Many of the top 30 Indian pharmaceutical companies reported sharp fall in their sales and profits during the first half of the year ended on September 2017 mainly on account of repeated US FDA actions, implementation of GST and price cuts. Adverse exchange fluctuations and competition in the overseas and domestic markets put additional burden on their working.
With poor financial performances, pharmaceutical companies market capitalisation declined significantly and investors lost heavily. The BSE Healthcare index of 70 companies declined by 12 per cent during April-September 2017 to 13,487.76 points from 15,312.40 points as at the end of March 2017. However, BSE Sensex of 30 companies improved by 5.6 per cent to 31,283.72 during first half.
The net sales of Pharmabiz sample of 30 companies declined by 2.5 per cent during the first half ended September 2017 to Rs. 84,343 crore from Rs. 86,524 crore in the corresponding half of last year. The EBIDTA declined by 18.8 per cent to Rs. 18,258 crore from Rs. 22,485 crore and net profit fell sharply by 41.7 per cent to Rs. 8,196 crore from Rs. 14,062 crore. For the full year 2016-17, these companies registered net sales of Rs. 1,73,071 crore and net profit of Rs. 25,857 crore.
The aggregate net sales of 30 companies declined as few majors like Sun Pharmaceutical, Lupin, Torrent Pharma, Wockhardt, Biocon, Divi's Laboratories, Ipca Laboratories, GlaxoSmithKline Pharma (GSK), Alembic Pharma, Pfizer, Dishman Pharma, Nectar Lifesciences, Vivimed Labs and Aarti Drug received setback in sales growth. Further, Dr Reddy;s Laboratories (DRL) net sales remained flat and that of Aurobindo, Cipla, Alkem Laboratories, and others registered only single digit growth. Cadila Healthcare, Glenmark Pharma, Jubilant Life Sciences, Strides Shasun, Abbott India clocked double digit growth in sales during the first half.
The net sales of Sun Pharmaceutical Industries, which posted net sales of over Rs. 30,000 crore for the year 2016-17 and maintained its leadership position, declined to Rs. 12,757 crore in the first half of the year from Rs. 15,756 crore in the same period of last year on account of lower sales in US. Similarly, Lupin's net sales declined by 10.2 per cent to Rs. 7,681 crore from Rs. 8,553 crore. Wockhardt suffered another setback and its net sales declined by 11.2 per cent to Rs. 1,913 crore from Rs. 2,155 crore and that of Divi's Laboratories went down by 15.4 per cent to Rs. 1,711 crore from Rs. 2,023 crore.
The net profit of 30 companies declined sharply basically due to setback suffered by Sun Pharma, Lupin, DRL and Cadila Healthcare. Further the net profit of few majors like Alkem Laboratories, Jubilant Life Sciences, Torrent Pharma, Biocon, Strides Shasun, Divi's Laboratories, Ipca Laboratories, Alembic Pharma, Pfizer, Dishman Pharma, J B Chemicals, Vivimed Labs and Aarti Drugs also declined by double digit during the first half. Wockhardt incurred a net loss of Rs. 413 crore as against a net profit of Rs. 33 crore. Cipla, Glenmark, Abbott India, Laurus Labs and Natco Pharma registered double digit growth in net profit.
The net profit of Sun Pharma declined due to lower formulation sales in US which declined by 45.4 per cent to Rs. 4,251 crore from Rs. 7,785 crore. Its net profit declined by 86 per cent to Rs. 679 crore from Rs. 4,739 crore due to settlements with certain plaintiffs related to the Modafinil antitrust litigation in the US, with the settlement amounting to Rs. 951 crore reported in Q1FY18. Commenting on performance, Dilip Shanghvi, managing director, said, “A challenging US generic pricing environment coupled with continued investments in building our global specialty business has impacted our performance. We expect our performance to gradually improve in the second half of this year.”
The net profit of Lupin declined by 47.3 per cent to Rs. 813 crore from Rs. 1,544 crore in the same half of last year as its sales in US declined sharply by 32 per cent in the second quarter ended September 2017. Its R&D expenditure also declined to Rs. 974 crore from Rs. 1,071 crore. Its cumulative ANDA filings reached at 377 and it received 225 approvals upto the end of first half.
Despite US FDA actions against several majors, Indian pharma companies received final approval for 138 ANDAs during the January-June 2017 as against approval for 201 ANDAs during the full year ended December 2016. The US FDA approved total 387 ANDAs during this period as compared to 598 ANDAs in the full year 2016. Similarly, Indian companies got 32 tentative ANDA approvals from US FDA during the first half ended June 2017 as compared to 70 ANDA in the full year ended December 2016. The US FDA approved total 85 tentative approvals during first half of 2017 as compared to 156 in the full year ended December 2016.
Based on the first half performance, it looks that the full year 2017-18 will be most difficult year for the Indian pharmaceutical companies in respect of sales and profit growth. Though these companies are launching new product and getting higher approvals from highly regulatory bodies, the resolving cGMP problem with US FDA will be major task for improvement in US sales.
Financial Highlights first half ended Sept 2017