Global Economic Mess & Policy Paralysis in Indian Pharma Sector result sluggish growth, Sales & Profits decline!
The revenue growth and profit margins of leading 50 pharmaceutical companies in India have exhibited slow growth during the quarter ended June 2013 on account of competition, higher interest cost, quality problems and settlement provisions. The net sales of 50 pharma companies improved only 9.6 per cent to Rs. 33,107 crore from Rs. 30,195 crore in the corresponding period of last year. The earnings before depreciation, interest, taxation and adjustments (EBDITA) improved by 13 per cent to Rs. 8,204 crore from Rs. 7,258 crore. This was mainly on account of significant growth in other income by 42.2 per cent to Rs. 1,497 crore from Rs. 1,053 crore. Operating profit margins worked out to 24.8 per cent as against 24 per cent in the last period.
However, the net profit after adjustments and forex loss, declined sharply by 66.3 per cent to Rs. 1,010 crore from Rs. 2,999 crore as Sun Pharmaceutical has provided huge amount of Rs. 2,631 crore for settlement agreement with Pfizer Inc., Wyeth LLC and Nycomed GmbH in respect of patent infringement litigation related to generic versions of ‘Protonix’. Further, Ranbaxy Laboratories provided Rs. 493 crore and Jubilant Life SciencesRs. 128 crore during the quarter under review for adjustments. The overall forex loss declined to Rs. 377 crore from Rs. 679 crore in the last period. Jubilant Life has shown an exceptional item of Rs. 122.31 crore during the quarter under review as compared to Rs. 105.30 crore in the last period. This includes forex loss of Rs. 25.51 crore and mark to market loss of Rs. 94.96 crore, which put pressure on bottom line
The raw materials, including purchases and stock adjustments of 50 companies increased only by 5.2 per cent to Rs. 12,488 crore from Rs. 11,867 crore in the similar quarter of last year and the staff cost moved up 17.9 per cent to Rs. 5,413 crore from Rs. 4,590 crore. Other expenditure surged by 12.8 per cent to Rs. 8,499 crore from Rs. 7,533 crore. The depreciation provision worked out at Rs. 1,257 crore as compared to Rs. 1,089 crore, a growth of 15.4 per cent. The interest burden of these companies increased by 23.6 per cent to Rs. 1,178 crore from Rs. 953 crore.
Among the Pharmabiz sample of 50 companies, Sun Pharmaceuticals clocked highest sales of Rs. 3,482 crore as compared to Rs. 2,658 crore, a strong growth of 31 per cent. This was followed by Dr Reddy’s Laboratories at Rs. 2,845 crore with growth of 12 per cent during the quarter under review. Ranbaxy’ s net sales declined by 17.8 per cent to Rs. 2,633 crore from Rs. 3,205 crore and caught third position for the quarter ended June 2013. The fourth largest company, Lupin registered net sales growth of 9.1 per cent to Rs. 2,421 crore and Cipla notched up net sales of Rs. 2,308 crore as compared to Rs. 1,932 crore. Markson Pharmaceutical and Aurobindo Pharma reported strong net sales growth of 49 per cent and 42 per cent to Rs. 141 crore and Rs. 1,700 crore respectively.
Besides Ranbaxy Laboratories, the sales of few majors like GlaxoSmithKline Pharma, Nectar Lifesciences, Dishman Pharmaceuticals, Ind-Swifit Laboratories,Orchid Chemicals, Shasun Pharmaceuticals, Wyeth, Strides Arcolab, Indoco Remedies, Ind-Swift, Neuland Laboratories and Dr Datsons Laboratories (formerly known as Aanjaneya Lifecare) declined during the quarter under review. Cadila Healthcare, Wockhardt, Jubilant Life Sciences, Abbott India, Sanofi India, Pfizer, Novartis India, FDC, Claris Lifesciences registered only single digit growth in sales which put overall pressure on sample of Pharmabiz sample of 50 companies during the quarter ended June 2013.
The EBDITA of Ranbaxy Laboratories declined sharply by 48.7 per cent to Rs. 298 crore from Rs. 581 crore in the corresponding quarter of last year. Similarly, EBDITA of Cadila Healthcare, Wockhardt, Jubilant Life Care, GlaxoSmithKline Pharma, Vivimed Labs, Orchid Chemicals, Novartis India, Shasun Pharmaceuticals, Strides Arcolab, Wyeth, Ind-Swift, Dr Datsons Labs and Panacea Biotec declined sharply by over 20 per cent. However, Aurobindo Pharma, Piramal Enterprises, Granules India, Hikal and Natco Pharma registered strong EBDITA growth of over 50 per cent.
For the full 2012-13, these 50 companies registered net sales of Rs. 1,24,625 crore and this worked out to over 87 per cent of the sales of Pharmabiz sample of 100 companies. Similarly, the net profit of these 50 companies worked out to Rs. 13,903 crore for full year as against Rs. 16,901 crore for 100 companies and worked out to over 82 per cent. The 100 companies registered net sales growth of 19 per cent during 2012-13.
Based on the figures of June 2013 quarter, the net sales as well as net profit will be significantly under pressure in remaining three quarters of 2013-14. Though it is to early to pass any firm judgment, the competition, quality problems and recently announced Drug Price Control Order (DPCO) may put pressure on working. The depreciation of Indian rupee against US Dollar may likely to assist well for top line growth of these companies as many of them are exporting over 50 per cent of there sales to highly regulated countries.
