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ShareMUMBAI: Ranbaxy Laboratories, India's largest drugmaker, is facing a bleak winter.
Problems emerging due to the United States Food and Drug Administration ban on 30 of its drugs and currency fluctuations are set to dent the profit margins of the company
significantly.
Data from IMS, the consulting and analytics firm, show in a span of two months, Ranbaxy lost 45% of prescription in the US market. The US market is key to Ranbaxy's revenues, contributing 23.3% of its Rs 7,332 crore topline.
IMS data suggest that the US market will witness a slow growth of 1-2%, against the 14-15% growth seen in the developing markets. Sarabjit Kour Nangra, vice president, Angel Broking, said about 40-45% of the US sales of the company could be impacted by the FDA ban.
The ban was imposed a few months ago on import of drugs made at Ranbaxy's Dewas and Paonta Sahib plants due to alleged manufacturing deficiencies. The drugs include Ranbaxy's popular generic equivalents of the cholesterol-reducing drug Zocor and generics to fight allergy such as Claritin and Alavert.
"The US FDA issue may take another six months to be resolved. This will create pressure on margins," said analyst Bino Pathiparampil from institutional equity firm IIFL.
According to Sujay Shetty, associate director of PricewaterhouseCoopers (PwC), the volatility in the rupee will also impact the company in the coming quarter.
However, it is felt that the company's presence in emerging markets like South Africa, Mexico, Kenya, Egypt, Zimbabwe, Ukraine, etc could cushion the impact from the US market.
According to a source from Ranbaxy, though US is the largest market which can't be ignored, emerging markets would also be a key focus area, with close to 55% of the total business coming from there at present.
There are pricing pressures in the US and increased competitiveness, hence the company has been focusing on having more contribution from developing economies as a risk mitigation model, says the source.
However, pharma industry experts feel that the US is by far the most profitable market, and hence emerging markets cannot cushion the impact arising from erosion of US business.
"The USFDA action could lead to problems in other countries as well. So emerging markets cannot be looked at with very high optimism," says an analyst from a broking firm.
