Ranbaxy up on clarification from US FDA

2 Mar 2009, 1154 hrs IST, ET Bureau

MUMBAI: Even in a bad market, the share price of Ranbaxy Laboratories surged over 1.5% on news that the US FDA has clarified that there was no evidence that certain drugs from Ranbaxy do not meet their quality specifications and has not identified any health risks associated with the currently marketed products from Paonta facilities.

At 11:43 am on NSE, the stock was trading at Rs 162.80, up 0.62% from the previous close. The stock had risen to a high of Rs 166.30 earlier in the day, with total trade quantity at 5.87 lakh shares.

"We believe the current USFDA action will have limited impact on Ranbaxy’s US sales since the import ban on products from the Paonta facilities is already in place since September 2008. Though we had reduced our US sales estimates for CY2009E after the import alert, we would be again reviewing our estimates post the 1QCY2009E results to gauge any further impact of the AIP especially for products, which used clinical data from the Paonta facility," Angel Broking said to its clients recommending the stock with a target of Rs 277.

Earlier on Sep 16, 2008, the USFDA had issued two warning letters and instituted an Import Alert barring entry of all finished drug products and active pharmaceutical ingredients (API) from Ranbaxy's Dewas, Paonta Sahib facilities due to violation of US current Good Manufacturing Practices requirements. That action barred commercial importation of 30 different generic drugs into the US and continues to be in effect.

Since then the Ranbaxy stock has slipped by 18%.

"We maintain a Buy on the stock, with a Target Price of Rs277 wherein the Core business is valued at Rs178 giving it a fair P/E of 16x CY2009E Core Earnings of Rs 11.1, Rs 24 for the Non-Core Income and NPV Rs75 is ascribed to the FTF opportunities available to the company," the Angel report said.