Ranbaxy may sell off Biovel, exit vaccine business
During July-September, Ranbaxy accounted for an impairment loss of Rs 48.5 crore due to Biovel
 "Ranbaxy may sell off Biovel, exit vaccine business")
Although Ranbaxy made the acquisition to foray into the vaccine business, it failed to roll out any product in the segment for the past two years. The company recently booked impairment losses on account of Biovel.
During the July-September quarter, Ranbaxy's depreciation, amortisation and impairment were higher at Rs 133.4 crore, as against Rs 81.5 crore during the corresponding quarter the previous year. This was mainly on account of an exceptional impairment loss of Rs 48.5 crore registered by the company during the quarter with regard to the vaccine plant in Bangalore, the company management had told investors after announcing its July-September earnings in October. The company management had said the facility "is being impaired owing to prevalent market conditions".
Ranbaxy refused to comment on this. Biovel was working on biotechnology products in segments such as cardiology, endocrinology, oncology, dermatology and gynaecology, and also making typhoid and influenza vaccines in 2010, when it was acquired by Ranbaxy. The buyout was expected to mark the entry of Ranbaxy, owned by Japan's Daiichi Sankyo, into vaccines as well as biopharmaceuticals.
According to a McKinsey 2012 study on Indian vaccine market and its transformation, the market in India during the year was estimated at $500 million by value. However, experts opine the vaccine market in the country is still small and underpenetrated with huge growth potential as it currently accounts for less than two percent of the world's total vaccine market.
"It is a growing market with huge potential in following years," said senior research analyst Praful Bohra. According to Bohra, the domestic vaccine market is currently growing at 15-20 per cent. A lot of domestic as well as multinational companies have attempted to penetrate the vaccine segment in the recent past. Currently, the market is mostly dominated by foreign players such as GlaxoSmithkline Pharmaceuticals, Pfizer along with Wyeth and Sanofi. Among domestic players, Cadila Health has a decent vaccine portfolio along with other players such as Bharat Biotech and Panacea Biotec.
Experts feel that if Ranbaxy decides to exit the space, it may reflect on company's own business requirements and the need to increase profitability, instead of market conditions. "Vaccine market is not a low-margin market. Besides, if Ranbaxy has failed to bring out vaccines, it cannot blame unviable market...The company seems to be under pressure to show profitability and selling off Biovel could be one of the options, if it is not performing," said another sector analyst, who wished not to be named.
Following the US Food and Drug Administration (US FDA) enforcement on various Indian factories of Ranbaxy, there is a financial pressure on the company's accounts. The company's business has suffered because of regulatory issues through past years. Besides, it also had to incur additional costs to settle those issues.