Ranbaxy may suffer loss of $250 mn on approval woes: Expert

Furthermore, Pal expects Teva, Mylan, Sandoz and Dr Reddy’s Laboratories to benefit from this loss.

Below is the verbatim transcript of Surajit Pal’s interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy.

Latha: What does this combined loss of approvals for both Nexium and for Valcyte mean for Ranbaxy’s P&L?

A: Overall you can expect around USD 230-250 million in bottom line and in earnings per share (EPS) level it could be roughly around Rs 32.3 of one time EPS.

Latha: How much was the EPS hurt?

A: Rs 32.3 one time EPS. Two things we have to consider, one thing for sure is that Valcyte is gone. So the regulator mention is that error in charging over compliance. The point they said is that overall compliance it is not the data integrity issue which means that they are indicating Mohali plant, not Paonta. So the new application was basically from Mohali when they started producing Lipitor. That time the new application had happened. What means is that Mohali plant issue of compliance is also currently in question. That is one point to ponder.

Second point is that why this scenario has been triggered. I believe so far my knowledge goes and whatever my understanding in the company is that the third party is APF which was sent to the regulator in Nexium and Valcyte. That surplus product is substandard and I believe that that guy is already under observation. So most likely it could be IPCA, I am not very sure, whose third party API was sent to the regulator.

Third point is that the current scenario in Nexium is that the 30 months is over and they don’t have tentative approval. Technically if you don’t have tentative approval within 30 months being a first filer means that you don’t get sole exclusivity or your First to File (FTF) is actually null and void. So being a regulator they are not bound to clarify their point, number one.

Number two is that if similar scenario happened in Tricor. When Teva clearly say it to their shareholders that since 30 months is over and we don’t have any tentative approval it means that in effectivity we don’t have any sole exclusivity in the drug. Similar scenario would happen over year, that is my call, but at this point of time Ranbaxy maintains they have the exclusivity, there is nothing that has been mentioned.

Sonia: Which are the companies that could benefit from Ranbaxy’s forfeiture?

A: There are six guys, Teva, Mylan, Sandoz, Dr. Reddy’s, Lupin, Hetero. But the question is that only these four guys Teva, Sandoz, Dr. Reddy’s and Mylan has out of court settlement with Astra, whereas Lupin and Hetero has not had any out of court settlement. So even if they get approval they might not be launching at risk whereas the other four guys will be free without any risk they can second launch. So most likely these four guys will be launching as and when they receive the approval.

Sonia: What could the combined impact be on Sun and on Ranbaxy on the P&L as a whole?

A: That is what I said. In bottom line USD 250 million combined for both.

Sonia: What about the stock itself. Ranbaxy what do you with it now?

A: Basically for Ranbaxy it is a cash flow impact. If I remove these onetime scenarios concerned. So that would have been easy for them to repay their loan of which is roughly around USD 800 million currently but otherwise first Sun Pharma who is sitting with roughly USD 2 billion of cash USD 200 million might be hardly any matter to them or given the kind of market cap of USD 30-31 billion both the companies put together that is not great. So I don’t expect more than 2-3 percent correction.

Latha: So Sun already would be a buy for you at current levels, it is standing at Rs 842.

A: Yes, not buy actually because Sun with the kind of huge valuations they have accumulate would be the right thing.