Ranbaxy: Conference Call Update

1. The generic Lipitor (Atorvastatin) has helped the company to bolster its current earnings. The exclusivity of Lipitor runs till the end of May and hence we will see the benefits arising even in the June quarter. The company is still under agreement with the generic giant Teva and hence revenues from Lipitor will continue to be shared. Based on our calculations, we believe that about 40-45 per cent of the revenues will be shared with Teva. The company has, however, decided not to answer questions related to the revenue sharing agreement.
2. The company has started production from its Mohali plant which has received USFDA approval. Currently this facility is manufacturing generic version of Lipitor and going ahead it will cater to other product markets as well.
3. Ranbaxy currently holds the largest i.e. 47 per cent market share in Lipitor with 60-70 per cent price erosion. Ranbaxy expects expansion of the overall Lipitor market but with its exclusivity coming to end by this month, its market share will drop. The inventory for Lipitor is enough to sustain the next few months of supply. We estimate that its Lipitor market share may drop by nearly about 20-30 per cent initially.
4. It is also enjoying the highest market share in Caduet (Amlodipine + Atorvastatin) in which it has exclusivity.
5. The company is targeting the big five markets in the Afican region i.e. South Africa, Egypt, Morocco, Tunisia and Algeria. It already has a presence in South Africa. It will start a new facility in Morocco by 2013. Besides, the Egyptian markets also hold the key for its growth. It is also planning to set up a plant in Nigeria.
6. The domestic market has kept growing by a steady rate of 13 per cent. In the Australian market the growth was improved mainly due to the exclusivity of Lipitor.
7. The consent decree is progressing as per the management’s expectations. Due to regulatory requirements the company has not provided more information. There would be more news in the results of the September quarter.
8. Its ten facilities were inspected by international agencies during the quarter. However, the management has not shared the outcome of the same.
9. The company’s total debt is USD 815 million (about Rs 4,075 crore). Due to the huge cash earned due to Lipitor’s exclusivity, the net debt has come down to USD 44 million (about Rs 220 crore) from over USD 260 million (about Rs 1,300 crore) in the year-ago period.
10. Exceptional gains of Rs 344 crore were on account of forex gains and revaluation gains.
11. The taxes were lower during the quarter as the company pays taxes on the April – March fiscal year basis. Ranbaxy paid lower taxes on account of the losses made in the previous year.
12. The management said that the base business margins have also expanded. However, no numbers have been provided.

Investors may turn bullish on the stock for a short term due to the good profits made in the last two quarters. The company is seen recovering from the USFDA jolt it suffered in 2008. However, since many issues remain unresolved, it is very difficult to predict the future growth rate. It is also not clear what is the growth rate in the base business. That apart, the time frame for the resolution of the consent decree is not clear and hence the stock will remain heavy until some concrete information is available in the public domain.