Wockhardt Limited, which was planning to introduce three of its new biotechnology products, recombinant human insulin, interferon alpha 2B and quadruple combination vaccine of DTP-Hep-B, in the Indian market during the first half of the current financial year, has decided to defer the launch till the last quarter of the year.
According to a senior official in the company, though it has already received approval from the DCGI for the manufacture and marketing of human insulin in the domestic market, the launch of the same will not take place before the third quarter.
The company was also planning to launch two more biotech product by 2003. Interferon alpha 2B and combination vaccine of Hep B and DTP. The sources said that though these two products were initially planned for launch during the H1CY03, the company do not expect any meaningful revenues from these two products in CY2003. However, the company is yet to receive the DCGI approval for the marketing of these products.
Though the sources declined to give any indication about the pricing of the insulin in the domestic front, it is learnt that the company will have to work out a fresh competitive pricing for the product considering the current market situation. In the recent past, prices of insulins have fallen by 30-40 per cent. This could possibly reduce the price competitiveness of the Wockhardt' s insulin, the most important USP of the company now.
It may be mentioned that during the fourth quarter of 2002, the company had recorded a significant fall in its sales and profits. The company reported a decline of 0.34 billion in sales at Rs.1.77 bn in Q4CY02, significantly lower than its expectation of Rs.2.11bn.This was mainly due to 15 per cent decline in domestic formulations, which constituted 57 per cent of sales during Q4CY01. EBITDA margin of the company also shrunk to 12.69 per cent from 22.26 per cent in Q4CY01.
The company registered a 43.9 per cent drop in PAT at Rs.183 million against the expectation of Rs.369 million. The company sources cited the key reason for the fall such as fall in income from Hep B sales due to shrinking growth opportunities and falling prices. Hepatitis B was a highly profitable product for the company. In Q4CY01, Hepatitis B vaccine contributed Rs.80mn to sales, which were negligible in Q4CY02.
The other main reason for the law sales and profit this time was due to the problems with its field force (approx 150 MRs) since September 2002, affiliated to the outside union Federation of Medical Representatives Association of India (FMRAI). In the interim, the company recruited 300 MRs. This resulted in loss of sales to the tune of Rs.150-Rs.170 mn on the one hand and additional expenditure of Rs.40-50 million on the other during the quarter.
The company sources indicated that the H1CY03 would be tough in terms of top line as well as bottom line on account of field force disruption in the domestic formulations market and postponement of purchases by trade due to uncertainty on implementation of VAT. It also stated that international business would continue to maintain growth momentum at 40 per cent rate in CY2003. "We believe that growth in the domestic formulations could be negative 2-3 per cent while international business would grow in excess of 35 per cent for CY2003," the sources said.
In a recent analysts meet, the company management revealed that field force disruption created by FMRAI would continue to impact sales until Q2CY03. In addition, confusion on implementation of VAT will further deteriorate the falling sales. We believe sales could drop anywhere between 10-20 per cent during the H1CY03 and 2-3 per cent for CY2003. Additional expenses incurred to mitigate field force problem, which essentially include payments and incidental expenses incurred on contract field force of around 250 people, providing security blanket to marketing people, expenses on maintaining contacts with key customers etc., would continue during H1CY03. The company had spent additional Rs.40-50 million in Q4CY02 to deal with this issue.