New Delhi: Indian drug maker Ranbaxy Laboratories, which is being taken over by Japan's Daiichi Sankyo, reported a worse-than-expected fall in quarterly net profit as a weak rupee swelled foreign exchange losses.
Daiichi Sankyo is paying up to $4.6 billion for control of Ranbaxy, which it aims to set among the world's top five generic drug makers with $5 billion sales by 2012.
Ranbaxy has grown globally by selling generics -- cheap copies of off-patent branded drugs -- and challenging patents held by Western firms.
But a U.S. probe into whether Ranbaxy submitted false data to support generic drug applications and tried to hide manufacturing violations has raised concerns about the firm's future in the main U.S. market, which accounts for 24 percent of its revenue.
Shares in Ranbaxy, valued at nearly $5 billion, were down 2.4 percent at 482 rupees at 0735 GMT in a Mumbai market that was down 3.9 percent. Ranbaxy Chief Executive Malvinder Singh said the deal with Daiichi Sankyo would help it tap opportunities in the global pharmaceutical market.
"We expect performance to be stronger as we move through the rest of the year," he said in a statement. Consolidated April-June net profit plunged to 229 million rupees ($5.4 million) from 2.64 billion rupees a year ago.
Net sales rose 12.7 percent to 18.30 billion rupees from 16.24 billion a year earlier.
The average forecast by 10 analysts in a Reuters poll predicted earnings would drop 80 percent to 536.9 million rupees on sales of 18.86 billion rupees.
Ranbaxy said excluding foreign exchange gains or losses, profit in the quarter was at 1.61 billion rupees, little changed from 1.60 billion a year ago.
A 6.8 percent fall in the rupee's value against the dollar in April-June would have bloated Ranbaxy's foreign loan exposure and may have resulted in hedging losses, analysts have said.
In the year-ago quarter, Ranbaxy, India's top drugs firm by sales, notched a forex gain of 1 billion rupees as the currency rose 7 percent against the dollar.
Smaller rival Dr Reddy's Laboratories last week posted a bigger-than-expected 26 percent drop in quarterly profit to 1.35 billion rupees.
Analysts are upbeat on the sector outlook, however, as drugs with annual U.S. sales of $50 billion are expected to go off patent by 2010, creating opportunities for Indian generic firms.
A patent settlement reached over AstraZeneca Plc's top-selling ulcer pill Nexium could add revenues of up to $1.5 billion between 2009 and 2014, Ranbaxy said in April.
Ranbaxy shares rose 19.2 percent in April-June, outperforming a 14 percent fall in the broader market.
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