Ranbaxy loses Rs395 crore; Daiichi cuts profit forecast

Ranbaxy loses Rs395 crore; Daiichi cuts profit forecast

New Delhi: Ranbaxy Laboratories Ltd, the Indian drugmaker controlled by Japan’s Daiichi Sankyo Co., posted a third-quarter loss on foreign-exchange fluctuations and a writedown of inventories because of a US import ban.

The company made a loss of 95 crore in the three months ended 30 September compared with a profit of 235 crore a year earlier, the company said. That compares with the 19.75 crore median profit estimate of 10 analysts surveyed by Bloomberg.

Earlier, Daiichi Sankyo Co., Japan’s third-biggest drugmaker, cut its annual profit forecast because of costs to buy control of India’s Ranbaxy Laboratories Ltd. and develop new medicines.

Net profit will be 65 billion yen ($660 million) in the year ending March 31, 20 % less than expected, the Tokyo-based company said in a statement to the stock exchange today.

Ranbaxy’s profit was crimped by a one-time writedown of the value of its foreign-currency convertible bonds as the Indian currency had its biggest quarterly decline in 16 years. Sales in the US, the world’s largest drug market, were hit as the US drug regulator blocked the import of more than 30 generic medicines made by Ranbaxy in India because of deficiencies in manufacturing processes.

The Indian rupee fell 8.4% in the three months ended 30 September, its worst quarterly decline in more than 16 years, leading to a foreign-exchange loss of 310 crore at Ranbaxy. The Indian currency dropped to 46.99 rupees against the dollar on 30 September compared with 39.84 rupees in the year earlier, a 15% decline.

Ranbaxy posted a $73 million translation loss on its foreign currency debt because of the adverse movement of the rupee and wrote down the value of its inventories by $59 million after the U.S. import ban, Chief Executive Officer Malvinder Singh told reporters.

US ban

Sales rose 15% to 1890 crore , less than the 1990 crore rupee median estimate of analysts.

The U.S. is probing whether Ranbaxy destroyed reports it was required to keep, falsified data and failed to meet quality- control specifications in manufacturing the generic drugs it sells. The Indian company has denied the allegations and has handed over documents sought by the government.

In a separate move, the U.S. drug regulator on 16 September blocked the import of medicines made in two factories by Ranbaxy. The U.S. Food & Drug Administration said there was no evidence that Ranbaxy’s drugs were harmful. The Indian company has hired former New York City Mayor Rudolph Giuliani to help respond to the U.S. order.

Sales in North America, the company’s biggest market, rose 9.2% to 486 crore as sales in Canada more than doubled. U.S. revenue fell 7% to 414 crore, Singh said. European sales rose 15% to 365 crore.

Acquisition plans

Ranbaxy is planning to buy drug production facilities to supply to the U.S. market after the bar on imports from the Indian factories, Singh said. He declined to give more details.

Ranbaxy fell 1.2% to 168.75 each at close of Mumbai trading today. Earnings were announced after the market closed.

Ranbaxy is challenging patents in the US, the world’s biggest drug market, because success will allow it to sell copies exclusively along with the patent holder for six months without generic competition. That’s when generic makers make the most money because prices plunge when rivals enter.

In June, Ranbaxy agreed to keep copies of Pfizer’s cholesterol pill Lipitor off the U.S. market an extra 20 months, protecting $12 billion in sales for Pfizer.

The agreement ensures that Ranbaxy can enter the market five years before patents on the process of making Lipitor expire without having to fight the issue in court.

In Tokyo shares of Daiichi slumped the most in two weeks. They slumped 8.3% to 2,000 yen at the close in Tokyo, the steepest slump since 16 October The shares have declined 42% this year, versus a 24% drop in the MSCI World Health-Care Index of 113 companies. Ranbaxy is down 60%.

“I want to see the earnings impact of the purchase," Kenji Masuzoe, a Tokyo-based pharmaceutical analyst at Deutsche Bank AG, said by telephone. He rates the Daiichi stock “hold."

Kanoko Matsuyama in Tokyo contributed to this story.