German Order Buzz Props Ranbaxy

Shares of Ranbaxy Laboratories gained amid depressed conditions on reports that the company may receive up to $50 million under a licensing deal with a German drugs group. The stock of the domestic pharmaceutical heavyweight went up to an intraday high of Rs 901.50, before closing at Rs 888.65, up 0.34 per cent over its previous close amid a volume of 5.15 lakh shares on BSE and 8.52 lakh shares on NSE.

The rise in Ranbaxy today followed unconfirmed reports that the company may receive up to $50 million under a licensing deal with German drugs group Schwarz Pharma AG. The talks are that the German group will develop and launch Ranbaxy's new chemical entity (NCE) to treat benign prostatic hyperplasia (BPH).

Under the pact, out of the $50 million as license fee from Schwarz, which excludes royalty payments, $8 million will be paid upfront and the rest will be milestone payments. Analysts said that earlier, there were some doubts over whether Ranbaxy had the capabilities to develop the NCE. But with the RBX 2258 (the NCE codename) materialising, these doubts have been cleared.

At least two positive developments have enhanced the sentiment for the stock of late. One, the easing of the tensions between India and Pakistan. And also, reports that GlaxoSmithKline Plc (GSK) has obtained an injunction from a Chicago court preventing Apotex from selling a generic version of GSK's antibiotic Ceftin in the US market (which Ranbaxy already markets).

Analysts had expected the price of the drug to fall after the launch of Apotex's generic version.

With the court's order expected to keep Apotex's version off the US market for around 6-7 months (till December 2002), Ranbaxy is expected to gain analysts said.

There have been reports that Ranbaxy had applied to the US Food and Drug Administration (US FDA) to market the generic metformin syrup, an anti-diabetes product, under a specific provision under US law. If the company gets the permission, it will enjoy three-year marketing exclusivity for the drug.

For the first quarter ended March 31, 2002, Ranbaxy (exclusive of the extraordinary income of Rs 56.4 crore) registered a 31 per cent fall in net profit to Rs 38.5 crore compared with Rs 55.7 crore in the corresponding period last year. Sales increased 24 per cent to Rs 552.9 crore, from Rs 445.7 crore in the March quarter 2001.