New Delhi: India’s biggest drug maker by revenues,Ranbaxy Laboratories Ltd, confirmed that one of its associates has acquired a significant stake in antibiotics maker Orchid Chemicals and Pharmaceuticals Ltd even as it announced an alliance with the Chennai-based company.
Ranbaxy, which reported a 7.22% increase in net profit to Rs153 crore for the quarter ended March, the first quarter of 2008 for it (Ranbaxy follows the calendar year), has thus far not commented on its relations with Solrex Pharmaceuticals Co. which now has a 14.7% stake in Orchid.
The company’s sales in the quarter rose on higher US revenues. Revenues from US operations accounted for $110 million (Rs438.9 crore), or 27% of Ranbaxy’s revenues, in the quarter compared with $91 million, or 25.6%, in the corresponding quarter of 2007.
Booster dose: Ranbaxy Laboratories chief executive officer and managing director Malvinder Singh. (Photo: Jonothan Drake/Mint)
Ranbaxy’s planned alliance with Orchid spans several regions and categories of antibiotics. Solrex’s stake in Orchid is very close to 15%, the level at which it will have to make an open offer to public shareholders of the company in keeping with Indian law.
In the March quarter, Ranbaxy registered sales of Rs1,623.1 crore, up 3.75% from Rs1,564.4 crore in the corresponding quarter last year. The company’s revenues are lower than the Rs1,740 crore projected by five analysts polled by Mint, although its net profit beat their average estimate of Rs138.28 crore.
However, one analyst said the actual profit could be lower. “The devil lies in the details. The profit looks higher, but that is on account of other operating income,” said Nimish Mehta, head of India research at equity research firm MP Advisors.
The net profit figure has a Rs89 crore one-time revenue component due to sale of land, but this is offset by another one-time component, a Rs79 crore translational loss due to foreign exchange rate changes, explained Ranbaxy’s managing director, Malvinder M. Singh.
Singh declined to specify the nature of Ranbaxy’s engagement with Orchid or answer questions on whether the company will have a presence on the board of its new partner. “It will be a long-term, strategic business alliance involving multiple geographies and therapies for both finished dosages and active pharmaceutical ingredients,” said Singh, confirming that Solrex was fully owned by Ranbaxy.
Ranbaxy also said that it will soon sign an agreement for drug discovery with a new firm on the lines of its existing agreement with GlaxoSmithKline Plc. (GSK), but declined to name the company involved. It added that an announcement could be made in a few weeks.
Shares of Ranbaxy closed at Rs 487.15 each on the Bombay Stock Exchange, down 2.36% on a day when the exchange’s benchmark Sensex index closed flat. Shares of Orchid, which is a niche manufacturer of sterile injectibles and cephalosporins, closed 0.24% lower at Rs248.80 each.
Ranbaxy maintained its forecast of 18-20% growth in sales and 20-25% growth in profit for the year. Singh explained, and Mehta independently confirmed, that the first quarter is typically slow, but that growth in the remaining part of the year usually makes up for this. Ranbaxy will enjoy a six-month run in US of limited competition for GSK’s $985 million pain drug Imitrex, starting from December this year.