Ranbaxy profits hit by lower US sales

Nalinakanthi V | Updated on January 24, 2018 Published on January 28, 2015

Ranbaxy’s weak performance in the December quarter added to the disappointment of its shareholders who were hoping for some respite. Earlier on Tuesday, the US drug regulator revoked the tentative approval granted to Ranbaxy for manufacturing generic versions of Astrazeneca’s heart burn drug Nexium and Roche’s anti-viral drug Valcyte. This would have added around $400 million to the company’s revenue.

The weak performance in the December quarter – with the company’s operating profit slumping by over 58 per cent to ₹113 crore was largely on account of revenue decline from the US market. Expectations of good growth in the US, driven by exclusive sales of generic version of Novartis’ hypertension drug Diovan came undone.

The company’s revenue in the geography declined by over 12 per cent. This was possibly due to lower sales of generic Diovan and other generic drugs due to increased competition and consolidation of distribution channel partners in the US.

Barring India, Asia Pacific and the Latin American region, revenues from other geographies, including Europe, declined during the quarter. In India too, the growth pace decelerated from double digit levels seen over the last few quarters to a sedate 2 per cent in the December quarter.

In addition to adverse mix — weakness in high-margin geographies such as US and India, higher staff costs also ate into the company’s operating profit. Provision of ₹822 crore as minimum alternate tax adjustment led to an over six-fold jump in losses to ₹1,030 crore in the December quarter, compared with a loss of ₹159 crore in the same period last year.

Looking ahead, Ranbaxy’s merger with Sun Pharma, subject to approval of the US competition authority, and resultant synergies will be key.

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Published on January 28, 2015
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