Ranbaxy, Indian Drugmakers’ Estimates Raised at Goldman Sachs

Oct. 14 (Bloomberg) -- Ranbaxy Laboratories Ltd. and eight Indian health-care companies have had their share-price estimates raised by Goldman, Sachs & Co., which cited declining risk from U.S. regulators and the industry’s “stable” outlook.

Ranbaxy’s target price was raised 22 percent to 240 rupees and the stock was removed from Goldman Sachs’s “Conviction Sell” list, according to a report today by analysts including Balaji V. Prasad.

Concerns that the U.S. Food and Drug Administration will impose further curbs on Indian drugmakers have weighed on their share prices this year. The measure of health-care shares on the BSE 500 Index has gained 50 percent this year, lagging behind an 82 percent rally in the broader index.

“Recent developments demonstrate that FDA issues can be resolved, allowing the focus to shift back to a longer-term view for the sector,” the Goldman Sachs analysts wrote. “We continue to believe that the sector can grow at mid-teen rates, sustain its operating margins at 18 percent to 19 percent and generate consistent cash returns.”

Sun Pharmaceutical Industries Ltd., India’s largest drugmaker by market value, had its share-price estimate raised 23 percent to 1,099 rupees at Goldman Sachs. The brokerage also boosted its target for Dr. Reddy’s Laboratories Ltd. by 17 percent to 1,060 rupees. Dr. Reddy’s, Cadila Healthcare Ltd. and Piramal Healthcare Ltd. are the analysts’ top picks, they added.

Easing Restrictions

Goldman Sachs said U.S. regulatory risks for Indian drugmakers have been “reduced” after Cipla Ltd.’s Bangalore plant was cleared of observations by the FDA and Sun Pharmaceutical’s U.S. unit agreed to accept similar monitoring. Cipla is the second-largest Indian pharmaceutical company by market value.

The FDA also barred the import of more than 30 generic medicines from Ranbaxy because of manufacturing deficiencies at the Dewas plant in central Madhya Pradesh state and at its Paonta Sahib factory in the northern province of Himachal Pradesh. Ranbaxy needed to have the ban lifted to stem four straight quarters of sales declines in the U.S., the company’s biggest market last year.

Ranbaxy said in July it expects the U.S. regulator to start inspection of its Dewas plant.