Name of the company

Ranbaxy Ltd Rs.585 Market OutPerformer
Profit (Rs.m)
* nine month results
Injunction vacated, opens doors for cefuroxime launch
The US Court of Appeals for the Federal Circuit, Washington, has vacated a preliminary injunction of a US District Court, for District NewJersey, which prevented Ranbaxy from selling any Cefurixime Axetil under its ANDA. With this development, the grant of USFDA approvalfor Ranbaxy’s ANDA for crystalline Cefuroxime Axetil, will open the way for Ranbaxy to introduce the product into the US market. Therecent see saw and the final acceptance of crsytalline cefuroxime in the US pharmacopea has also strengthened Ranbaxy’s case with theUSFDA for its ANDA. At this point of time we do not see many impediments in Ranbaxy getting USFDA clearance for its generic version ofcefuroxime axetil.
Court states likelihood of success is in Ranbaxy’s favor
The above litigation refers to GSKs (Glaxo Smithkline) ‘181 patent, which is to expire on June 29, 2003, and which broadly claims thatCefuroxime Axetil in amorphous form is essentially free from crystalline material. Ranbaxy’s crystalline cefuroxime axetil contains 10 to15% crystalline content with the balance being amorphous. The pending patent infringement lawsuit filed by GSK at the New Jersey DistrictCourt will take a view on the exclusivity of these claims. GSKs ‘320 patent on Cefuroxime expired on May 2000. Also at this moment, weunderstand that besides Ranbaxy, there is likely to be no other competitor in the market.
Management will take a view on the ruling
Notwithstanding the Appeal Court’s conclusion that the likelihood of success was in Ranbaxy’s favor, we understand that the Ranbaxymanagement will have to consider the pending patent infringement suit for potential liabilities incase it were to lose the same, before taking afinal decision for Cefuroxime’s market launch.
Strong Upside to CY02 earnings
In light of the above developments, we see upsides to Ranbaxy’s earnings especially in CY02. While Ranbaxy’s pricing and GSKs marketingstrategy will determine Ranbaxys market share gain, at this moment we expect Ranbaxy to derive Rs 2000m of sales in year 1 of sales (with a+50% price drop and a +25% market share gain). Assuming a 35% contribution and an introduction in 4QCY01, will translate into a 6% anda 30% upward revision of our CY01 and CY02 earnings, besides contributing to earnings in CY03. We will revise our earnings after Ranbaxyhas all clearances to go ahead with market introduction. Further, we are reviewing our CY02 earnings on account of the ongoingdevelopments with Bayer for the cipro OD molecule and the successful progress of one version (for which domestic approvals have been gotrecently) will boost Ranbaxy’s outlook.
Upgrade to Outperformer
As mentioned in our last update, we have revisited the Ranbaxy story on account of favorable development on the cefuroxime front. Inconsideration of the above developments, which will likely concretize favorably over the next few weeks, we see upside to the Ranbaxy stockfrom the current levels and upgrade our recommendation from Market Performer to Outperformer.
Gaurav Misra
022-659 3212
This document has been prepared by InvestSmart India Ltd. (the Company) and is being distributed in India by the Company, a registered broker-dealer. The information and opinionscontained in the document have been compiled from sources believed to be reliable. The company does not warrant its accuracy, completeness and correctness. This document is not, andshould not be construed as, an offer to sell or solicitation to buy any securities. This document may not be reproduced, distributed or published, in whole or in part, by any recipient hereof forany purpose without prior permission from the Company. 2001 Investsmart India Ltd For further information please call : Research (022) 6533333 Extn: 3217 Dealing : 6533114-17 An IL & FS initiative


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