Ranbaxy Labs + Glaxosmithkline Pharma

Ranbaxy Labs: Ranbaxy’s 2Q PAT (adjusted for forex impact) of Rs1.6bn was on the back of 13% revenue growth and modest margin improvement (17.8% vs 16.4% in 1QCY07). Reported PAT at Rs229mn was largely shadowed by Rs1.93bn forex translational loss. As a result, forecasts are lowered by 12-19% and we now model 34% CAGR in core profits (CY08-10E) and impact of FTF opportunities till 2010.

Timelines on Daiichi Sankyo’s open offer remain intact (August 8th-27th). Management reiterates guidance of 20% top-line growth and 17-18% EBITDA margin. W.Europe markets continue to face pressures while growth outlook on RoW markets is robust. Complying with USFDA, to send necessary documents relating to district court motion on Poanta Sahib case by August 3rd, 2008. Ranbaxy is expected to report an EPS of Rs 16 to Rs 17 for year ending Dec-2008.

Glaxo Smithkline Pharma: GSK’s revenues (net of excise) grew 11% YoY on a comparable basis; reported growth (6.3% YoY) is lower due to sale of the fine chemicals business. This was driven by healthy growth rates in priority products and vaccines.

GSK continues with its efforts to boost revenues. It launched Tykerb in 2Q and has entered into an in licensing deal with Astellas. It has entered into a co-promotion agreement with Daiichi Sankyo India for the antihypertensive drug Olmesartan Medoxomil and its combination products.

Gross margins improved 176bps YoY on the back of improving product mix (no fine chemicals; higher share of priority products within pharma). At the same time, strong control over costs translated into a 207bps YoY improvement in EBIDTA margins. GSK is expected to report an EPS of Rs 55 for FY08 ending in Dec-08.