Export-oriented Growth Driven By R&D

Updated: Oct 20 2002, 05:30am hrs
Ranbaxys 55 per cent sales growth at Rs 860 crore during the quarter to September 2002 dwarfs the pharma industrys by a wide margin. Moreover, this growth has come on a very large base.

Export nearly doubled at Rs 521 crore. However, domestic sales grew by a dismal 2.8 per cent at Rs 283 crore. This is because of slack domestic market for bulk drugs. Clearly, the company is focussing more on export as export contribution to total sales has increased from less than 50 per cent to 61 per cent. The export business is mainly driven by strong growth in formulations and generics business in USA, Brazil, Europe and Russia.

Anti infectives contribute more than one third of domestic turnover. Cephalosporins, quinolones and semi synthetic penicillins dominate in the product mix in the anti-infective segment. Anti-infectives business is no longer profitable as new entrants, declining demand and mass production of generics by many large size Indian companies are eating into margins. The company introduced more than 50 products during the fiscal 2001 but these could not give momentum to its domestic sales.

Operating profits more than doubled (119 per cent) at Rs 208.6 crore and margins improved sharply from 17.2 per cent to 24.2 per cent. Export of formulations brought better realisation that helped accelerate margins. Despite 149 per cent rise in tax provision at Rs 35 crore, net profit jumped 79 per cent at Rs 159 crore.

Ranbaxy keeps on reviewing its multi pronged strategy for higher growth. Recently, the company launched Ranbaxy Global Consumer Healthcare (RGCH) division which will shift prescription drugs to OTC. Presently, this division has taken four brands - Revital, Pepfiz,, Gesdyp and Garlic Pearls and will take up more brands after strengthening these brands. This division will exploit the opportunities which exist during global consumer trend towards self-medication and preference for naturals. Besides, the global OTC market is $50 billion strong and in India, OTC market is close to $1 billion. This strategy will also help in building brand equity for these products.

The company has been steadily enhancing its presence in the worlds advance regulated markets. Under this strategy, Ranbaxy has entered into an alliance with Nippon Chemiphar Co Ltd (NC) and Nihon Pharmaceutical Industry Co Ltd (NPI) for $50 billion pharmaceutical market in Japan. This alliance will provide Ranbaxy with a platform to gain experience in the Japanese regulatory framework and market environment.

Ranbaxy has received final approval from the US FDA to manufacture and market lisinopril used in treatment of hypertension and has global market for $2 billion. This drug is sold under two brands Zestril and Prinizide. Patent for prinizide is expired on June 2002. Ranbaxy will be one of the four companies that will have approval for both the single entity and combination products of lisinopril.

The WHO has approved three anti-aids drugs Zidovudine, Nevirapine, Lamivudine. The company can provide cost effective quality drugs in several market in Asia and other continents. South Africa has shown a keen interest in their drugs. The company is doing more research on anti-aids drugs. In the Indian market, there are ten products available with more in the pipeline. With this, the company will be able to offer several drugs to construct several first line HAART (Highly active anti retroviral therapy) regimens.

It has announced bonus shares in the ratio of 3:5 which will enhance the present equity of Rs 116 crore to Rs 186 crore. However,the enlarged capital may mean lesser earnings per share. The company will, therefore have to earn more to keep shareholders happy.

Research and development will be a focus area. During the third quarter, the company increased the R&D spending from Rs 17 crore to Rs 49 crore. Ranbaxy posted sales of Rs 2,176 crore for the nine month period and is likely to near Rs 3,000 crore during the current fiscal. The consolidated sale for nine months were Rs 2751 crore.