PREVIEW-Indian drug makers July-Sept earnings seen mixed

* What: Quarterly earnings of India's top drug makers

* When: From Thursday, Oct. 18

* Ranbaxy, Sun profit seen up; Dr Reddy's, Cipla seen down

By Himangshu Watts

MUMBAI, Oct 17 (Reuters) - Indian drug makers Ranbaxy
(RANB.BO: Quote, Profile, Research, Stock Buzz) and Sun Pharmaceutical (SUN.BO: Quote, Profile, Research, Stock Buzz) are expected to
report quarterly earnings grew by more than a fifth as sales of
cheaper generic drugs rose, but Dr Reddy's (REDY.BO: Quote, Profile, Research, Stock Buzz) will post
a sharp drop in the absence of one-time gains.

Generic drugs are increasingly popular as governments
around the world battle to contain soaring healthcare costs,
but Indian pharmaceutical firms are facing challenges from the
rapidly rising rupee since exports form a significant part of
the revenue of top firms.

Ranbaxy and Sun, however, are expected to gain from reduced
costs in dollar terms and the lower rupee value of foreign
debt.

Drug makers are also facing margin pressure because of
intense competition in generics, or cheap versions of
off-patent drugs.

"The outlook for the pharma sector remains challenging,"
brokerage Religare said in a research note.

"The generics business of most of the companies has become
commoditised and hence companies have limited pricing power."

Ranbaxy Laboratories is expected to report on Thursday net
profit grew 23 percent to 1.72 billion rupees ($44 million) in
the September quarter, a Reuters poll showed.

(See bottom of story for company valuation, share price
movement. For a table of forecasts, click on [ID:nBOM250444])

The company said in June it had launched pravastatin sodium
80 mg tablets in the United States and would enjoy a 180-day
exclusivity period for producing the generic version of the
cardiac drug for sale in the U.S.

Ranbaxy has forecast revenues will grow by about 20 percent
a year for the next five years.

Ranbaxy was the only major Indian drug maker to see a share
price gain in the quarter. Its stock rose more than 22 percent.

Dr Reddy's Laboratories (RDY.N: Quote, Profile, Research, Stock Buzz), India's only drug maker
listed on the New York Stock Exchange, is forecast to report a
44 percent fall in net profit to 1.58 billion rupees from a
year ago, when one-time gains lifted earnings and revenues.

"Excluding this one-time impact, revenues are likely to
record just 1.3 percent growth mainly due to pressure on German
operations and currency appreciation," brokerage Motilal Oswal,
which has a "buy" rating on the stock, said in a report.

Sun Pharmaceutical Industries, India's most valuable drug
maker, is forecast to report that net profit rose 21 percent to
2.26 billion rupees.

The company, which said in July that it would raise 35
billion rupees in equity or debt for acquisitions, is expected
to gain in the key U.S. market where it has a subsidiary.

"With the domestic business progressing well and increasing
traction on the U.S. front, the possibility of rapid scale-up
over the next couple of years is high," Motilal Oswal said.

Cipla (CIPL.BO: Quote, Profile, Research, Stock Buzz) is expected to report profit declined for a
third quarter in a row, with July-September earnings seen down
19 percent as the appreciating rupee erodes export earnings.

The rupee <INR=IN> has risen about 12.5 percent against the
dollar in 2007, boosted by foreign investment in the booming
economy.

In the past investors had valued Cipla for its steady
growth, unlike Ranbaxy and Dr Reddy's, which have seen sharp
swings.

"We believe that the 'consistent growth' is under pressure
from higher overheads and a deteriorating business mix which is
reflected in the last two quarters," Religare said.

During the quarter, the Mumbai market's healthcare index
fell 0.6 percent, lagging the benchmark index
.BSESN, which rose 18 percent.
SHARE PRICE, P/E OF TOP DRUG MAKERS
--------------------------------------------------------------
COMPANY Share performance P/E Market cap

(pct quarter) (forecast) (as of Oct 16)
--------------------------------------------------------------
Ranbaxy +22.4 25 $4.1 bln
Dr Reddy's -1.1 17.4 $2.7 bln
Sun -5.5 21.8 $5.0 bln
Cipla -12.5 21.6 $3.7 bln
--------------------------------------------------------------
($1=39.3 rupees)