NEW DELHI Shares in leading Indian drug maker Ranbaxy Laboratories fell as much as 9 percent on Monday after it posted a huge first-quarter loss and forecast a second year of losses, hit by derivatives losses and falling revenue following a U.S. import ban.
Ranbaxy, in which Japan's Daiichi Sankyo last year bought a controlling 64 percent stake, said late on Friday it expected net losses of about $150 million in 2009 and also said revenue would fall 9 percent to $1.4 billion.
The company, which has about $1.4 billion in outstanding hedges, booked forex losses of 9.18 billion rupees ($184 million) in its first quarter ended March. It is also weighed down by troubles in the U.S. market and price pressures Europe.
"Given the likely poor results in the medium term, high sensitivity to a volatile rupee and no clarity on how long the U.S. impasse could last or how worse it could get, we believe the recent strength in the stock is a good exit opportunity," Citigroup said in a note.
By 11:15 a.m. (0545 GMT), Ranbaxy shares were trading down 4.7 percent at 167.50 rupees, after falling as low as 160 in early deals. The broader Mumbai market was little changed.
"Besides poorer-than-expected Q1 results and consequent reduction in estimates, we build in added conservatism into our valuation of Ranbaxy's first-to-file pipeline," Citi analysts Prashant Nair and Akshay Rai wrote, downgrading the stock to "sell".
The U.S. Food and Drug Administration (FDA) said in February Ranbaxy had sold misbranded or adulterated drugs in the United States, having earlier banned imports of more than 30 generic drugs.
"We are maintaining a close and regular dialogue with FDA and corrective actions are underway," Chairman Malvinder Singh said in an analysts' conference call on Friday.
Ranbaxy will cut back on chasing higher volumes and focus on profits from the European markets amid high competition and sharp price erosion of generics, he said.
The firm has "barely managed" to breakeven in Europe in the past three years, he said.
"We've started pulling back, especially in the UK, recently even in Germany," Singh said. "And in France, in 2009 we'll give it a good shot, because that's one area, which we still believe that has some promise."
Ranbaxy shares, which the market values at about $1.5 billion, are down more than 30 percent on the year. The shares are now trading at about a fourth of their 52-week peak of 613.70 hit in June last year.