The Hindu Business Line : Ranbaxy: Hold

In the backdrop of these events, investors could retain their holdings of the stock; those looking at adding the stock to their portfolio may consider doing so on any weakness linked to trends in the broad market.

Acquisitions

Ranbaxy kicked off buying by acquiring Allen SpA, the generic unit of GlaxoSmithKline in Italy, for an undisclosed sum.

It followed that by snapping up Romania-based Terapia, the acquisition of which will make the combined entity the largest generic player in Romania, for $324 million (about Rs 1,450 crore).

It rounded off the week by buying into Ethimed, based in Belgium, the financial details of which were not divulged.

Ranbaxy has built up a war chest to pursue its inorganic growth plans by putting through an FCCB issue, the proceeds of which have been used to fund the Terapia buy.

While the Romanian buy would give Ranbaxy a strong presence in the fast-growing Central and Eastern European region, the buy out of Ethimed should serve as a beachhead to tap into the Benelux geography.

With the recent setback suffered by Ranbaxy in its litigation against Pfizer for the launch of a generic version of the latter's blockbuster Lipitor, the focus now appears to be on building scale in Europe through a strong generic pipeline.

Admittedly, though the generics business lacks the pizzazz associated with challenging and succeeding against innovator patents, it does lend predictability to revenue streams.

What's in store

Though 2005 turned out to be a disappointment for Ranbaxy, we believe that the current year and the next will be crucial. In this year, one may expect launches in the US, on which Ranbaxy is likely to enjoy exclusivity (notably Pravastatin and Simvastatin, contingent on approval by the US FDA).

Further, with the patent expiry cycle likely to peak over this year and the next, Ranbaxy, with its strong pipeline, may be expected to cash in on some opportunities that come its way. However, at this juncture, we would prefer to adopt a cautious approach and prefer to wait for a better entry point to play the stock.

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