Ranbaxy reports flat earnings in Q2, outlook positive

The company's consolidated net profit in Q2 of 2008 stood at Rs.160.80 crore, up from Rs.160.40 crore posted in Q2 of 2007 (year-on-year or YoY rise of 0.24 percent).

During the same period, the company's sales rose from Rs.1623.80 crore to Rs.1829.60 crore (YoY rise of 12.67 percent).

The company, however, said the figures do not include foreign exchange loss and gains. Taking foreign exchange loss into consideration, the reported net profit stood at Rs.22.90 crore, hurt by a foreign-exchange loss of Rs.193 crore as against a net profit of Rs.266 crore in Q2 of 2007, which included a foreign-exchange gain of Rs.201 crore.

Regionwise, Ranbaxy saw its sales surge 18 percent, 3 percent, 4 percent, 20 percent and 11 percent in North America, India, Europe, Asia Pacific & CIS (excluding India), and Rest of the World respectively.

Emerging markets contributed 53 percent of global sales and grew 9 percent. Key countries in Latin America, Asia Pacific and Africa contributed to the growth in emerging markets, the company said.

Despite underperforming during the quarter, the company remains upbeat in its outlook. "Most striking has been our path-breaking deal with Daiichi Sankyo which I believe will substantially alter the rules of the game and re-define the global pharmaceutical landscape," said Malvinder Mohan Singh, managing director and CEO, Ranbaxy.

"We have the early mover advantage and are best placed to gain from the complementary strengths of both partners in capitalizing on the opportunities available across the entire pharmaceutical value spectrum. We expect performance to be stronger as we move through the rest of the year," Singh said.

In June, Ranbaxy said it has struck a binding agreement with Japanese drug maker Daiichi Sankyo pursuant to which Daiichi would acquire Ranbaxy's majority stake for around $4.6 billion (£2.3 billion).

During the quarter, the company said it struck a significant deal with Pfizer Inc. to settle most of the patent litigation worldwide, involving Atorvastatin (Lipitor), the world's most-prescribed cholesterol-lowering medicine.

The company also signed a strategic Product Development Agreement with Merck & Co. Inc. in the therapeutic area of anti-infectives, it said.

In a separate development, the company, which is under investigation in the US for allegedly selling substandard drugs in the US market, said it is cooperating with the US Food and Drugs Administration (US FDA), which has leveled the charges against the Indian drug maker and would provide the US investigators with all the documents required. "By Aug. 3 all the information that is needed will be provided," Singh said.

Earlier this month, the US FDA accused Ranbaxy of forging and concealing documents relating to an investigation into the quality of the company's drugs sold in the US market and filed a motion in the district court of Maryland seeking documents from the Indian firm.

The US Government alleged that officials at Ranbaxy's plant in northern India had used raw pharmaceutical chemicals from unapproved sources, fabricated in-house test data to meet US FDA standards and attempted to conceal the fraud from FDA inspectors.

The "pattern of systemic fraudulent conduct," the government said in papers filed in district court, left an untold portion of the tablets and capsules made by Ranbaxy "subpotent, super potent or adulterated."

"The government has reason to believe that these violations have resulted and continue to result in the introduction of adulterated and misbranded products" into the US market, federal prosecutors said.

Following the accusations, Ranbaxy's shares fell over 25 percent in the domestic market as fears grew that the charges would affect its sales in the US market and also jeopardize its deal with Daiichi.

Ranbaxy aims to be among the world's top five generics drug makers with $5 billion sales by 2012.