | 2,992 | 2,025.27 | 2,291.48 | 613.06 | ||
| Syrups & Powder Dry | 44 | 42.32 | 50.05 | 280.12 | ||
| Injectible Vials | 39 | 35.55 | 103.09 | 253.66 | ||
| Ointments | NA | 317.80 | 983.84 | 133.15 | ||
| others | NA | NA | NA | 86.68 | ||
| Liquids | NA | 1,372.73 | 3,259.35 | 85.15 | ||
| Ampoules | 48 | 99.47 | 104.37 | 79.47 | ||
| Other fiscal benefits | NA | NA | NA | 68.80 | ||
| Other operating income | NA | NA | NA | 33.69 | ||
| Royalty income | NA | NA | NA | 12.72 | ||
| Drops | NA | 46.56 | 46.86 | 7.00 | ||
Georaphical Segments The United States, which accounts for about half of all pharmaceutical sales in the world, is the company's largest international market.[24]The emerging markets led by India, CIS, Romania, South Africa and Brazil accounted for 54% of the company's gross revenue in 2007[25] The geographical segmentwise gross revenue breakup is:
Key Trends and Forces
Gaining First-to-File exclusive rights to a generic through patent challenges
Generic drug companies can challenge a patent's validity or argue that their version doesn't infringe on the existing drug's patent even before patent expiration. The first company to apply for FDA Approval for a generic, in spite of an existing patent, receives a 180-day period of exclusivity to produce and sell the generic version. [26]
Ranbaxy has been filing more than 20 ANDAs to the U.S.Food and Drug Administration (FDA) each year[27] The cumulative abbreviated new drug applications (ANDA) filings stood at 239 with 141 approvals as on December 31, 2007.[2] The company has entered into 3 independent litigation settlements with innovator companies, GlaxoSmithKline (GSK) for Valacyclovir (Valtrex) and Sumatriptan (Imitrex) and with Boehringer Ingelheim / Astellas Pharma for Tamsulosin (Flomax)[2]It has one of the largest product pipeline in the US that includes 18 potential First-To-File opportunities with a market size of around US $ 27 Bn, at innovator prices.[2]
Pricing Pressures in US & European generic markets affect Ranbaxy's revenue
Due to an increase in number of pharma companies forging into the generics market, there has been downward pricing pressure on generics in the U.S.[28].The generics market in Europe, which had become a safe haven for Indian pharmaceutical companies after competition pulled down margins in the US, has come under pricing pressure too, especially in countries like Germany, UK and France, the top three generics markets in the continent. These countries have seen margins in the generics segment erode as much as 80-90%[29] The pricing pressure has been adversely affecting revenue as both US & Europe occupy Ranbaxy's majority market share. Due to continuing competitive and pricing pressures, Ranbaxy's revenues dropped 6% to Rs 149.5 crore from the UK, France, Germany in the quarter ended September 30, 2008.[29]
Regulatory issues raised by regulators in various countries where Ranbaxy operates pose a risk to it's markets
On September 16, 2008 the U.S.Food and Drug Administration (FDA) issued warning letters to Ranbaxy Laboratories Ltd., and an Import Alert for Drugs from Two Ranbaxy Plants in India affecting over 30 different generic drugs and citing serious manufacturing deficiencies[16]. Following this the World Health Organisation (WHO) observed that several inspections of Ranbaxy's Paonta Sahib site - in June 2008 - revealed noncompliance with WHO good manufacturing practices standards.[30] Further, India's business daily Mint quoted the Canadian health ministry as saying a "regulatory letter" was sent to Ranbaxy Pharmaceuticals Canada requesting an action plan and a response to the FDA's move.[31] Impending healthcare reforms in Romania, Ranbaxy's largest market in EU, is leading to a delay in the government's product and price approval list, and adding to uncertainty amongst customers and suppliers.[2] The outcome of these regulatory issues pose a risk to the company's image as global generic player as well a risk to its markets worldwide
Competition
The pharmaceutical industry is characterized by rapid advances in scientific knowledge and ability to discover new drugs.The industry is therefore led by large manufacturers and marketers of drugs investing heavily in research & development, having clinical testing, marketing and distributing capabilities[32].Some of the main competitors of Ranbaxy are:
- Sun Pharamceuticals Industires - It is No. 1 in India in speciality therapy areas like psychiatry, neurology, cardiology, gastroenterology, diabetology and respiratory.[33].It has brands in 30 markets worldwide and also has a generic presence in the U.S. with Caraco Pharm Labs, Sun Pharmaceutical Industries Inc (subsidiary)[33]
- Cipla - Cipla is a leader in the domestic retail pharmaceutical market.[34]It also exports raw materials, intermediates, prescription drugs, over-the-counter products, and veterinary products to some 180 countries around the world.[34]
- GlaxoSmithKline - It is one of the oldest pharma companies in India and with a turnover of Rs. 1500 crore is one of the market leaders(market share) in India with a share of 6.2 per cent[35]Its main portfolios consists of anti- infectives, dermatologicals and pain management drugs[36]
- Dr. Reddy's Laboratories - It is a global pharmaceutical company with it's headquarters in India and a presence in more than 100 countries.[37]In India it the biggest drug maker by sales[38]
Comparison with the competitors:
| Financial metrics FY2008[39] | ||||
|---|---|---|---|---|
| Name | Yr Ended | Market Capitalization in Rs Cr | Sales Turnover in Rs Cr | Net Profit in Rs Cr |
| Ranbaxy Labs | Dec '07 | 7,835.69 | 4,026.60 | 617.72 |
| Sun Pharma | Mar '08 | 22,861.51 | 1,662.56 | 628.93 |
| Cipla | Mar '08 | 13,435.48 | 4,226.81 | 700.48 |
| GlaxoSmithKline | Dec '07 | 1,570.30 | 1,596.52 | 537.66 |
| 'Dr Reddys Labs | Mar '08 | 7,217.19 | 3,301.98 | 475.22 |
Market Share on the basis of sales of Indian pharma players combined through stockists and on hospital-driven revenues
| Market Share for Quarter4-FY2007[40] | ||||
|---|---|---|---|---|
| Company | Rs. in Cr. | |||
| CIPLA | 1721 | |||
| GLAXOSMITHKLINE | 1664.2 | |||
| RANBAXY | 1620.7 | |||
| NICHOLAS PIRAMAL | 1262.6 | |||
| ZYDUS CADILA | 1208.4 | |||
| SUN PHARMA | 1130.4 | |||
| ALKEM | 1085.9 | |||
| LUPIN LABS | 874.5 | |||
| PFIZER | 869.7 | |||
| SANOFI AVENTIS | 801.4 | |||
| Grand Total | 33471.2 | |||
References
- ↑ Ranbaxy Labs Corporate Profile
- ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15 Annual Report 2007
- ↑ 3.0 3.1 YahooFinance/Ranbaxy/Company profile
- ↑ 4.0 4.1 4.2 Ranbaxy Official Website / Press Release 2008
- ↑ 5.0 5.1 The Hindu Business Line/Daiichi Sankyo acquisition of Ranbaxy
- ↑ Wikipedia Ranbaxy Labs
- ↑ ranbaxy Labs/History History of Ranbaxy labs
- ↑ Google Finance/ Ranbaxy Labs Parent
- ↑ Ranbaxy Labs/Products
- ↑ Equity Master/news on Ranbaxy/April 5, 2008
- ↑ Ranbaxy Labs/Indian Operations
- ↑ Hoovers/Ranbaxy Labs
- ↑ 13.0 13.1 Rediffmoney/Ranbaxy Labs/New FY2008 results
- ↑ 14.0 14.1 ranbaxy labs/Q3'08 results
- ↑ 15.0 15.1 15.2 Reliancemoney/Ranbaxy/Q3 results
- ↑ 16.0 16.1 FDA News/Ranbaxy Labs
- ↑ TimesOnlineUK/Business/Takeover of Ranbaxy
- ↑ Ranbaxy Loboratories Limited Share holding pattern, Rediff Money wiz
- ↑ 19.0 19.1 Insurance Business Review/ Ranbaxy
- ↑ Ranbaxy official website/Products
- ↑ 21.0 21.1 Ranbaxy Official Website/Global API
- ↑ 22.0 22.1 Ranbaxy/Global HealthCare Business
- ↑ , Page 02 Annual Report 2007-08
- ↑ Enote/Ranbaxy/Company History
- ↑ Annual Report 2007 Pg.6
- ↑ Wikinvet Concept/Generic Drug
- ↑ Ranbaxy USA/Business Opportunities
- ↑ The Hindu Bisiness Line/Ranbaxy Q3 net down
- ↑ 29.0 29.1 YahooFinance/After US, generics players feel the heat in European market
- ↑ Biopharma Today/Ranbaxy's trouble with WHO
- ↑ AFP/Canada drug review
- ↑ Hoovers/Pharma Industry Profile
- ↑ 33.0 33.1 Sun Pharma Industries
- ↑ 34.0 34.1 YahooFinance Cipla
- ↑ GlaxoSmithKline website
- ↑ Business Standard/ORG-IMS report
- ↑ Dr.Reddys Labs/Company Profile
- ↑ Business Standard/ Dr. Reddy's Labs
- ↑ Money control, Ranbaxy Labs, Competition data
- ↑ ExpressPharmaOnline/ORG IMS rankings for pharma companies 2007
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