Top 50 pharmaceutical companies in the country have achieved a standalone net profit growth of 27 percent and a sales growth of 22 percent during the first half of the current year despite tough international competition and strengthening of rupee according to a study by Pharmabiz.
Going by the performance so far in the current year, Indian pharma companies should record a growth of over 20 percent in revenues and profitability during the whole of current year. The companies with high exports to the US and European markets may still suffer on account of rupee appreciation against US dollar during the remaining part of the year.
The Pharmabiz sample of 50 companies notched up net sales of Rs 18,895 crore during the first half ended September 2007 as against Rs 15,543 crore in the corresponding period of last year. Similarly, the net profit touched to Rs 3,244 crore as compared to Rs 2,553 crore in the same period of last year. The net sales for the full year ended March 2007 of these 50 companies reached at Rs 33,126 crore and the net profit amounted to Rs 5,594 crore. Considering the revenues and net profit of first half, these companies will easily surpass the last year's figures in the current year.
The Pharmabiz sample has not included some important companies like Ranbaxy Labs, Wockhardt, Stride Acrolab, Sterling Biotec and MNC like GSK, Aventis, Pfizer, Abbott, Merck, AstraZeneca, Fulford and Solvay as their financial year ends in November- December. The net sales of these 12 companies for the first nine months ended September 2007 improved by 6 per cent to Rs 8,490 crore from Rs 8,011 crore in the similar period of last year. The net profit,however, jumped by 36 per cent to Rs 1,978 crore. For the full year 2006, these companies recorded net sales of Rs 10,617 crore with a net profit of Rs 1,859 crore. The growth in profit of these companies marked mainly due to huge gain on selling of assets.
Among the 50 companies, the standalone performances of top companies like Cipla, Dr Reddy's Labs and Nicholas Piramal were disappointing with a fall in net profit of 11.5 per cent, 33.1 per cent and 2.3 per cent respectively in the first half of 2007-08. The net sales of DRL and Nichols improved only by single digit to 2.6 per cent and 9.9 per cent. However, Cipla's net sales increased by 14.1 per cent to Rs 2000 crore from Rs 1753 crore and reached on top.
The net profit of companies like Lupin, Aurobindo Pharma, Jubilant Organosys, Glenmark and Orchid Chemicals increased in the range of 75-170 per cent and that of Sun Pharma and Ipca Laboratories increased by 34-36 per cent. Relatively small companies, with net sales in the range of Rs 100-500 crores, also reported improved working. For instance, Nectar Lifesciences, Surya Pharmaceuticals, Themis Medicare and Parenteral Drugs reported net profit growth of 70-90 per cent during the first half and set to achieve further improvement in the current year. Nectar Lifesciences was the star performer during the first half with significant growth of over 100 per cent in net sales and net profit. Its net sales increased by 133.8 per cent to Rs 353.53 crore and net profit by 116.1 per cent to Rs 41.30 crore.
Few companies like Panacea Biotec, Unichem Laboratories, FDC, J B Chemicals, Shasun Chemicals and Wyeth failed to improve net profit. Panacea's net profit declined by 17.6 per cent to Rs 79.33 crore from 96.29 crore and that of Unichem Lab's moved down by 13.9 per cent to Rs 43.78 crore. Panacea's net sales remained almost stagnant during the first half at Rs 409 crore and its other income decreased to Rs 17.48 crore from Rs 25.67 crore.
The other income of 50 companies increased by 32.5 per cent to Rs 1137.11 crore during the first half of 2007-08 from Rs 858.21 crore in the corresponding period of last year. Sun Pharmaceutical's other income reached at Rs 452.77 crore from Rs 348.95 crore, a growth of almost 30 per cent.
Similarly, other income of Aurobindo went up to Rs 70.56 crore from Rs 15.88 crore and that of Cipla's increased to Rs 60.36 crore from Rs 40.94 crore. Jubilant Organosys' other income went up sharply to Rs 121.50 crore from Rs 19.80 crore. However, DRL's other income declined sharply to Rs 147.78 crore from Rs 183.76 crore and Lupin's to Rs 32.75 crore from Rs 47.32 crore.
The raw material cost of 50 companies increased modestly by 23.1 per cent to Rs 9001.53 crore during the first half ended September 2007 from Rs 7314.86 crore in the same period of last year. The aggregate staff cost of these companies increased by 32.8 per cent to Rs 1734.49 crore from Rs 1306.23 crore in the last period. The staff cost of Dishman moved up by 250 per cent to Rs 95.89 crore from Rs 27.38 crore and that of DRLs increased by 60.3 per cent to Rs 158.46 crore from Rs 98.88 crore. Lupin and Nector also incurred substantial higher staff cost during the period.
The operating profit, before interest, depreciation, taxation and adjustments, increased by 18.8 per cent to Rs 4638.84 crore from Rs 3903.71 crorein the corresponding half of previous yer. The operating profit of Panacea, Aarti Drugs, Cipla, DRL, FDC, JB Chemicals and Neuland declined, but that of Glenmark, Jubilant, Lupin, Nectar, Sun Pharma, Surya, Wanbury, Biocon, Aurobindo, Ind-Swift Laboratories, Hikal,Venus Remedies and Hester, moved up over 30 per cent during the first half.
The tax provision of 50 companies reached at Rs 588.20 crore during the first half of 2007-08 from Rs 506.54 crore. The aggregate adjustment regarding extra-ordinary items added Rs 193.05 crore mainly from the Dabur Pharma and Orchid Chemicals. Dabur Pharma has sold its non oncology business and shown extra-ordinary gains of Rs 125.35 crore during the first half. Similarly, Orchid has reported exchange gain on outstanding FCCBs of Rs 72.62 crore.
Thus, the overall standalone performance of 50 leading Indian companies has improved during the first half of 2007-08. Several pharma companies are now de-merging R&D activities into the separate entities and likely to reduce burden of R&D investment on bottomline in the current year. With the better approval rate from the US FDA and European Union authorities, several companies are well set to enter highly regulated market in the remaining part of the current year. Easy availability of funds for expansion at reduced interest cost will help them in coming years. Though the standalone performance of 50 companies improved during the first half, the consolidated figures are not showing similar trend basically due to rupee appreciation and higher cost of approval and selling in the regulated markets.