The top 75 pharmaceutical companies in India reported a massive 44.5 per cent growth in net profit and a 23.5 per cent growth in sales during 2006-07. This record growth in profits and sales was achieved during the year on account of their excellent export performance in the highly profitable regulated markets.
The Pharmabiz study has covered all listed pharmaceutical companies having a net sales of Rs 75 crore and more. The growth of Indian pharmaceutical companies is significantly higher as compared to a meager 10.5 per cent sales growth achieved by world's 15 top pharmaceutical companies.
The surge in overseas income is motivating several medium and small scale companies to invest more of their resources to tap future opportunities in CRAMS, clinical trials, biotechnology and novel drug discovery systems in regulated and emerging markets. These companies have filed increasing number of DMFs and ANDAs besides obtaining large number of product approvals from regulatory authorities.
The standalone net sales of 75 companies touched to Rs 46,008 crore during the year 2006-07 as against Rs 37,267 crore in the previous year whereas their net profit shot up to Rs 7,692 crore from Rs 5,325 crore in the previous year.
HIGHLIGHTS OF 75 COs
Ups and down in ranking
A notable feature of the performances of pharmaceutical companies during 2006-07 is that 10 companies of the 75 recorded standalone net sales of over Rs 1,000-crore as per the audited/unaudited financial results. Ranbaxy Laboratories maintained its lead with standalone net sales of Rs 3,925 crore as compared to Rs 3,408 crore in the 2005-06, a modest growth of 15.2 per cent. Dr Reddy's Laboratories (DRL) moved to second spot from third in the last year with net sales of Rs 3,750 crore, a smart gain of over 87 per cent. Cipla's ranking came down to the third spot with nets sales of Rs 3,572 crore. (Though the Jubilant Organosys is appearing in the list with net sales of Rs 1,610 crore, it is not included in ranking as its pharmaceutical sales are only Rs 752 crore during 2006-07).
Aurobindo Pharma moved up to fourth place from sixth place in the previous year with net sales of Rs 1,980 crore. It has overtaken GlaxoSmithKline Pharma (GSK) and Lupin in the 2006-07. The net sales ranking of GSK went down to 8th place from 5th place in the last year as its net sales increased only by 4.6 per cent to Rs 1,552 crore. Sun Pharma has taken over Nicholas Piramal and climbed up to 6th spot from 8th place in the 2005-06. Nicholas Piramal, Cadila Healthcare and Wockhardt has maintained their ranking at 7th, 9th and 10th spots during 2006-07 with net sales of Rs 1,638 crore, Rs 1,414 crore and Rs 1,134 crore respectively.
Ankur Drugs and Sharon Bio Medicine recorded more than 100 per cent growth in net sales to Rs 276.27 crore and Rs 89.11 crore respectively during 2006-07. Even on an annualised basis, net sales of Lyka Labs achieved sales growth of 121 per cent to Rs 121.2 crore. Divi's Laboratories net sales increased by 90.1 per cent to Rs 724 crore from Rs 381 crore.
Similarly, Panacea Biotec, Nectar Lifesciences, Venus Remedies and KDL Biotech achieved net sales growth of 55 per cent, 60.6 per cent, 53.5 per cent and 74 per cent respectively.
Consolidated vs Standalone
The mergers and acquisitions, joint ventures and alliances have all worked well for the pharma companies during 2006-07. In the consolidated working, DRL climbed up on No one position with net sales of Rs 6,435 crore, a significant growth of 174 per cent due to acquisition of Betapharm of Germany. Ranbaxy's consolidated sales increased by 16.3 per cent to Rs 6,143 crore from Rs 5,282 crore in the previous year. Cipla's consolidated and standalone net sales remained same as the company do not have any subsidiary or acquisition during 2006-07. Nicholas Piramal consolidated net sales reached at Rs 2,472 crore, with ranking at fourth place, from Rs 1,594 crore in the previous year.
The consolidated net sales of leading 20 companies from Pharmabiz sample of 75 companies went up by 38.8 per cent to Rs 41,065 crore from Rs 29,580 crore in 2005-06. The consolidated net profit of these companies moved up by 58.3 per cent to Rs 5,963 crore from Rs 3,766 crore in the previous year. The standalone net sales of top 20 companies increased by 24.9 per cent to Rs 30,492 crore and net profit by 52.3 per cent to Rs 5,628 crore. This shows that the consolidated working is stronger than the standalone working as acquisitions contributed significantly.
Multinationals moving slowly
The performance of multinational companies (MNCs) was not upto the mark during 2006-07 and was very slow as compared to Indian pharma companies. The Pharmabiz sample of 75 companies includes 11-listed MNCs. Recently, Matrix Laboratories became MNC as Mylan of USA has acquired majority shareholding in the company. The net sales of 11 MNCs namely Abbott India, AstraZeneca Pharma, Aventis Pharma, Fulford (India), GSK, Matrix Laboratories, Merck, Novartis India, Pfizer, Solvay Pharma and Wyeth increased only by 6.4 per cent to Rs 6,078 crore from 5,713 crore.
The MNCs net sales worked out to 13.2 per cent of the total sales of 75 companies during 2006-07 as against 15.3 per cent in the previous year. GSK remained as leading MNC with net sales of Rs 1,553 crore followed by Aventis Pharma at Rs 884 crore, Matrix Laboratories at Rs 750 crore, Pfizer at Rs 662 crore and Novartis India at Rs 542 crore.
Strong growth in profitability and margins
The other income of 75 companies increased by 22.9 per cent to Rs 2,327 crore from Rs 1,893 crore in the previous year. The raw material cost and staff cost increased by 19.6 per cent and 22.6 per cent to Rs 21,360 crore and Rs 3,922 crore respectively. Other expenditure including, selling, marketing and administration went up by 17 per cent 11,549 crore from Rs 9,873 crore. The profit before interest, depreciation, taxation and other non-recurring items (EBDIT) moved up by 39.9 per cent to Rs 11,504 crore. This is despite higher spending on R&D by several companies. EBDIT margins improved during the year to 25 per cent as against 22.1 per cent in the 2005-06.
Important companies like DRL, Aurobindo Pharma, Divi's Lab, Panacea Biotec, Glenmark Pharma, Ankur Drugs and SMS Pharmaceuticals contributed largely to bottom line with a growth of over 100 per cent. The net profit margins also improved to 16.7 per cent from 14.3 per cent.
DRL's net profit went up sharply by 457 per cent to Rs 1,177 crore during 2006-07 from Rs 211 crore in the previous year. Similarly, the net profit of Aurobindo increased by 230 per cent to Rs 302 crore from Rs 183 crore. Glenmark, with net sales of Rs 803 crore, achieved 100.3 per cent growth in net profit and the same touched to Rs 134.80 crore. Divi's Labs recorded handsome gain of 140.9 per cent in net profit. Ankur Drugs and SMS Pharma, relatively small companies, have put up impressive show.
There are several companies achieved net profit growth of over 50 per cent during 2006-07 which includes Ranbaxy (72.8%), Lupin (65.3%), Jubilant Organosys (66.8 %), IPCA Laboratories (91 %) , Torrent Pharmaceuticals (71.6%), Pfizer (55.2%), Elder Pharma (54.8%), Nectar Lifesciences (83.8%), Merck (69.2%), Plethico Pharmaceuticals (53.3%), Parenteral Drugs(71.8%), Wanbury (94.1%), Venus Remedies (74.8 %), Albert David (77.8 %) and Vinati Organics (80%).
Few companies, with net sales of above Rs 500 crore, like Wockhardt, Matrix Laboratories, Alembic and Novartis India received a setback during the year 2006-07. For instance, Wockhardt's standalone net profit declined by 10.4 per cent to Rs 213.55 crore from Rs 238.47 crore and that of Matrix moved down by 45.4 per cent to Rs 99.61 crore. Stride Arcolab, Ind-Swift Laboratories, FDC, Marksans Pharma, Hikal, Fulford (India), RPG Lifescience Mangalam Drugs and Bal Pharma also received setback during the year 2006-07. Lyka Labs, Morepen Laboratories, Kopran and KDL Biotech are still in red and there net losses increased significantly.
Positive trend in export earning
Despite stiff competition in the international market, especially in the US, Indian leading pharma companies recorded higher export earning during 2006-07. Though the export data is not available for all the 75 companies yet, the trend is positive. Ranbaxy's exports went up 16.7 per cent to Rs 2,704 crore, Aurobindo's by 34.2 per cent to Rs 1,095 crore, and Lupin by 22.6 per cent to Rs 1,128 crore. Sun Pharma's exports has taken a quantum jump of 39.2 per cent and touched to Rs 969 crore from Rs 696 crore. Nicholas, Wockhardt, Matrix and Indoco Remedies achieved significant improvement in the export earnings.
Spurt in R&D Activities
During the year under review and earlier, the Indian companies have created the ability to develop new cost effective product in the International markets. More and more companies are entering collaboration with multinational companies in the field of R&D, marketing and manufacturing. The R&D expenditure of DRL went up to Rs 245.71 crore from Rs 172.54 crore in the previous year. Lupin has stepped up its R&D activities and invested Rs 136 crore as against s 103 crore. Sun Pharma, which has recently demerged its R&D into the separate company, incurred R&D expenditure of Rs 154 crore as compared to Rs 113 crore. Wockhardt pushed its R&D expenditure to Rs 127.86 crore from Rs 81.08 crore and that of Torrent Pharma increased to Rs 73.96 crore from Rs 56.42 crore. The Indian companies are filing higher number of DMFs and ANDAs in the US and Europe with the help of own R&D activities. The rising costs of NCE research and stringent approval process are attracting global pharmaceutical companies to partner with Indian companies.
The mergers and acquisition activity is gaining ground and the consolidation of operations will be crucial for future growth. The size and entry into the markets will able to give necessary push for growth. The acquisition by Ranbaxy , Sun Pharma, Wockhardt, Jubilant Organosys, Glenmark and Zydus Cadila during 2007 of Be-Tabs Pharma, Taro Pharmaceutical, Negma Labs, Holister Steir, Medicamenta and Nippon Universal Pharma respectively will start yielding results in the current year. The fast integration of activities of merged company will assist for early rewards.
However, lack of clarity in the Government policy regarding price control and other issues is putting some pressure on pharmaceutical segment. The rupee appreciation during 2007 may impact adversely in the current year. The Pharma companies are taking proper care of their shareholding by rewarding them in the form of dividend or bonus shares. Despite better financial performance the pharma shares price movement is under pressure and the BSE Healthcare Index has underperformed as compared to BSE Sensex.
Leading 75 pharma companies