Ranbaxy plunges 25% in two sessions after USFDA ban
Shares of Ranbaxy Laboratories continued to remain under selling pressure for second straight session after the US FDA banned it from shipping drugs.
By ET Online |
MUMBAI: Shares of Ranbaxy Laboratories continued to remain under selling pressure for second straight session after the US FDA banned it from shipping drugs and raw ingredients from Toansa plant in Punjab.
“This precludes the company from exporting to the US from its core global API plant for now (likely for a few years), which spells difficulty not only for approval of new generics in the US but also production and supply of already-approved drugs. Ahead, Ranbaxy’s impairment and inventory disposal costs should also be a focus of debate,” said Morgan Stanley report.
“Daiichi’s balance sheet carries 40 bn yen in goodwill/intangibles related to the Ranbaxy acquisition. Still, we do not expect this to impact acne drug Absorica (production outsourced), a recent growth driver in the US,” the report added.
According to Aarthisundari Jayakumar, Research Analyst, Elara Securities the recovery for Ranbaxy is likely to be delayed and long drawn, with diminishing clarity on its FTF pipeline. Ranbaxy’s performance ex-US too appears weak, given its high-cost structure.
“We remain cautious, given the continued overhang from USFDA and high fixed-cost structure adversely affecting operating profitability. We have revised our earnings downwards, reflecting lower US sales and weaker margins. We maintain ‘Sell’ with revised target price down from Rs 322 to Rs 289 (based on 16x FY16E core earnings and SOTP of FTFs),” Jayakumar added.
At 10:20 a.m.; the stock was at Rs 314.45, down 6.63 per cent, on the BSE. It touched a high of Rs 329 and a low of Rs 306.05 in trade today. It has corrected nearly 25 per cent from its closing of Rs 416.70 on January 23, 2014.
“This precludes the company from exporting to the US from its core global API plant for now (likely for a few years), which spells difficulty not only for approval of new generics in the US but also production and supply of already-approved drugs. Ahead, Ranbaxy’s impairment and inventory disposal costs should also be a focus of debate,” said Morgan Stanley report.
“Daiichi’s balance sheet carries 40 bn yen in goodwill/intangibles related to the Ranbaxy acquisition. Still, we do not expect this to impact acne drug Absorica (production outsourced), a recent growth driver in the US,” the report added.
According to Aarthisundari Jayakumar, Research Analyst, Elara Securities the recovery for Ranbaxy is likely to be delayed and long drawn, with diminishing clarity on its FTF pipeline. Ranbaxy’s performance ex-US too appears weak, given its high-cost structure.
“We remain cautious, given the continued overhang from USFDA and high fixed-cost structure adversely affecting operating profitability. We have revised our earnings downwards, reflecting lower US sales and weaker margins. We maintain ‘Sell’ with revised target price down from Rs 322 to Rs 289 (based on 16x FY16E core earnings and SOTP of FTFs),” Jayakumar added.
At 10:20 a.m.; the stock was at Rs 314.45, down 6.63 per cent, on the BSE. It touched a high of Rs 329 and a low of Rs 306.05 in trade today. It has corrected nearly 25 per cent from its closing of Rs 416.70 on January 23, 2014.
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