Ranbaxy laboratories project

Ranbaxy LaboratoriesDemand Forecasting and Turnaround StrategiesCompany Details, Business Overview, Trading, Acquisitions, Allegations, Forecasting Demand, Conclusion and Recommendations 2009Amity Global Business School, Hyderabad11/18/2009MBA -2011, 1st SEMESTERAKSHITA GUPTA(A30601909001)M.VENKAT RAJU(A30601909019)BIPIN KUMAR SINGH(A30601909021)A.VENKATA SURESH(A30601909040)NANDITA SADANI(A30601909048)G.ANUSHA(A30601909049)ROHIT REDDY(A30601909051)P.V.S.SANJEEV KUMAR(A30601909057) CONTENTS ,[object Object]

BUSINESS AND FINANCIAL METRICS

LATEST DEVELOPMENTS: AT A GLANCE

SUGGESTIONS/ RECOMMENDATIONSRanbaxy Laboratories Ltd. is a research based International pharmaceutical company with its headquarters in India. It manufactures a range of high quality, affordable generic drugs. The company has manufacturing facilities in around 9 countries. It has strong presence in around 49 countries, products available in around 125 countries globally. It has dedicated workforce of about 10,500 employees representing 51 different countries. Formation: Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. The name Ranbaxy is a portmanteau word from the names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir Singh and Gurbax Singh. After Bhai Mohan Singh's son Parvinder Singh joined the company in 1967, the company saw a significant transformation in its business and scale. His sons Malvinder Mohan Singh and Shivinder Mohan Singh sold the company to the Japanese company Daiichi Sankyo in June 2008. Ranbaxy was established in 1961 and went public in the year 1973. It has global sales of US $1340 million for the year ended on 31st December, 2006. It has the largest market in USA (sales appx. US $380 million); then come Europe and BRICS (Brazil, Russia, India, China, South Africa). Company Details: Type-Public Founded-1961 Headquarters-Gurgaon, Haryana, India Employees-1100 in R&D Website-www.ranbaxy.com Working Details: Ranbaxy has a strong R&D competence that provides a sustainable competitive advantage to the company. It has scholarly pool of about 1100 scientists, engaged in out-of-box researches. Ranbaxy spends over 7% of its sales on R&D. Licensing of once-a-day Ciprofloxacin formulation, using NDDS (Novel Drug Delivery System) on a worldwide basis, was the first international success for the company. Ranbaxy is focused on Discovery and development of drugs on anti-infectives, urology, respiratory/ inflammatory and metabolic diseases. ,[object Object],• Simvastatin • AmoxiClav Potassium • Isotretinoin • Amoxycillin and Combinations • Ciprofloxacin and Combinations • Ketorolac Tromethamine • Omeprazole and Combinations • Cefuroxime Axetil • Cephalexin • Loratadine and Combinations • Clarithromycin • Ginseng+Vitamins • Diclofenac and Combinations • Ranitidine • Cefaclor • Cefpodoxime Proxetil • Efavirenz • Atorvastatin and Combinations • Fenofibrate • Ofloxacin and Combinations Business Overview Ranbaxy Laboratories Limited encompasses the entire pharmaceutical value chain from manufacturing to marketing generic pharmaceuticals; value added generic pharmaceuticals, branded generics, Active Pharmaceuticals Ingredients (API) and intermediates. As a research driven company, over 6% of it's revenues are invested in R&D, amongst the pharmaceutical companies in India, Ranbaxy has the largest R&D budget with an R&D spend of over US $ 100Mn. In 2008 it demerged its New Drug Discovery Research division into a separate entity, Ranbaxy Life Science Research Limited (RLSRL). The company has manufacturing operations in eight countries with a ground presence in 49 countries, and its products are available in over 125 countries. It has been aggressively entering into joint ventures and strategically acquiring companies in past few years. Besides concluding its acquisition of Be-Tabs in South Africa, which makes Ranbaxy the 5th largest generic pharmaceutical company in South Africa, the Company acquired 13 Dermatology products from Bristol-Myers Squibb in the USA in 2007. Ranbaxy made an acquisition of RPG Aventis, France which has since been renamed as Ranbaxy Pharmacie Generiques SAS. It also has subsidiaries in Spain, Netherlands, Russia and Australia. Anti-infectives amoxycillin, ciprofloxacin, and simvastatin are in Ranbaxy's top selling class of medications. In 2007, the company entered the specialty and niche therapeutic areas of Bio-generics, Oncology,Penems, Limuses, Peptides,etc. The company also has a groundbreaking anti-malarial candidate in late-phase trials. Business and Financial Metrics ,[object Object],From FY2004 to FY2008, sales revenue grew from Rs. 36,143.4 millions to Rs. 44,814.3 millions. The net profit for the same period increased from Rs.2,237 millions to Rs.6,177.2 millions. From FY2007 to FY2008 the sales revenue increased from Rs.41,844.9 millions to Rs.45857.80 million. However, the company reported a net loss of Rs (10323.34) million for FY 2008 compared to net profit Rs 6177.20 million for FY2007. In Q3'08 Consolidated Revenue was Rs. 18,884 Mn (USD 431 Mn) against Rs.16,520 Mn in Q3'07, exhibiting a growth of 14.3%. The growth was due to the weakening in Rupee against US Dollar and sales growth which was 6% in dollar terms at $428mn. Sales were hindered by an import ban imposed by the U.S. Food and Drug Administration (FDA) on 30 different generic drugs imported from its Dewas and Batamandi (Paonta Sahib) Facilities. With the import ban coupled and with a forex hedging loss worth Rs 900mn, their operating margin fell to 7.8% in Q3'08 from 16.0% in Q3'07. The resultant operating profit stood at Rs 1440mn as against 2,831 mn in Q3'07, down by 49.1%. The provision for inventory write offs due to the import alert issued by the US FDA and due to the forex translation loss have resulted in net loss of Rs 3945mn against a net profit of Rs 2074mn in Q3'07. ,[object Object],Year20042005200620072008Sales36,143.435,366.540,587.141,844.944,814.3 ,[object Object],Year20042005200620072008PAT5,284.72,237.03,805.46,177.210,448.0 Figure 1 ,[object Object], QuarterQ1’09Q2’09Q3’09Sales8,022.2110,099.1811,937.67 QuarterQ1’09Q2’09Q3’09PAT7,777.786,754.501,860.67 Figure 2 ,[object Object],Net Sales de-grew by 3.7%: For 1QCY2009, Ranbaxy posted Net Sales of Rs1,554.5cr, a de-growth of 3.7% yoy, which was in line with our estimates. Net Sales declined on account of USFDA issues in the US and challenging environment in the EU region. In the EU region and North America, the company‘s Sales fell by 14% and 7% in Rupee terms to Rs283.1cr and Rs404.0cr. However, Emerging market Sales fell marginally by 2% to Rs837.6cr. The company has stated that it is in discussion with the USFDA to resolve the issues involving its plants. The USFDA inspection of Paonta and Dewas facilities is likely to take place during the year. Also, the company does not expect the current USFDA issue to impact its FTF settlements. For CY2009, the company has guided for Top-line Rs7,000cr, a de-growth of 3% over CY2008. The company’s guidance does not include any upside from the launch of Valtrex. Ranbaxy is working on various synergies with Daiichi Sankyo, which includes launching of products from the parent’s portfolio in India and other Emerging markets. Operating Margins collapse: Ranbaxy reported Operating Losses of Rs104cr as against a Net Profit of Rs225cr in the last corresponding period. Operating Losses can be attributable to realised foreign exchange losses of Rs84.5cr, shifting of operations to Ohm facility in the US post the ban of fresh imports from the company’s Paonta Sahib facility and on-going overheads at Paonta Sahib and Dewas facilities. The company expects a marginal sequential improvement in Operating Margins by restructuring costs. Net Loss of Rs761cr: Ranbaxy reported a Net Loss of Rs761.3cr for 1QCY2009 primarily on the back of Rs1,046.1cr MTM losses on foreign hedges and FCCBs. The company has stated it has around US $1.4bn hedges, which are long term in nature. For CY2009, the company has guided for a loss of around Rs800cr provided that there is no further Rupee depreciation and no adverse impact from the USFDA front. Y/E Dec (Rs cr)CY2007CY2008CY2009ECY2010ENet Sales6,6417,2226,4507,517% chg10.58.7-10.716.5Reported Profit774.0-914.6-813.9408.7% chg51.5000Adj Net Profit554440.6-62334.2 ,[object Object],For the quarter, the company posted Net Sales of Rs1,554.5cr registering 3.7% yoy de-growth. Emerging markets, which accounted for 54% of the company’s Total Sales, de-grew by 2.0% to Rs837.6cr. Meanwhile, the Developed Markets de-grew by 6% to Rs608cr. For CY2009, Ranbaxy has guided for Sales of around Rs7,000cr and Net Loss of Rs800cr. The company expects to break-even in 9MCY2009 provided there is no further Rupee depreciation and adverse impact on account of USFDA. The guidance does not include any upside from the launch of Valtrex. Ranbaxy is working with on various synergies with Daiichi Sankyo, which includes launching products from the parent’s portfolio in India and other Emerging markets. ,[object Object],For 1QCY2009, the North American region comprising the US and Canada posted 7% de-growth to Rs404.0cr. The US market de-grew by 14% yoy to Rs340.1cr despite of rupee depreciation primarily on account of the US ban on products from the Paonta Sahib facility. During the quarter, the company received four ANDA approvals from the USFDA. Imitrex was launched during the quarter in the US. The company is investing towards increasing its manufacturing capacity at its Ohm facility. The company expects to begin supplying Nexium API to Astra Zeneca by 4QCY2009. Ranbaxy stated that it is in discussion with the USFDA to resolve issues at its plants. The USFDA inspection of Paonta and Dewas facilities is likely to take place during the year. Ranbaxy believes that supply from its Dewas facilities could start again if the USFDA finds the plants GMP compliant post the inspection. The Canada market grew at a faster pace of 57% yoy to Rs63.9cr and the company currently ranks seventh with a 4% share in the Generic market. In the EU region, the company recorded Sales of Rs283.1cr, a de-growth of 14% yoy primarily on account of currency devaluation and channel de-stocking. Ranbaxy has adopted a cautious view on the EU region with focus shifting to Profitability replacing its earlier Volume-based approach. Further, it is reducing its fixed costs in the UK and Germany market. ,[object Object],During 1QCY2009, the CIS region de-grew by 8% yoy to Rs86.5cr primarily on account of currency devaluation and stringent credit management adopted by the company. The Asia-Pacific region recorded Sales of Rs109.2cr growing at 9% yoy. In India, the company’s Sales during the quarter stood at Rs325.8cr, a yoy growth of 9% as the company continues to maintain its second rank in the domestic market with 4.8% marketshare. The company also launched the first product Olvance from Daiichi’s product portfolio. The company also plans to scale up Daiichi’s products in India and other Emerging markets. Business Segments There are three basic business divisions: pharmaceutical dosage forms, active pharmaceuticals ingredients (API) and allied business which comprises of animal healthcare, diagnostics and a range of other products. Of these, the pharmaceutical dosage forms division is the largest sector, accounting for two thirds of annual sales. Dosage Form Sales (94% of total revenue) the dosage form sales grew from 91% of global sales in 2006 to 94% of global sales in 2007. It comprises the majority of Ranbaxy’s sales, including sales of generic pharmaceuticals, value added generic pharmaceuticals and branded generics. API (Active Pharmaceutical Ingredients & Others) (6%) Ranbaxy supplies API to leading generic companies in more than 50 countries. The API division has in its portfolio over 50 products covering a wide therapeutic range such as Cardio-vasculars, Anti-infectives, Anti-ulcerants, Anti-diabetics, Anti-depressants, Anti-virals and others. In 2001 Ranbaxy identified Consumer Healthcare as its new business area with the launch of 4 brands: Revital, Pepfiz, Gesdyp & Garlic Pearls. During 2006, the business registered sales of US $ 19 Mn registering a growth of 19%. Demand Forecasting: FY 2009-2010 ,[object Object],YearSales in Crores2004-0536,143.402005-0635,366.502006-0740,587.102007-0841,844.902008-0944,814.30 ,[object Object]

Ranbaxy’s Profit/Loss Year wise:YearProfit in Crores20045,284.7020052,237.0020063,805.4020076,177.20200810,448.00 ,[object Object]

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