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Ranitidine: Spikes in short span, can hold on for a few months
After sustained fall in prices from Rs 740 per kg in May 2006 to Rs 490 in Jan-Feb'08, the Ranitidine Hydrochloride prices have rebounded to Rs 700 in fag end of May 2008
Ranitidine HCl belongs to a class of medications, called H2–Blockers used for treatment of ulcers. Ranitidine HCl blocks the action of histamine (acid) on stomach cells thus reducing stomach acid production. Ranitidine HCl is useful in healing of stomach ulcers and reducing ulcer pain and has been effective in preventing ulcer recurrence when given in low doses for prolonged period of time. In doses higher than that used in ulcer treatment, Ranitidine HCl has been helpful in treating heartburn and in healing ulcer and inflammation of the throat resulting from the acid reflects.
The product patent for Ranitidine HCl was held by GlaxoSmithkline (GSK) and was marketed under the brand name 'Zantac'. The product patent for Ranitidine HCl held by GSK expired in 2002.
According to the industry sources, the annual requirement for Ranitidine HCl is around 6000MTPA. India, with around 3600MT of suppy, is the biggest supplier of Ranitidine to the world market. As the production os Ranitidine is very complex, the product is manufactured by few players only. These are; Neuland Laboratories, Shasun Chemicals and Drugs, SMS Pharmaceuticals, Orchev Pharma and Saraca Pharma.
The domestic Ranitidine HCl prices crashed from Rs 740 per kg in May 2006 to a low of Rs 490 per kg in January and February 2008. In FY07-08, the Ranitidine HCl prices tumbled down by over 22% to Rs 519.29 per kg. The condition was so bad that the prices, even on m-o-m basis, continued to fall.
The earthquake in China and the disruptions in production and exports, and the spike in input costs together lead to sharp spurt in Ranitidine prices from Rs 490 per kg in the week ended 18th March 2008 to Rs 700 per kg in the week ended 27th May 2008. But even these prices are lower than May 2006 levels. In this context, despite the sharp spike in a few weeks, they represent only a strong come back in prices, after two full years.
Rising raw-materials prices have forced producers to increase their prices. However, Ranitidine HCl is under Drug Price Control Order, 1995, which has fixed the price for Ranitidine at Rs 615 per Kg. Resultantly, the producers can not sell their produce as a price higher than the fixed price in the domestic market. This has already impacted the performance of players like Saraca Laboratories, which is enjoying a very negligible margin on the sale of this product in the domestic market.
Currently, Ranitidine producers derive comfort from two factors; One, there is no direct substitute for Ranitidine HCl and the complex production process for Ranitidine results into high entry barriers. Second, the Companies expect the Ranitidine prices to spurt even more, by another 20-30% in coming months. They expect no cooling-off in prices atleast until Nov-Dec08. In such a scenario, big players like SMS Pharma and Shasun Chemicals are expected to reap more benefits than the minor ones.
