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      Ranbaxy Q2 profit halves on competition, costs

      Posted AtReuters

      BOMBAY (Reuters) - India's top drug maker, Ranbaxy Laboratories Ltd., said on Thursday its quarterly net profit fell 49 percent on competition in the key U.S. generic drugs market and higher research & development (R&D) costs.

      Ranbaxy had warned this year would be tough as it incurs higher research costs to boost its drug pipeline and also prepares to launch a copy of Pfizer Inc.'s cholesterol-lowering blockbuster drug Lipitor.

      A U.S. court is yet to decide whether Ranbaxy's challenge of Pfizer's patent is valid.

      The company said its April-June net profit fell to 1.01 billion rupees from 1.97 billion a year earlier. Sales in the second quarter rose 7 percent to 13.48 billion rupees.

      A Reuters poll of 10 analysts had forecast a profit of 1.36 billion rupees and sales of 13.05 billion for Ranbaxy, which has the biggest presence in the U.S. drug market among Indian drug makers.

      After the recently announced acquisition of Ivax Corp by Teva Pharmaceutical Industries, Ranbaxy will have the second-largest pipeline of filings for generic drugs with the U.S. Food and Drug Administration, the Indian company's chief executive Brian Tempest said.

      Ranbaxy aims to sell generic copies of patented drugs with a U.S. market size of more than $30 billion.

      But the pricing pressures in the United States this year is a big dampener on the company's performance.

      "There has been a falling away of prices, away from where we had expected it at the beginning of the year, through quarter one and also into quarter two," Tempest told reporters on a conference call after the results.

      "In the light of the continuing pricing pressure that we are seeing, we are going to see the year-end generating less earnings per share than 2004," he said.

      As billions of dollars worth of drugs go off patent in the United States, more generic drug makers are entering the market, causing prices to fall.

      Rival Dr. Reddy's Laboratories Ltd., another early entrant into the U.S. market, reported on Tuesday a doubling of April-June profit on higher domestic and European sales and also said the U.S. market was tough.

      More Indian companies such as Glenmark Pharmaceuticals Ltd., Lupin Ltd., and Cadila Healthcare Ltd. have stepped up drug launches in the United States in the past few months.


      Ranbaxy said its R&D costs doubled to $26 million during the quarter. Tempest said it would continue to spend more on R&D to develop generics, and said Ranbaxy was also spending more on intellectual property rights litigation with patent holders.

      Ranbaxy said its U.S. performance was affected by quinapril, a generic version of Pfizer's Accupril blood pressure drug, staying off the market. A U.S. court had, in March, asked Ranbaxy and its partner Teva to stop selling the drug. Ranbaxy said an appeal hearing was scheduled for next week.

      Ranbaxy said its sales in all other regions had improved over the previous year. European sales rose 27 percent from a year earlier. Indian sales also improved.

      Domestic market sales have rebounded as traders restocked their supplies after the previous quarter's hesitancy to pick up drugs ahead of the introduction of a new lower value-added tax from April, which replaced higher sales tax.

      Tempest said Ranbaxy was more focussed than ever on acqusitions, but declined to comment on anything specific. It has said in the past that it would look for opportunities in Germany and the United States. It acquired the generic portfolio of Spain's EFARMES last quarter.

      Ranbaxy's shares rose 5 percent in the April-June quarter, while the benchmark Bombay Stock Exchange Healthcare index gained 9 percent. Indian stock exchanges were closed on Thursday due to severe flooding in Bombay.

      July 28, 2005


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