Pharmabiz
 

Net profit of 50 Pharma Cos grow by 18 %, sales by 17 % in 2003-'04

Sanjay Pingle, MumbaiFriday, July 2, 2004, 08:00 Hrs  [IST]

Indian pharmaceutical sector appears to be well set to meet the future challenges in the post 2005 era. This is evident from the excellent performances by large and medium scale pharmaceutical companies in India during 2003-'04. A study of financial highlights of 50 listed pharmaceutical companies, conducted by Pharmabiz, shows that higher exports, new product launches, mergers and acquisitions, increased focus on R&D and a constant search for new markets have contributed to exemplary performance of this sector. Pharmabiz study of 50 drug companies, consisting of 39 Indian and 11 multinational companies, showed 18 per cent rise in net profit (after exceptional items and taxation) during the fiscal year 2003-'04. The net profit, after exceptional items and taxation, of these 50 companies touched to Rs 3600 crore from Rs 3052 crore in the year 2002-'03. The net sales of 50 companies increased by 16.9 per cent to Rs 26,173 crore from Rs 22,399 crore in the preceding year. Ranbaxy maintained its leadership position among the 50 companies with net sales of Rs 3,398 crore, followed by Cipla (Rs 2,060 crore), Dr Reddy's Laboratories (Rs 1,667 crore), Aurobindo Pharma (Rs 1,341 crore) and Nicholas Piramal (Rs 1,269 crore). Lupin, Cadila Healthcare and GlaxoSmithKline also reported net sales of over Rs 1,000 crore during the fiscal year 2003-'04. Sun Pharmaceutical, Wockhardt and Orchid Chemical are likely to cross the Rs 1,000-crore mark during the course of the current year. The Indian pharma companies have entered very aggressively into international market giving tough competition to international giants. Major players are concentrating on advanced profitable markets like USA and Europe. The export earnings of Ranbaxy moved up by 31.3 per cent to Rs 2429 crore. Similarly, Cipla, Dr Reddy's, Aurobindo, Nicholas Piramal, Lupin, Sun Pharma, Wockhardt and Orchid also notched up sound export performance during the year 2003-'04. Relatively new companies like Matrix, Divi's Laboratories, Biocon also added substantially in export earnings and there exports amounted to Rs 310 crore, Rs 237 crore and Rs 346 crore respectively. The Pharmaceutical companies are consolidating thier position by mergers, acquisition or by entering into marketing tie-ups. Recently, Wockhardt acquired a German pharmaceutical company Espharma GmbH, for Rs 49 crore. Similarly, Dr Reddy acquired Triigenesis Therapeutics Inc, US in an $ 11 million deal. Nicholas acquired the API business of Global Bulk drugs, Lupin entered marketing tie-up with Allergan Inc US. The effect of these mergers or acquisition will boost their earnings in the current year. Further, Cadila Healthcare set up Zydus Pharmaceuticals USA Inc in US and it also acquired Alpharma France. Cadila also entered into marketing tie-up with global pharma majors such as Schering and Boehringer Ingelheim. Sun Pharma acquired Detroit-based Caraco Pharmaceutical Laboratories. The major MNCs are also merging operations of relatively small entities. GSK is merging Burroughs Wellcome in the current year and Pfizer, after taking over Parke-Davis, is merging Pharmacia Healthcare. Foreign companies are reducing their manufacturing activity and focusing more on cost effective contract manufacturing. The other income of 50 pharma companies moved up by 38.6 per cent to Rs 1096.72 crore from Rs 791.17 crore in the previous year and helped to push overall profitability of the pharma sector. There has been substantial rise in other income of Cadila Healthcare to Rs 71.88 crore (Rs 27.60 crore in the previous year), Dr Reddy's Laboratories Rs 75.74 crore (Rs 46.45 crore), Ranbaxy Laboratories Rs 384.19 crore (Rs 269.98 crore) and Sun Pharmaceuticals Rs 121 crore (Rs 14.52 crore). The other income of MNCs' like Aventis Pharma and GlaxoSmithKline also increased to Rs 15.99 crore and Rs 54.38 crore from Rs 9.79 crore and Rs 42.71 respectively. The raw material cost of 50 companies increased by 15.7 per cent to Rs 12,491 crore from Rs 10,796 crore and employees' cost went up by 15.7 per cent to Rs 2,070 crore from Rs 1,789 crore in the previous year. Staff cost of 10 MNCs declined to Rs 497 crore from Rs 516 crore, however, that of 39 Indian pharma companies went up by 23.6 per cent to Rs 1,573 crore from Rs 1,273 crore. The operating profit before interest, depreciation, exceptional items and taxation moved up by 16.9 per cent to Rs 5,948 crore during 2003-'04 from Rs 5,090 crore in the previous year. However, the operating profit margin i.e. operating profit as per cent of net sales, declined slightly to 22.35 per cent from 23.30 per cent on account of heavy operating losses incurred by Morepen Laboratories and Lyka Labs. Further, the operating profit of Alembic, Dr Reddy's Laboratories Strides Arcolab declined during the year 2003-'04. Morepen Laboratories incurred a heavy operating loss of Rs 165.47 crore during the 18 months period ended September 2003 as against a operating profit of Rs 178.12 crore. Lyka Labs also incurred an operating loss of Rs 9.32 crore as against an operating profit of Rs 33.73 crore. Dr Reddy's operating profit declined to Rs 376.54 crore from Rs 495.44 crore. The reduction in interest rates and restructuring of high cost loans during 2003-04 by companies helped to reduced the interest burden by almost 5 per cent to Rs 552 crore from Rs 581 crore. The interest burden of 39 Indian companies worked out to Rs 546.56 crore as against Rs 574.38 crore in the year 2002-'03 and that of 11 MNCs declined to Rs 5.77 crore from Rs 6.21 crore. There was substantial rise in interest burden of Morepen, Strides Arcolab, Sterling Biotech, Orchid Chemicals, Dishman Pharmaceuticals and Cipla, which put pressure on net profit margins. For instance, the interest cost of Morepen went up to Rs 100 crore from Rs 70 crore and that of Sterling Biotech increased to Rs 49.57 crore from Rs 36.89 crore. Though the overall interest burden of 50 companies came down by 5 per cent, the provision for depreciation increased by 24.6 per cent to Rs 824 crore from Rs 661 crore in the previous year. The net profit before exceptional items and taxation saw a growth of 19.3 per cent, mainly due to reduction in interest cost, to Rs 4,594 crore from Rs 3,851 crore. The net profit of Biocon, Elder Pharmaceutical and Sterling Biotech improved by 248 per cent, 108 per cent and 110 per cent respectively during the year 2003-'04. Further, Cadila Healthcare, Jubilant Organosys, Matrix Laboratories, Nicholas Piramal, Orchid Chemicals and Unichem Laboratories pushed their net profit by over 50 per cent. Click here for Financial Highlights of 50 Pharma Companies It is observed that the exceptional items cut into the net profit as the companies provided more and more funds for VRS, write off of receivables or investments and provision for outstanding. Lupin has provided Rs 50 crore as extraordinary items comprising of write offs taken on certain old receivables and diminution in the value of certain fixed assets. This impacted its net profit, which reduced by same amount to Rs 95.09 crore. The pharmaceutical industry is known for rewarding its investors by declaring higher dividend or bonus shares. Almost all the companies declared higher equity dividend during the year 2003-04. Ranbaxy, Sun Pharma, Cadila Healthcare, FDC, IPCA Laboratories, Jubilant Organosys Abbott India, Aventis Pharma, Burroughs Wellcome, GlaxoSmithKline, Merck and Novartis declared equity dividend of 100 per cent or more. FDC's equity dividend worked out to 225 per cent for the year 2003-04. Further, Alembic issued bonus shares in the ratio of 2:1. Jubilant Organosys, Sun Pharma, Unichem Laboratories, FDC and Wockhardt also issued bonus shares in the ratio of 2:1, 3:5, 1:1, 1:1 and 1:2 respectively. The initial public offers (IPOs) of pharma companies received excellent support from investors. Biocon Ltd, a Rs 500 crore plus Bangalore based company, entered the capital market with a public issue of 100 lakh equity shares of Rs 5 each at a price of Rs 315 for cash. The issue was made through the 100 per cent bookbuilding process. Similarly, Dishman Pharmaceuticals and Chemicals Ltd issued 34.33 lakh equity shares of Rs 10 each at a price brand of Rs 155 to Rs 175 per equity share. Both the issues were oversubscribed by 33 times and 39 times respectively. These two companies shares listed with much higher premium. Relatively new companies like Matrix Laboratories, Divi's Laboratories, Biocon and Dishman Pharmaceutical achieved substantial growth in sales and profits. The net sales of Matrix increased by 34.7 per cent to Rs 537.45 crore and that of Biocon improved by 97.7 per cent to Rs 501.88 crore. Divi's Laboratories' net sales increased by 22.8 per cent to Rs 302.83 crore. Dishman Pharma recorded sales of Rs 128.86 crore during the year 2003-04 as against Rs 108.26 crore in the previous year. The net profit of Matrix, Divi's, Biocon and Dishman went up by 79.4 per cent, 32.7 per cent, 248 per cent and 30.6 per cent respectively. We have omitted Dabaur Pharma Ltd from our study as the company was incorporated during March 2003 and it provided figures only for one year. It has achieved sales of Rs 213.57 crore in its first year of operations and earned a net profit of Rs 13.99 crore. Indian pharma companies, of late, are spending heavily on R&D to meet the new challenges and overcome competition. Ranbaxy is spending over $ 100 million for capacity expansion in the current year. Nicholas Piramal planning investment of Rs 200 crore on R&D and upgradation. Lupin is investing Rs 20 crore in Aurangabad for manufacturing anti-TB products. Ranbaxy is set to launch 20 new products and Lupin is launching herbal products. Dr Reddy launched Iburpofen and Nefazodone in North America. Ranbaxy's US subsidiary received tentative approval from USFDA for manufacture of Auinapril Hydrochloride tablets for hypertension drugs. Indian companies filed around 43 DMFs in the last quarter of 2003-04, which accounts for 22 per cent of total filings. This includes DMFs by Cipla (7 nos), Dr Reddy (5 nos) and Sun Pharma (4). Ranbaxy's 38 ANDAs are pending approvals. Lupin filed 32 patents including 10 finished products. Cadila is planning to launch 16-18 ANDAs in current year Wockhardt also filed 30 DMFs in US. Thus the Indian companies are moving aggressively in developed markets and increasing their market share. The pharma companies are undertaking new molecular research and around 25 to 30 products are in pipeline. These NCE products will be crucial for post-WTO period. Thus the Indian pharma sector has established its brands in the international market with strong support from own R&D activities. The strong financial position, investment in new markets and focus on R&D assisted to the pharma scrips movements on the stock exchanges. Even the returns from the Mutual Fund Units of Pharma Sector improved during 2003-04.The future of the pharma companies, however, to a great extend depend on the government policies such as DPCO, VAT and implementation of new patent law. Click here for Financial Highlights : 2003-04 & 2002-03 Click here for Top earners & loosers among 50 pharma Cos.

 
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