The Supreme Court dealt a severe blow to the beleaguered pharma major Ranbaxy by issuing a notice based on a Public Interest Litigation (PIL) alleging that the company was selling adulterated cholesterol drug in the domestic market. If a ban is imposed on the drug, then Ranbaxy is likely to lose Rs 76 crore revenue, say experts.
Reacting to the news, the stock crashed 5 percent in the afternoon trade. This was the first time the pharma company has been penalised domestically.
The company is already reeling under US FDA imposed restrictions on all its plants.
In an interview with CNBC-TV18, Ranjit Kapadia, Pharma Analyst, Centrum Broking says that the company will straight away lose Rs 76 crore worth of topline if the Atorvastatin drug is banned.
Kapadia is certain that this predicament will have an impact on Ranbaxy sales in the domestic market but to what extent will depend on the pretext of the adulteration.
Below is the verbatim transcript of the interview:
Q: First, your initial thoughts on this newsflow and how it could impact Ranbaxy?
A: Firstly, the company is marketing the Atorvastatin drug that is the generic version of Lipitor in domestic market under the brand name Storvas and the revenue for the same is about Rs 76 crore. So, if the drug is banned they will straight away lose Rs 76 crore worth of topline or revenues. In the past as well, the company has been in the US market when they had to withdraw generic Atorvastatin because of glass particles as well as mix up of tablets making this its third incident.
Q: What is the reason for the ban specifically? Is it a drug related problem?
A: It is said to be an adulterated drug. Adulteration maybe anything; it maybe a microbial contamination, it maybe less of quantity of the drug per tablet or it maybe any other mix up of tablets.
Q: How much of a sentimental impact is this on the domestic business for Ranbaxy going forward? Do you think there will just be some amount of goodwill impact coming in for Ranbaxy and consumers might get conscious of sales and hence we could see an impact on Ranbaxy sales in the domestic market?
A: Yes, it is definitely going to impact on Ranbaxy sales in the domestic market, because all this time domestic was protected and now once the ball starts rolling for the domestic market, more and more things will be get exposed and the company will have to face more and more problems.
Q: You did mention that Rs 76 crore of revenues will straight away be stripped off the books if this drug is banned. So, what kind of an impact do you think that could have on the EPS as well as the stock price because the stock is already down 5 percent right now?
A: I think it is already discounted by now. 5 percent already takes care of that Rs 76 crore.
Q: Would it percolate into other drugs that Ranbaxy has in the domestic market?
A: Can’t say at the moment because it all depends on what is the type of the adulteration or under what pretext this has been treated as an adulterated drug.
Q: Has any more pleas been put forth in front of the Supreme Court on any other drugs for Ranbaxy?
A: No, I don’t think so. This was only PIL which was filed.
Q: You said that this is happened a couple of times in the past. Was this on the domestic business itself?
A: No, it was in the US market. This is first time that it has percolated in the domestic market.
Q: What is your view on the stock itself right now? What is your recommendation?
A: Our recommendation is to sell and we have a target price of Rs 270. The stock is at about Rs 330-340 now.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
