Tuesday, March 8, 2011

Hoard Ranbaxy - Will not get a better time than now. Aricept has taken 30% market share.. Lipitor opportunity still in hand

Ranbaxy has taken 30% prescription share of the US Aricept market. Aricept branded sales before patent expiry in the US was $2billion. At 28% makret share, and assuming 40% sales erosion, Ranbaxy should end 2011 with annual sales of $250m (30% of 2010 sales) from Aricept alone. The profitability from Aricept sales should be close to 50% and this should translate into INR 600 Crores in net profits or EPS of  INR 14 per share.

Ranbaxy also holds the 180 days exclusivity for the world’s largest selling drug i.e Lipitor and is expected to launch lipitor generics by November 2011. Lipitor sales in the US is $6billion..  Assuming an average 20% market share and 40% price erosion, Ranbaxy should be able to generate about $700m in sales from this drug for the full year. The average profitability from Lipitor should be around 60%, which will translate into net profits of INR 1900 Crore or an EPS of Rs 20/share from Lipitor alone.

There is also  a risk that Ranbaxy may not get an FDA approval for its plant, which manufatures Lipitor generic as it is currently under FDA scrutiny. In that Ranbaxy would still have two options with it. Either it can do a site transfer or  monetize its exclusivity by selling it to another generic player and this should fetch Ranbaxy upto 70% of the potential earnings i.e INR 14 per share or INR 1300 crore