Drug maker Ranbaxy Laboratories Ltd has given a rather conservative sales guidance of 6% on a consolidated basis for calendar 2010 despite sales having risen by just 1.4% to Rs7.329 crore in 2009. The firm counts its accounting year from January.
But Ranbaxy can be forgiven for being conservative as it is not in a position to predict how things unfold in the current year, though the last quarter of 2009 ended on a bright note.
The company launched the generic version of Valtrex in the US in the December quarter, with a first-to-file status. This gives it an exclusive period of six months in which no other generic competitor will enter the market.
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Sales rose by 25% over in the December quarter, compared with a year ago, as opposed to an 18% decline in the September quarter. Thus, sales in North America grew by 68% during the quarter compared with a 9% decline during the full year. Ranbaxy’s sales in India grew by just 6% in the quarter, though it grew by 9% during 2009. The company has formulated a new plan to drive growth, which it expects will show results by the second half of 2010.
Graphic: Yogesh Kumar/Mint
Two events will define the outlook on Ranbaxy. One is the ongoing regulatory action by the US Food and Drug Aministration that has affected its sales to the US markets. The company said in a conference call it hopes to resolve the issue in 2010. If it succeeds, that will be a key positive. The second is its ability to launch one or more generics with exclusivity status in the US market, which could significantly boost performance, just as Valtrex has.
While its guidance of profit growth for 2010 is quite high at 48%, there have been non-operational items at work in 2009 which may be visible in 2010 too. There was a total gain due to foreign exchange gain of Rs516 crore, accounting for over half its profit before tax of Rs1,009 crore. Tax was unusually high at nearly Rs700 crore, due to certain accounting effects. Its reported net profit was thus Rs310 crore in 2009, compared with a loss of Rs935 crore.
While profits may fluctuate, investors would focus on issues such as better than expected sales growth, key generic launches in the US and a resolution to its regulatory issues as positive triggers.
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