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India's Ranbaxy surprises with quarterly loss

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(Globalpost/GlobalPost)

India's largest drug firm Ranbaxy reported Tuesday a sharp narrowing of its quarterly net loss but missed analyst forecasts for a profit after it was hit by product recall charges.

The generics drug maker, majority-owned by Japan's Daiichi Sankyo, posted a net loss of 4.92 billion rupees ($91 million) for the three months to December, down from a loss of 29.83 billion rupees a year earlier.

But analysts had expected Ranbaxy to be in the black for the fourth quarter and report a net profit of around 2.2 billion rupees, according to a poll by Dow Jones Newswires.

"Profitability for the fourth quarter was primarily impacted by the voluntary recall" of a generic version of the cholesterol-lowering drug Lipitor in the US market, Ranbaxy Laboratories said in a statement.

In November, Ranbaxy voluntarily recalled the drug after it discovered tiny glass particles in some batches of the medicine.

The problem was the latest to beset the generics heavyweight, India's largest drug firm by sales, which reached a deal with US regulators earlier in 2012 over a lengthy quality compliance dispute in which it promised tighter checks.

The surprise quarterly net loss reflected the accounting costs stemming from the recall of the drug which it has since started resupplying to the US market again. Ranbaxy set aside 1.86 billion rupees towards recall costs.

"Ranbaxy results were disappointing, due to higher raw material costs. This was further worsened by one-off product recall costs," said Gautam Sinha Roy, vice president (equities), Motilal Oswal Securities.

The results sent shares of Ranbaxy down 3.66 percent to 417.30 rupees.

Sales of the company, headquartered in Gurgaon near the capital New Delhi, fell 29 percent to 26.71 billion rupees in the fourth quarter from a year earlier.

Ranbaxy, which has factories in eight countries, has expanded by selling cheap copies of branded drugs that have gone off-patent, and through challenges to patents owned by Western companies.

The company, which was bought by Japan's Daiichi Sankyo for $4.6 billion in 2008, launched Lipitor in the US market in 2011.

Daiichi Sankyo purchased control of the Indian firm to diversify globally and to break into the fast-growing generics market.

But Daiichi Sankyo faced an uphill battle to turn around Ranbaxy after US authorities alleged the company falsified data, failed to prevent contamination of medicines and kept poor records.

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