Lupin outshines Ranbaxy on strong US sales

Lupin has built a US portfolio that is delivering consistently, while Ranbaxy's dependence on exclusivity sales is hampering it

The stock movement for pharma majors Ranbaxy Laboratories and Lupin captured the contrasting performance in the March quarter. While Lupin, which has been hitting highs recently managed to scale the all-time high mark on Wednesday, Ranbaxy closed almost three per cent down at Rs 443. Lupin continues to beat analyst expectations on a consistent basis, on the back of a strong product portfolio it has also scored on the domestic growth parameter, outshining larger peers.

On the other hand, Ranbaxy’s US business growth is largely dependent on exclusivity launches, so revenues tend to be lumpy. The company saw a massive decline in revenues and profitability as compared to the year ago quarter in the absence of one-off sales of the cholesterol reducing drug, Atorvastatin.

Thus, while both companies clocked almost similar revenues (Rs 2,437 crore and Rs 2,450 crore, respectively), Lupin registered growth of 34.7 per cent year-on-year, while Ranbaxy recorded a decline of 34.2 per cent year-on-year. Adjusted for one-off sales, Ranbaxy’s growth has come in over 10 per cent, according to the management.

Lupin: Stronger US foothold
The superior performance of Lupin can be attributed to a consistent US markets growth on the back of a good product portfolio. The company saw US revenues grow 49 per cent y-o-y during the quarter and contribution from this geography has been increasing. US contributed 45 per cent to the total revenues in the March quarter against 42 per cent seen in the December 2012 quarter.

This has been on the back of strong performance by the earlier and new product launches. Lupin had launched around 10 generics in FY13 and another plans 10-20 in FY14. The acquisitions of brands cannot be ruled out. Also the company is looking at new therapies and limited competition products to continue driving growth. It has successfully developed a pipeline of oral contraceptives (OC), estimated to contribute $60-70 million in FY14. Nilesh Gupta, managing director said CY13 will see 10 OC launches.

Ranbaxy: Prospects hinge on approvals
For Ranbaxy, the main revenue driver, too, is the US market. However, the company has had large dependence on one-off sales i.e. launch of generics on exclusivity for six months. During 2010, it was anti-viral Valacyclovir generics that drove revenue growth; in 2011, it was Alzheimer treatment drug Aricept. In 2012, growth came from the blockbuster Lipitor going off-patent and Ranbaxy getting the opportunity to reap the gains. The absence of the contributions of these products on exclusivity impacted the company’s March quarter performance.

Thus, the trigger for Ranbaxy will come from approval of Diovan ($187 million revenues expected) as and when it comes, while launch of another product Valcyte is lined up for the end of the year. Among other generic products, Ranbaxy acne product Absorica is shaping up well and has gained eight-nine per cent market share. Its marketing partnership with Alembic for marketing anti-depressant product Desvenlafaxine  can help Ranbaxy garner $50-60 million revenues in the US during 2013.

India, key markets
Lupin marked a 22 per cent growth in the domestic market, twice Ranbaxy’s 11 per cent growth in the March 2013 quarter.  Though Ranbaxy’s growth was higher than around nine per cent by the Indian Pharma market, Lupin outscores its larger peer on home soil as well.

Nilesh Gupta observes they will continue the run-rate of 30-40 launches in FY14 also and said that 18-20 per cent domestic growth rate will be sustained. Overall, while Lupin’s prospects remain strong looking at a consistent performance, Ranbaxy will have to be better going ahead, a key trigger being FDA approvals.  In the backdrop it is not surprising that while the stock prices of Lupin have surged 32 per cent over the past year, Ranbaxy’s has tanked almost 20 per cent in the same period.