India’s number one drugmaker, Ranbaxy Laboratories, really felt the pinch from an increasingly-competitive US market during the third quarter which, together with mounting research and legal expenses, helped drive down its net income a dramatic 91% to just 184 million rupees ($4.1 million). Consequently, earnings per share nosedived from the year-ago quarter’s 5.36 rupees to 0.49 rupees.
The company’s outgoings were pushed up by soaring R&D costs, rising 71% to 1.53 billion rupees, while consolidated sales slipped just under 3% to 13.04 million rupees, but grew 2% in dollar terms.
In addition, mounting legal costs, particularly from its current patent battle with Pfizer over the latter’s $11-billion cholesterol-buster Lipitor (atorvastatin), are expected to continue through to next year. Pfizer recently won a victory in the UK where it was ruled that the drug’s patent is valid, and industry observers expect a similar decision in the USA in 2006 [[13/10/05a]], which would deal a significant blow to Ranbaxy.
However, the poor results were largely the result of continued pricing pressures in the USA which, due to increased competition from rival generic drugmakers such as Israel’s Teva Pharmaceutical Industries and the USA’s Mylan Laboratories, led to a cut in sales of 25% to $76 million. On the up side, the group’s total prescription growth in the US market hit 26% in quarter, helping to buffer some of the impact from the generics side.
But revenues from other territories fared significantly better, with turnover in Europe up 5% to $49 million and combined turnover from Brazil, Russia, India and China rising 16% to $95 million.
Commenting on the firm’s performance, chief executive Dr Brian Tempest said: “In spite of the weak USA generic market picture, we are continuing to invest in the future product flow of Ranbaxy, through expanded R&D activities.” Furthermore, he believes that, “when the dust settles in the US, we will be stronger.”
But, despite the company’s upbeat comments, shares were trading down almost 8% at 358.6 rupees on the Bombay Stock Exchange in early morning trading today, reflecting investor sentiment on Friday’s news.