Ranbaxy posts 48% net profit rise in 3rd quarter

Ranbaxy posts 48% net profit rise in 3rd quarter

New Delhi: Ranbaxy Laboratories Ltd, one among India’s top two drug makers, reported a 48% growth in net profits to Rs207.4 crore in the July-September quarter, the third in its accounting year, aided by financial income.

The Gurgaon-based firm, which announced on Thursday that it would hive off its research unit into a separate firm, said its revenues looked set to cross $1.5 billion (Rs5,925 crore) in 2007. Mint reported first on 23 August that Ranbaxy was considering restructuring its research unit.

Ranbaxy, which reports its results from January to December, announced an interim divident of Rs2.50 a share. Shares of the company closed at Rs421.85, about 0.4% higher on the Bombay Stock Exchange; its benchmark index closed 3.83% lower on Thursday.

Foreign exchange gains contributed Rs45.5 crore to net profits, helping Ranbaxy vault 48% from Rs140.4 crore in September quarter last year.

However, the company missed analyst estimates on revenues. It reported sales of Rs1,652 crore for the quarter, a marginal increase from Rs1,640.4 crore in the year-ago quarter. The almost-flat performance was partly due to an appreciating rupee against the US dollar as also because the performance in the September quarter in 2006 was boosted by near-exclusive sales of cholesterol drugs that went off patent then.

In dollar terms, the rise in revenues was 15% from $354 million in the quarter ended September 2006 to $406 million in the quarter just gone by. A Mint poll of five equity analyst firms had estimated revenues of Rs1,696 crore and net profit of over Rs187.5 crore.

“Romanian sales were less than expected," said Nimish Mehta, head of India research, MP Advisors, explaining the slow growth in revenues.

Gurgaon-based Ranbaxy has decided to spin off its drug discovery and research division and will finalize details of the de-merger by the end of 2007. “The new entity will be listed by next year. By keeping the discovery research as an independent unit, we can invest much more and create many more alliances. We spend about $20-25 million on new drug research and that won’t be on our P&L anymore," said Malvinder M. Singh, Ranbaxy’s managing director.

Research on the generic or off-patent drugs will stay in-house with Ranbaxy.

Other drug makers such as Dr Reddy’s Laboratories Ltd, Sun Pharmaceutical Industries Ltd and Nicholas Piramal India Ltd have also hived off their R&D businesses with the latter two going on to list shares on the new units.

Even as it is likely to cross revenues of $1.5 billion in 2007, Singh said the company will not achieve its earlier target of $2 billion sales by end of 2007. The next milestone is $5 billion by 2012, he said.

Ranbaxy’s US sales were $102 million in the September quarter, growing 7%. The company is expecting the US market to aid sales as it strengthens its dermatology drugs portfolio there and launches new drugs with limited competition. Under terms of a settlement with GlaxoSmithKline Plc. on a patent challenge to its $1.3 billion anti-herpes drug Valtex, Ranbaxy has a 180-day market exclusivity towards the end of 2009. It also has near-exclusive access to the market on two other drugs with over $250 million sales.

Sales in Europe have grown by 8% to $78 million this quarter with Romania, where Ranbaxy entered with the buyout of local drug maker Terapia in March 2006, contributing $23 million. Drug sales in India grew by 15% in July-September quarter to Rs322 crore.

For the first nine months of 2007, Ranbaxy has clocked revenues of Rs4,840.2 crore, up 11%, and net profit of Rs602.3 crore, a jump of 80% from the comparable months of the previous year. While this net profit figure exceeds the profits of the entire year in 2006, it includes significant foreign exchange gains to the tune of Rs175.4 crore. The gains come mainly from cheaper servicing of foreign currency debt as the rupee appreciates against the dollar.