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Dr Reddy's dares Ranbaxy

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By VIVEK NAIR in Mumbai
  • Published 27.07.09
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Mumbai, July 26: Dr Reddy’s may overtake Ranbaxy to become the largest Indian pharmaceutical company in terms of turnover by the end of this fiscal.

While Ranbaxy is saddled with regulatory problems in the US, Dr Reddy’s is going strong in key markets, fuelling analysts’ expectations that it is “only a matter of time’’ before the Hyderabad-based company topples the Daiichi Sankyo unit to occupy the top slot.

At present, Ranbaxy is the largest pharmaceutical company with a consolidated turnover of Rs 7,400 crore in 2008. Dr Reddy’s comes second with a topline of Rs 6,901 crore in fiscal 2008-09.

Dr Reddy’s chairman Anji Reddy expressed a similar optimism at the company’s annual general meeting. “By the end of this fiscal, we will probably be the No. 1 pharmaceutical company in India in terms of turnover,” Reddy said.

Strong sales of the generic Imitrex, a drug against migraine, pushed up the company’s margin in the first quarter of the current fiscal. Sales were robust in the North American and Indian markets.

Analysts expect the earnings to get even better in the months ahead with the launch of Omeprazole, a drug used to treat stomach ulcers, in the current quarter.

Ranbaxy, on the other hand, continues to bear the brunt of an import ban on 30 drugs produced from its Paonta Sahib (Himachal Pradesh) and Dewas (Madhya Pradesh) facilities imposed by the US Food and Drug Administration (USFDA). The US regulator has restrained Ranbaxy from submitting drug applications from these units.

On Friday, Ranbaxy CEO Atul Sobti told reporters that the company was expecting a reply from the USFDA by the end of this month on its corrective action plan for the Paonta Sahib unit.

Analysts, however, say it may take a couple of quarters for the situation to be normal.

Leader slips

Though Ranbaxy beat estimates to post better-than-expected profit in the second quarter ended June 30, this was mainly on account of the company reversing its mark-to-market losses on foreign exchange hedges.

Observers said Ranbaxy failed to impress despite the profit because of the impact of the USFDA action.

Net sales of the company on a consolidated basis stood at Rs 1,795 crore, a degrowth of 2 per cent over the corresponding period last year. Sales in the developed markets stood at $125 million, a degrowth of 26 per cent over the year-ago quarter.

“Ranbaxy is now the largest company but it is facing problems. Dr Reddy’s, on the other hand, is doing fairly well. There is an opportunity for Dr Reddy’s to inch ahead of Ranbaxy,” Sarabjit Kaur Nangra, pharma analyst at Angel Broking, said.

While Dr Reddy’s has an estimated sales growth of 10 per cent for the current fiscal over 2008-09, Nangra’s forecast is a conservative 4.6 per cent.

Souvik Chatterjee, analyst at ULJK Securities, has a more cautious view on Dr Reddy’s.

“The company will grow at a strong rate if the US market performs well. This is important because its European operations continue to see some pressure,” Chatterjee said.

Though it has guided for a 10 per cent growth this fiscal, I am not too optimistic,” Chatterjee said.