Ranbaxy Delays Spin Off Of R&D Unit Until Later This Year

NEW DELHI - Gurgaon, India-based Ranbaxy Laboratories has delayed plans to spin off its research unit until the second half of the year, but noted during a Jan. 17 press conference that it had settled a key lawsuit over Flomax (tamsulosin) and expanded a development deal with GlaxoSmithKline that will secure earnings momentum.

"We expect the development to happen in the second half of the year," CEO Malvinder Singh told reporters about spinning off the research unit, following release of Ranbaxy's full-year earnings results.

The company announced late last year that it planned to split the unit from consolidated operations at the start of 2008 as part of its drive to develop new drugs outside of its main generic business (Also see "Ranbaxy Board Approves Spin-off Of Drug Discovery Company" - Scrip, 22 Oct, 2007.).

Singh said the delay would not impact earnings as he forecast an 18 percent to 20 percent increase in revenue and a 20 percent to 25 percent increase in net profit this year based on a series of acquisitions, drug approvals and litigation settlements in the U.S. and Europe last year.

"We have taken appropriate steps to structure the business for the future by forming alliances in several niche therapeutic areas. This will bring certainty of profit flow for the future," Singh said.

The company said it won approval on 18 of 28 U.S. FDA abbreviated new drug applications in 2007.

In November, the company resolved a patent dispute with Astellas/Boehringer Ingelheim in the U.S. over tamsulosin capsules, used to treat benign prostatic hyperplasia.

Ranbaxy also noted that it signed last year a new multi-year research and development deal with GSK to expand its role in drug development, adding that it could receive more than $100 million in potential milestone payments for a product it develops and GSK launches (Also see "Ranbaxy/GSK Partnership Yields First Drug Candidate" - Scrip, 3 Apr, 2007.).

In other litigation and development deals, Ranbaxy noted that it had won a favorable patent ruling from a Munich federal court in Germany in a case against Pfizer/Warner Lambert's European patent 409 281, related to the enantiomer calcium salt of Lipitor (atorvastatin).

Ranbaxy also received tentative U.S. approval in the fourth quarter (October-December) to sell valsartan tablets (Novartis' angiotensin receptor blocker Diovan ), for which it has a first-to-file status, a market it estimates at $1.3 billion annually. In December,the Indian company also won tentative U.S. approval to sell a generic version of Eisai/Pfizer's Alzheimer's drug Aricept (donepezil).

"There is steady movement to solve litigation issues, make select acquisitions and aggressively file to challenge patent claims at the same time. The company had been overly dependent on the U.S. and lagged in emerging markets, but even that seems to be looking up," said Rohit Bhat, a pharma analyst with Batlivala & Karani Securities in Mumbai.

Ranbaxy bought a 14.9 percent stake in India's Krebs Biochemical Industries in the fourth quarter for 89 million rupees ($2.26 million) for access to low-cost manufacturing of fermentation products, and a similar stake in Jupiter Biosciences for an undisclosed amount to gain access to peptide products.

Ranbaxy said in its third quarter results that emerging markets accounted for 54 percent of its total sales in 2007, compared to 49 percent in 2006.

The company, which aims to be among the top five generic drug makers by 2012, said Jan. 17 that its fourth quarter net profit was 1.88 billion rupees ($48 million), up marginally from a revised upward 1.86 billion rupees a year ago.

Sales rose to 17.95 billion rupees ($460 million), from 17.08 billion rupees a year earlier.

- Ed Lane ([email protected])