With its $3.2 billion buyout of Ranbaxy Laboratories, Sun Pharmaceutical is not only buying a business in need of serious manufacturing improvements, but one that is bleeding money as FDA bans keep it from launching exclusive generics for blockbusters like Novartis' ($NVS) Diovan and AstraZeneca's ($AZN) Nexium.
Ranbaxy today reported a loss of 736.54 million rupees ($12.3 million) for its quarter ended March 31, compared to a profit of 1.26 billion rupees, ($21 million) in the same quarter a year ago, Reuters reports. The loss came even though its sales grew slightly to 24.4 billion rupees ($406.8 million.) This follows a quarterly loss of $25.5 million for the last three months of 2013 and a loss of $162 million for the 2013 calendar year.
Its weak showing last year came before the most recent ban in January of its active pharmaceutical ingredient plant in Toansa. Ranbaxy took a $10.5 million hit in the most recent quarter for inventory it had to write-off and costs tied to regulatory issues and a similar-sized write-off of its goodwill. Toansa was the second Ranbaxy plant in a year to be hit with an import alert and its fourth of 5 FDA-approved plants to be prevented from selling products in the U.S., its largest market.
India's Sun Pharma in April announced a deal with Daiichi Sankyo, majority owner of Ranbaxy, and other investors for its all-stock buyout of the long troubled company. Sun's managing director, Dilip Shanghvi, said his top priority will be to get Ranbaxy's plants back into the good graces of the FDA but that he sees big upside in combining the two. Their deal is slated to close by the end of the year.
There is no doubt that Ranbaxy has big potential that has gone unrealized in recent years because of its problems meeting FDA expectations. It was the first into the U.S. market with generic Lipitor, but then had to halt production because of manufacturing problems. It is approved to be first to the market with an exclusive generic of Novartis' ($NVS) blockbuster blood pressure medicine Diovan, a launch last has been delayed in the U.S. since September 2012. It also has first-to-file status for a generic of AstraZeneca's ($AZN) stomach drug Nexium, also a blockbuster, when it goes off patent in the U.S. this month. But again, its launch has been put into question because Ranbaxy does not have an approved plant now that can make it.
You have to go back two years to get an idea of Ranbaxy's money-making abilities. That's when sales of its just-released generic Lipitor led it to report earnings of 12.47 billion rupees--$234.3 million for the quarter--up from 3.04 billion rupees in the same quarter of 2011. Its U.S. sales in that period were 20.93 billion rupees ($375 million).
- here's the announcement
- read the Reuters story
Sun Pharma hopes to turn fortunes of Ranbaxy around with $3.2B buyout
As Ranbaxy's plant problems mount, so do its losses
AstraZeneca set for earnings boost if Ranbaxy can't deliver a Nexium generic
Novartis raises guidance thanks to no-show Diovan generic
Lipitor copy powers a surge in Ranbaxy sales, profits