Acne drug sales in US help Ranbaxy pare loss in Q3

On Wednesday, the Ranbaxy Laboratories management had to face tough questions from investors and analysts, following the latest US Food and Drug Administration (US FDA) ban on supplies from the company’s active pharmaceutical ingredient (API)-manufacturing factory in Toansa (Punjab). This was the fourth plant of the company to face an import alert from US FDA.

Three other Ranbaxy factories — at Mohali, Paonta Sahib and Dewas — have already received US import alerts. Currently, the company is only allowed to supply products from its New Jersey-based Ohm Laboratories to the US market.

For the December quarter, the company’s net loss fell to Rs 159 crore, owing to ramped-up sales of acne drug Absorica in the US. In the year-ago period, the net loss stood at Rs 492 crore. At that time, the company had incurred substantial costs in recalling the generic version of cholesterol-lowering drug Lipitor, after glass particles were found in some batches of the product.

RISING CONCERN

• North America sales at Rs 1,020 crore, with the US accounting for Rs 910 crore
• Ban on supplies from the Toansa (Punjab) plant would have a 10-12% hit on overall US sales
• Provisioning made of Rs 257.4 crore towards the financial impact of a US ban on import of products made at the Toansa plant

In the December 2013 quarter, net sales rose seven per cent to Rs 2,894 crore from Rs 2,711 crore in the year-ago period. North America sales stood at Rs 1,020 crore, with the US accounting for Rs 910 crore, Ranbaxy said. While detailing Ranbaxy’s financial performance for the quarter ended December 2013, the management said the ban on supplies from the Toansa plant would have an impact of 10-12 per cent on the company’s overall sales in the US. However, it failed to provide a timeline for the resolution of long-pending issues with US FDA and the resumption of supply from its domestic factories to the US.

In the December quarter, the company made a provisioning of Rs 257 crore towards the financial impact of a US ban on the import of products from the Toansa plant.

Chief executive and Managing Director Arun Sawhney told investors the company was conducting an internal investigation at Toansa, through a third party. It had also hired consultant to take corrective measures, he added.

When investors asked the management why the company had failed to take corrective measures after US FDA had raised similar concerns in 2012, Sawhney said, “After the 2012 incident, we did take a lot of measures such as training, counselling, inviting Daiichi Sankyo people and hiring the best consultant, we think the company needs to do a lot more.” He added the company would continue to make incremental investments in back-end manufacturing, developing skills and knowledge and training employees.

On the company’s product pipeline, Sawhney said it had tied up for alternate API sourcing as part of its business strategy and, therefore, supplies to the US from Ohm Laboratories would continue for existing products. However, he refused to comment on pending applications and their API sourcing. The company has key products such as generic of Diovan, Nexium and Valcyte pending for approval with the US FDA. Timely approval may also earn the company rights for 180 days of exclusive sale of some of these products.

Going forward, the company plans to focus on differentiated products and control substance releases in the US.

However, analysts suggests that with four Indian facilities barred from supplying to the US, Ranbaxy’s earnings are likely to be under pressure from January-March. US contributes around 40 per cent of the company’s consolidated revenues.

With the company changing to an April-March financial year effective April 1, the current financial year is being extended to a 15-month period ending March 2014.

On Wednesday, shares of Ranbaxy closed at  Rs 340.05 on the Bombay Stock Exchange, up 5.69 per cent from its previous close.