India's Ranbaxy and Dr Reddy's post strong results

India's two leading pharmaceutical companies, Ranbaxy Laboratories and Dr Reddy's pleased investors with solid financial results for the third quarter of 2009, with the former returning into profit and the latter seeing earnings double.

Controlled by Japan's Daiichi Sankyo, Ranbaxy, India's largest drugmaker, reported a consolidated net profit of 1.17 billion rupees ($25.2 million) for the three months ended September 30, compared with a net loss of 3.95 billion rupees a year earlier, when it had a large foreign-exchange loss. Sales fell 8.9% to 17.2 billion rupees in the quarter, Ranbaxy said.

Ranbaxy's revenues from the USA and Romania, however, continued to decline, with those in North America recording a slump of 43% to $61 million and in the European country dropping 25%. Total European sales were down 10% to $67 million. Sales in India, which exclude consumer health-care products such as protein supplements, gained 2% to 3.62 billion rupees, while in South Africa these rose 3% to $22 million. Since the beginning of 2009, however, Ranbaxy has been improving its performance. The firm attributes this to a focus on a better product mix, revenue growth in key markets and an attempt to contain operational costs.

A CLSA analyst was not impressed, according to The Wall Street Journal. 'It's not a dramatic improvement. In some geographies the decline is stable, specially in Europe. India is flat year-on-year,' said Hemant Bakhru, Mumbai-based analyst with foreign brokerage CLSA Asia-Pacific Markets. 'But, in the USA, this quarter onwards, the number should not decline since the inventory has come down. Operationally, this quarter has been better,' he added.'

Dr Reddy's turnover helped by favorable currency

Number two in India, Dr Reddy's reported that profit in its second quarter ended September 30 doubled to 2.2 billion ($47.3 million), compared with 1.1 billion rupees in the prior-year period, due in part to favorable currency exchange rates.

Net income climbed to 2.17 billion rupees ($47 million) in the three months ended Sept. 30, from 1.05 billion rupees a year earlier, the Hyderabad-based company said today. That beat the 1.97 billion-rupee median of 14 analyst estimates compiled by Bloomberg in the past four weeks. Sales in the USA and Russia gained and as currency fluctuations worked in the company's favor.

Profit, as well as total revenue, which increased 14 percent to 18.4 billion rupees, exceeded analysts' estimates, and the company's shares rose 6.2 percent following the release of the results.

Chief financial officer Umang Vohra said that growth in sales came from key markets, specifically the USA and Russia. He explained that sales growth in the USA was mainly because of issues with other drugmakers and "a shortage of product availability in the market." In Europe, Dr Reddy's sales fell 13% compared the like period last year, largely as a result of pricing pressures in Germany.