The export growth of Indian pharmaceutical sector has declined by more than 50 per cent during 2007-08 due to stiff competition in the major regulated markets of the US and Europe and also because only a few products got 180 days market exclusivity in the US as compared to 2006-07. A Pharmabiz study of the export earnings of 30 leading pharmaceutical companies on FOB basis showed an increase of 17.8 per cent during 2007-08 as against a growth rate of 37.9 per cent achieved in the previous year. Steady appreciation of rupee during last year also impacted the export earnings.
The export growth in pharmaceuticals is set for a further fall in the current year as the recession is gripping the highly lucrative western markets. Stringent approval norms in the US and Europe and the US FDA action against 31 products of Ranbaxy Labs have shaken up the confidence of Indian pharma companies.
Sujay Shetty, associated director- Pharmaceutical of Price Waterhouse, pointed out that the higher demand for generics in global market and the rupee depreciation in the last two months could be positive factors for Indian exports. The US FDA decision regarding Ranbaxy product quality may not affect the overall prospects of Indian exports that seriously. A possible victory of Democratic party in the forthcoming election in the US may give further push to demand for generics in future. He added that only factor negative for the Indian export is erosion of price worldwide.
The value of exports on FOB basis of 30 pharma companies reached at Rs 20,619 crore during the year ended March 2008 from Rs 17,498 crore in the previous year. The export earnings during 2006-07 went up sharply by 38 per cent from Rs 12,694 crore in the 2005-06 mainly due to setting up of subsidiaries in foreign countries. Indian pharmaceutical companies continue to aggressively enter into regulated as well as emerging markets with the help of cost effective, R&D-based quality products.
The Pharmabiz study of 30 major pharma companies, with exports earnings of over Rs 100 crore or more during 2007-08, shows that exports as a percentage of standalone net sales improved to 52 per cent as compared to 51.8 per cent in the previous year and 47.8 per cent in the 2005-06. The standalone net sales of 30 companies improved by 17.5 per cent to Rs 39,656 crore during 2007-08 from Rs 33,751 crore. The standalone net sales were up by 25.4 per cent in 2006-07 from Rs 26,924 crore. Thus the net sales growth in 2007-08 has also been slow as compared to 2006-07.
The exchange rate of rupee against US dollar was at Rs 43.33 as at the end of 2006-07 and the same was at Rs 39.90 as at the end of 2007-08. At the end of September 2008, the exchange rate was at Rs 47.35 per dollar. So this will have positive impact on export earnings in the current year provided the export demand is not hit.
However, despite all odds, the Indian companies are set to grab opportunities coming up with the expiration of patents of several blockbusters in the coming years. Besides patent expiration, increasing number of chronic diseases in underdeveloped markets, rising demand for generic drugs globally, out licensing, clinical trials, CRAMS and R&D activities should also give necessary boost to Indian exports. Additionally, every player is entering international markets aggressively by setting up subsidiary companies or spreading their presence through mergers and acquisitions.
Currently, Indian pharmaceutical industry is a net foreign exchange earner with its export earnings being higher than their import value. The imports of 30 companies increased by 15.3 per cent to Rs 7,779 crore from Rs 6,747 crore in the previous year.
Except a few major companies like Ranbaxy Laboratories, Dr Reddy's Laboratories, Panacea Biotec, Stride Arcolab and Unichem Laboratories, others have achieved strong export growth during 2007-08. Glenmark Pharmaceutical remained as a star performer among 30 top exporting companies with export growth of 123 per cent in 2007-08 and 116 per cent in 2006-07. The company's export earnings on FOB basis touched to Rs 677.41 crore as against Rs 303.76 crore in the previous year. Its export earning in 2005-06 was only Rs 140.81 crore.
Similarly, Nectar Lifesciences notched up sustained export growth of 116 per cent at Rs 384.20 crore as compared to Rs 177.81 crore. The company posted export growth of over 279 per cent in 2006-07. Sun Pharmaceutical, Piramal Healthcare, Plathico Pharmaceuticals and Alembic achieved better export growth of above 50 per cent in 2007-08. Lupin's exports went up by 46.1 per cent to Rs 1355 crore from Rs 928 crore in the previous year. Cadila also strengthen its international market operations and notched up export growth of 48.1 per cent.
Glenmark with standalone net sales of Rs 1,325 crore plus, has marching ahead in the international market with impressive export growth. Within a short span, the company's exports contributed over 50 per cent to its net sales. Now it has initiated steps to focus on exports by implementing the re-organisation of its business into Specialty and Generic. The reorganisation process was initiated in third quarter of 2007-08 and company's export earnings as per cent of standalone net sales moved up to 50.6 per cent from 39.8 per cent in the previous year. In 2005-06, its exports were contributing only 26 per cent in its net sales.
The company is currently marketing its products in 95 countries. Glenmark put up its first commercial foothold in Europe by acquiring Medicamemnta a.s. Czech Republic in 2007. The company entered in new markets like Romania, Bulgaria and Poland. It has set up its operations in Australia, China, Thailand and Egypt and now entering into Hungary and Turkey markets. Glenmark is marketing finished dose formulations in USA, Europe and Argentina, and APIs is in over 80 countries. The company is set to export products worth US$ 200 million in the current year.
Glenmark is earning higher revenues by out licensing molecules in US, Europe and Japan. The company received payment of US$ 15 million from Forest Labs, North America for its GRC 3886 molecule. The company entered strategic deal worth US$ 350 million with Eli Lily for developing and marketing GRC 6211. Its GRC 4039 molecule has entered phase-I trials and likely to undertake phase-II trials by January 2009.
Nectar Lifesciences is a leading manufacturer of cephalosporins and phytochemicals with a growing presence across 50 nations. It is managing its business through 11 world-class facilities across three locations. The company is now investing Rs 70 crore in setting up US FDA compliant facility to be commission in the current year. The management is taking steps to commercialise eight-nine oral cephalosporin products in next two years.
Dr Reddy's Laboratories, which achieved an export growth of 138 per cent during 2006-07, failed to maintain the trend during 2007-08 mainly due to non exclusivity of 180-days in US. Due to this its sales in North America declined sharply to Rs 802 crore from Rs 2362 crore. Further, its European revenue improved only by 1.2 per cent to Rs 972 crore. In 2006-07, DRL launched Simvastatin and Finasteride as authorized generics of Merck's Zocor and Proscar in USA and it got 180-days exclusivity launch of Ondansetron, the generic version of Zofran, and Fexofenadine, the generic version of Allegra.
Ranbaxy Laboratories, now under the fold of Daiichi Sankyo of Japan, has also suffered on export front during 2007-08 and its exports declined by 2.8 per cent to Rs 2,517 crore from Rs 2,589 crore in the previous year. However, its total global sales recorded a robust growth of 21 per cent and exceeded US $ 1.6 billion in 2007. The contribution of exports in standalone net sales moved down to 57.9 per cent in 2007 from 65.3 per cent in the last year. The company's business in North America and Canada constituted 26 per cent of its global revenue. Its sales in this region increased by 7 per cent to Rs US$419 million in the year ended December 2007. The company is marketing 54 molecules in diversified formulations and it launched 11 new FDA approved formulations during 2007.
Ranbaxy acquired a total of 13 established dermatology brands from Bristol Myers Squibb during 2007 and re-launched under its label with a renewed and expanded marketing effort. It also acquired Be-Tabs in South Africa during 2007. The company completed three major litigation settlements with innovator companies on Para IV FTF products and launching Sumatriptan in 2008, Valacyclovir in 2009 and Tamsulosin in 2010, on exclusive basis. The company has strengthened its European operations and pushed its sales by 24 per cent to $ 365 million. It launched 8 new products in UK.
The export performance for the April -June quarter of 2008 for a few companies looks to be better, but rest of the current year appears to be gloomy due to the global financial crisis. DRL has increased its global generic business by 25 per cent to Rs 1,030 crore in the first quarter from Rs 830 crore in the corresponding period of last year mainly because of growth in revenues from North America, Russia and Germany. Its revenues from North America increased by 62 per cent, mainly driven by a combination of volume growth in key existing products, new product launches in the last 12 months and acquisition of Shreveport facility. North American revenue reached at Rs 280 crore as against Rs 180 crore and that in Europe increased to Rs 290 crore from Rs 260 crore. The company filed 4 ANDAs taking the total filings to 126 and 72 ANDAs awaiting US FDA's approvals.
Ranbaxy's sales in the US & Canada increased by 18 per cent to $120 million during the quarter ended June 2008. Its sales in USA recorded 12 per cent growth at $ 106 million. Volume growth, contribution from new products introduced during the year and a robust performance from the branded business led to an overall improved performance. The overall market share in the US generic market was 10.3 per cent. During the quarter ended June 2008, Ranbaxy entered into a strategic Product Development Agreement with Merck & Co, Inc, in the therapeutic area of anti infectives.
The revenues from speciality business, including out licensing revenues, declined marginally by 2.3 per cent to Rs 225.85 crore during the first quarter ended June 2008 from Rs 231.05 crore due to decline in primary sales in Latin America, Africa, Asia and CIS region. The secondary sales growth in these markets continues to be above 40 per cent as per third party data sources. The company received 4 ANDA approvals in this quarter and expect another 4-5 in the second quarter.
During the first quarter of 2008-09, Cipla's domestic sales grew by about 16 per cent and export sales grew by 50 per cent. This was mainly due to a 117 per cent growth in export of bulk drugs, intermediates and chemicals as well as a 32 per cent growth in formulations.
Thus the overall export performance remained strong during the quarter ended June 2008. According to analysts, the Indian companies will maintained the export growth at previous level during the first half of the current year, but they are not optimistic about the second half. View Table Information