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Ranbaxy net profit down 62 pc, sales drop — Increased litigation, hike in R&D spend

Our Bureau

New Delhi , Jan. 18

CONTINUED price erosion in the US market, increased litigation and research and development (R&D) spend has impacted on the net profit of Ranbaxy Laboratories Ltd, which fell 62 per cent to Rs 259.1 crore for the financial year ended December 31, 2005.

The company also witnessed a 2 per cent drop in global sales to end the year at Rs 5,195.6 crore. For the fourth quarter, consolidated sales fell 1 per cent to Rs 1,405.5 crore while profit after tax fell about 57 per cent to Rs 68.6 crore compared to Rs 156.5 crore recorded during the corresponding period last year. Lower profit in the last quarter is also attributed to a $5-million write-off after a branded product launched through a joint venture was withdrawn from the market.

Speaking to newspersons after the board meeting, Dr Brian Tempest, Chief Mentor and Executive Vice-Chairman, Ranbaxy, said, "While 2005 was a tough period, we strongly believe that the business outlook will get better in 2006." The company is optimistic about crossing the $2-billion mark in 2007 and $5-billion by 2012.

Mr Malvinder Mohan Singh, CEO and Managing Director, Ranbaxy, said, "In 2006, we are hoping to achieve a sales growth of 18 per cent and EBITA to improve by 16 per cent." This, he said, would be achieved by launching new products across the globe, improving overall cost efficiencies, lowering R&D spends and litigation costs.

R&D costs are set to drop by $20 million in 2006 from the $104 million that the company spent last year. Similarly about $30 million was spent on litigation and this expense is expected to be lower this year. While pricing pressure in the US is expected to continue this year as well, Ranbaxy hopes to launch several new products in the second quarter of this year. These could be generic or branded generic and would be dependent on the market requirement.

On the litigation front, Mr Singh said the company did not have a risky strategy.

"We have about 30 Para IV filings, 19 of which are first-to-file, giving us 180-day exclusivity. Of these only seven molecules are under litigation," he said. Ranbaxy hopes to launch certain dosage forms of cholesterol-lowering drug Pravastatin and Simvastatin later this year.

The company is also aggressively eyeing acquisitions both in India and abroad. While market is abuzz with talks that the company is close to acquiring companies in Romania, Mr Singh did not comment on this.

He said, "The acquisition would depend on the overall fit. For instance, in the US, the acquisition should help us attain critical size, but in Europe, it could be viewed as an entry strategy or help us widen our product portfolio." In the coming years, Japan — which is the second largest pharma market in the world — would be an important market.

The company's share fell marginally on the Bombay Stock Exchange to close at Rs 383.95, down from Rs 390.25 registered a month ago.

Change of guard

STRONG PARTNERSHIP: Dr Brian Tempest, Chief Mentor and Executive Vice-Chairman, Ranbaxy Laboratories, with Mr Malavinder Mohan Singh, CEO and Managing Director, at Gurgaon in Haryana on Wednesday. - Kamal Narang

IN a top-level change, the reins of Ranbaxy have returned to the family with Mr Malvinder Mohan Singh taking over as CEO and Managing Director from Dr Brian Tempest, who has been designated Chief Mentor and Executive Vice-Chairman of the company.

Dr Tempest said that the promotion is in line with the succession plan chalked out earlier. "It is part of the process and I will work till the end of 2007." Even as Mr Singh assumes full operational responsibility, he will continue to report to Dr Tempest.

Along with this, the board has also approved the appointment of brother, Mr Shivender Mohan Singh as Director.

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