CLSA lowers Ranbaxy's target price as it delays drug launch

MUMBAI: CLSA has maintained its outperform rating on Ranbaxy Laboratories but has revised its target price downward as the company has delayed its launch of generic version of Diovan drug in the US market.

At 10:00 a.m.; the stock was at Rs 333.15, up 0.14 per cent, on the BSE. It touched a high of Rs 335.70 and a low of Rs 330.20 in trade today.

Novartis expects to lose $2.7 billion to generic competition this year, 23 per cent less than its own estimate in January, mainly due to continued absence of Ranbaxy's generic version of blockbuster drug Diovan.

The Swiss drugmaker went a step further to predict that the generic competition is unlikely to arrive in the third quarter (July-September 2013) for its blood pressure lowering bestseller.

Ranbaxy, which holds 180-day exclusivity for the generic version of the drug, was scheduled to launch the drug in the US market in September 2012. It has been over 10 months since then but its Diovan is yet to be launched.

"We believe Ranbaxy continues to maintain its first filer status and could get approval as and when it is able to rectify USFDA's observations," the CLSA report said.

The company is still in process of resolving issues at its Mohali plant.

"We revise our earnings considerably delay in Diovan, forex losses and change our rupee assumption to Rs 58/US$. With payment to DoJ and resultant cash outflow with reduce interest income," the report said.

"We have also lowered our target price to Rs 380 based on 18x one year forward core earnings (Rs 18 per share) plus present value of niche pipeline. We maintain Outperform as valuations have come off and see a couple of triggers over three to six months," the report added.