When Ranbaxy bought vaccine supplier Biovel in 2010, the then-CEO of the beleaguered Indian generic firm called it an important part of the company's growth strategy. The CEO is long gone, having resigned within months of buying Biovel, and now Ranbaxy is reportedly ready to split up with its vaccine unit too.
Indian newspaper Business Standard reports Ranbaxy is likely to sell Biovel because the unit has fallen short of expectations. Ranbaxy has failed to introduce any vaccines in the past two years, and the unit took an impairment loss of $7.7 million in October. The company attributed the writedown to market conditions that are affecting its biologics and vaccine production plant in Bangalore. Some analysts are unconvinced by the argument.
"If Ranbaxy has failed to bring out vaccines, it cannot blame unviable market. The company seems to be under pressure to show profitability and selling off Biovel could be one of the options," an anonymous market analyst said. Ranbaxy posted losses in the past two quarters, with falling sales in the U.S. one of several contributing factors. An FDA ban means Ranbaxy only has one plant approved to supply the U.S., a market which accounted for 40% of sales.
Selling Biovel could give Ranbaxy a short-term financial boost to help it through remediation efforts at its production plants. Ranbaxy declined to disclose what it paid for Biovel, but an Asia Pacific Biotech article from 2010 valued the deal at around $8 million.