PREVIEW-Indian drug makers Jan-March earnings seen mostly higher

* What: March quarter earnings from India's top drug makers

* When: Ranbaxy Laboratories reports on April 22

* Dr Reddy's profit seen falling by nearly two-thirds,
Cipla to rise the most

By Devidutta Tripathy

NEW DELHI, April 17 (Reuters) - India's leading drug makers
should report rises in quarterly earnings on strong generic
drugs sales, with the exception of Dr Reddy's Laboratories
(REDY.BO) whose profit is seen falling sharply due to one-time
gains in last year's earnings.

Cheaper generic drugs are becoming increasingly popular as
governments around the world battle to contain soaring
healthcare costs, but export-driven Indian pharmaceutical firms
are facing challenges of stiff pricing pressure in the United
States.

Analysts are upbeat about the outlook for the sector as
drugs with annual U.S. sales of $50 billion are expected to go
off patent by 2010, creating more opportunities for Indian
firms to sell generic versions or cheap copies of branded
products.

"We believe that the worst is over for Indian generic
companies and expect gradual improvement in their performance
over the next two years," Motilal Oswal Securities said in a
report.

An increased focus on the domestic market, which is
expected to maintain the 12-14 percent growth rate of recent
years, should help drug makers in the long term, Prabhudas
Lilladher said.

Ranbaxy Laboratories (RANB.BO), India's top drug maker by
sales, is expected to post a 15.5 percent rise in March quarter
sales when it reports on Tuesday, but higher interest costs and
lower other income mean its profit will rise by just 2.3
percent on year to 1.32 billion rupees, according to a Reuters
poll.

(See bottom of story for company valuation, share price
movement and a table of forecasts)

Goldman Sachs, which maintains a strong outlook for the
sector in the financial year that began on April 1, estimates
average industry sales growth to be 21 percent from a year
earlier, more than its previous forecast of 16 percent.

The Indian rupee weakened by 1.7 percent against the dollar
in the March quarter, after rising more than 12 percent in
2007, which could have led to some foreign exchange hedging
losses, analysts said.

New York-listed Dr Reddy's (RDY.N) is expected to report a
64 percent fall in net profit, as earnings a year earlier were
boosted by one-time gains from a 180-day exclusivity period for
the generic version of GlaxoSmithKline's (GSK.L) anti-nausea
drug Zofran.

The company also faces pressure on its business in Germany,
where it acquired Betapharm for $572 million in 2006. The
acquisition has been a drag on earnings because of supply
constraints and the appreciation of the rupee.

Sun Pharmaceuticals (SUN.BO), India's most valuable drug
maker, is expected to report its net profit rose 15 percent to
2.65 billion rupees, buoyed by sales of oxcarbazepine tablets,
a generic form of Novartis AG's (NOVN.VX) epilepsy drug
Trileptal.

Sun shares exclusive U.S. marketing rights with Indian peer
Glenmark Pharmaceuticals (GLEN.BO) for the drug.

Cipla Ltd (CIPL.BO) is expected to report a 39.4 percent
rise in net profit on revenue growth of 9.6 percent, helped by
higher exports.

Pharmaceutical stocks outperformed the main index in a
falling market during the January-March quarter, with the BSE
healthcare index .BSEHC falling 13 percent, versus a 23
percent drop in the benchmark index .BSESN.
SHARE PRICE & P/E OF TOP DRUG MAKERS
----------------------------------------------------------------

COMPANY Share performance P/E Market cap

(pct quarter) (forecast) (as of April
15)
---------------------------------------------------------------
- Ranbaxy 3.0 25.1 $4.5
bln
Dr Reddy's -19.6 20.7 $2.6 bln
Sun Pharma 0.8 24.5 $6.6 bln
Cipla 3.4 25.2 $4.2 bln
---------------------------------------------------------------
- Following are forecasts in billion rupees for the four
firms from a Reuters poll. Dr Reddy's and Sun based on nine
forecasts, Cipla on 10 and Ranbaxy on 11 analysts' forecasts.
NET PROFIT
--------------------------------------------------------------
Company Mean (% yr) Range Date
--------------------------------------------------------------
Ranbaxy (RANB.BO) 1.32 2.3 1.04-1.67 April 22
Dr Reddy's(REDY.BO) 1.17 -63.9 0.90-1.53 N/A
Sun (SUN.BO) 2.65 15.0 1.84-3.40 N/A
Cipla (CIPL.BO) 1.76 39.4 1.42-2.36 April 25
REVENUE
--------------------------------------------------------------
Ranbaxy 17.96 15.5 16.60-19.95
Dr. Reddy's 12.89 -17.2 11.45-16.89
Sun 7.32 34.5 6.24- 8.19
Cipla 10.28 9.6 9.13-11.95
--------------------------------------------------------------

NOTE: Estimates compiled from: Angel Broking, Motilal Oswal,
CLSA, Morgan Stanley, Sharekhan, Batlivala & Karani, SSKI,
Goldman Sachs, Edelweiss, Kotak Securities, and Prabhudas
Lilladher.
($1=39.9 rupees)
(Editing by John Mair and Lincoln Feast)