On account of quality problems, competition, forex losses and interest burden, the north- based pharmaceutical companies have failed to generate positive performance during the first nine months ended December 2013 and the year ended March 2013.
The 15 listed pharmaceutical companies incurred a net loss of Rs 2,157 crore as against a net profit of Rs 577 crore in the corresponding period of last year due to heavy setbacks suffered by Ranbaxy Laboratories and Surya Pharmaceutical. The net sales of 15 companies declined by eight per cent to Rs 19,301 crore from Rs 20,932 crore in the similar period of last year.
The 15 North India based pharma companies viz, Ranbaxy Laboratories, Jubilant Life Sciences, Nectar Lifesciences, Ind-Swift Laboratories, Ind-Swift, IOL Chemicals and Pharmaceuticals, Venus Remedies, Parabolic Drugs, Panacea Biotec, Morepen Laboratories, Poly Medicure Jagsonpal Pharma, Ahlcon Parenterals (India), Medicament Biotech and Surya Pharmaceutical have established strong presence in international markets with investment in research and development, expansion and international tie-ups during last couple of years.
Out of the 15 companies, IOL Chemicals, Venus Remedies, Poly Medicure and Ahlcon Parenterals posted growth in profits, but other companies have exhibited poor performance and are passing through a difficult phase. Fresenius Kabi Oncology, a North India based MNC, was delisted from stock markets recently.
The poor financial performance is reflected in share price movements of these companies. The equity capital of these 15 companies stood at Rs 568 crore as at the end of December 2013 and the market capitalization of these companies worked out to only Rs 19,333 crore. The market capitalization of Ranbaxy Laboratories was at Rs 14,677 crore as against its equity capital of Rs 212 crore and that of Jubilant Life Sciences stood at Rs 1,806 crore. The market capitalization of Poly Medicure and Ahlcon Parenterals improved significantly to Rs 951 crore and Rs 324 crore respectively.
These companies witnessed a tough mix of uncontrollable economic variables like rupee depreciation, eroding selling prices of APIs, slowdown in international market, new Drug Price Controlled order and returns from R&D investments, which impacted the overall working. Several companies undertook a financial restructuring with its lenders through CDR mechanism. However, low cost of production, investment in R&D, higher approvals from regulatory bodies, CRAMS, mergers & acquisitions, higher foreign direct investments, patent expiration and diversified portfolio covering major therapeutic segments will boost working in the near future.
The future growth will be driven mainly due to increase in penetration of medical facilities, increase in the prevalence of chronic diseases, rising per capita income and increase in the health insurance coverage.
Though the international companies are trying their best to restrict the entry of generic companies, Indian companies are giving a tough time to competitors by launching generic versions in the market. These companies have strong collaborations and strategic alliances across the business lines with their partners to grab opportunities. Further these companies are investing huge amounts in the R&D activities.
Ranbaxy's standalone R&D expenditure for the 12 months period ended December 2013 declined marginally to Rs 440 crore from Rs 449 crore. Recently it has suffered a major setback as US FDA prohibited it from manufacturing and distributing active pharmaceutical ingredients from its facility in Tonasa.
Panacea Biotec has invested Rs 90 crore on R&D during 2012-13 against Rs 103 crore in the previous year. It has set up a state-of-the-art research centre Laksh, which is dedicated for development of NCEs and small molecules and API research at Mohali, Punjab. The company suffered setback during last couple of years due to delisting of its vaccines from the WHO’s list of prequalified vaccines for supply to UNICEF and other UN agencies. It has taken several corrective measures to ensure compliance with the WHO pre-qualification guidelines.
Ranbaxy net loss at Rs 1012 cr
For the 12 months ended December 2013, Ranabxy's consolidated net sales declined by 12.7 per cent to Rs 10,604 crore from Rs 12,253 crore in the previous year. It incurred a net loss of Rs 1,012 crore as against a net profit of Rs 923 crore mainly due to the provision of Rs 326.94 crore for inventory write off, Rs 119.17 crore for impairment of goodwill and Rs 483.91 crore for loss on foreign currency option derivatives. Further, forex loss amounted to Rs 82.99 crore as compared to Rs 115.17 crore in the previous year. Its EBDITA declined by 52 per cent to Rs 1,066 crore from Rs 2,211 crore. The employees cost increased by eight per cent to Rs 2,080 crore from Rs 1,928 crore and its interest cost went up sharply by 46.1 per cent to Rs 443.69 crore from Rs 303.60 crore. The company extended its year end by three months to March 2014.
Jubilant Life net profit dips
For the nine months ended December 2013, Jubilant Life Sciences' net sales increased by 11.7 per cent to Rs 4,170 crore from Rs 3,733 crore in the corresponding period of last year. Its net profit, however, declined sharply by 94.4 per cent to Rs 10.23 crore from Rs 183.70 crore due to higher exceptional expenditure of Rs 259.88 crore as against Rs 114.30 crore . The tax provision declined to Rs 34.41 crore from Rs 109.51 crore. The interest cost is impacting its profitability significantly and went up by 12.8 per cent to Rs 245.19 crore from Rs 217.81 crore in the same period of last year.
Its pharmaceutical sales increased by 3.2 per cent during the nine months ended December 2013 to Rs 1,956 crore and that of life science ingredients moved up by 22 per cent to Rs 2,218 crore. International sales increased by 15 per cent to Rs 3,162 crore and domestic sales by 6 per cent to Rs 1,074 crore.
Nectar Lifesciences net under pressure
Nectar Lifesciences, a Rs 1,625 crore pharma major from Punjab, has suffered a setback during the first nine months ended December 2013, Nectar's net sales declined by 6.4 per cent to Rs 1,177 crore from Rs 1,257 crore and its net profit declined sharply by 27.7 per cent to Rs 43.38 crore from Rs 60.02 crore. Its interest cost went up by 30 per cent to Rs 105 crore from Rs 81 crore.
Ind-Swift Laboratories pares losses
Ind-Swift Laboratories, a Rs 1,100 crore pharma major from Chandigarh, has reduced its net loss to Rs 30 crore during the first nine months ended December 2013 from Rs 95 crore in the corresponding period of last year due to lower forex loss. The foreign exchange loss declined to Rs 0.59 crore from Rs 31.74 crore. Its interest cost increased to Rs 87.76 crore from Rs 76.48 crore. However, its net sales declined by 15.3 per cent to Rs 730.76 crore from Rs 863.19 crore.For the full year ended March 2013, Ind-Swift registered a net sales of Rs 1,083 crore and incurred a net loss of Rs 119 crore.
Panacea Biotec reduces net loss
Panacea Biotec, one of the leading research based health management companies in India, has managed to reduce its net loss during the nine months ended December 2013 to Rs 34.40 crore from Rs 147.38 crore in the similar period of last year on account of hefty rise in other income and change in depreciation provision method. Its net sales declined by 10.1 per cent to Rs 310.99 crore from Rs 346.05 crore. Its other income went up sharply to Rs 178.17 crore from Rs 2.71 crore. Other operating income declined to Rs 28.35 crore from Rs 59.51 crore.
Its accumulated losses have resulted in erosion of more than 50 per cent of its peak net worth as per SICA provision. It has reported to BIFR its plan to improve financial working during November 2013 and taken further measures to improve its working such as supply to UNICEF, strategic alliances with foreign collaborators for the supply of vaccines and pharma products, corporate debt restructuring proposal and launching of new products with approval of ANDAs.
World Health Organization (WHO) had delisted company's DTP-based combination vaccines from its list of pre-qualified vaccines during September 2011. Panacea made substantive efforts since thenand has revamped the whole Quality Management System at its Lalru and Baddi sites enabling it to get pre-qualified by WHO once again.Recently WHO has pre-qualified company's vaccine product. Further, UNICEF has also awarded supply contract to supply of DTP-HepB-Hib (Pentavalent) vaccine (Easyfive-TT) during period 2014-2016.
Marginal rise in Venus Laboratories net
Venus Laboratories, a Rs 460 crore pharma major from Chandigarh, has improved its working during the nine months ended December 2013 and its net sales improved by 14.2 per cent to Rs 381 crore from Rs 334 crore in the similar period of last year. Its net profit improved marginally by 3.7 per cent to Rs 46.84 crore from Rs 45.19 crore. The company has made inroads into Latin America with its patent protected novel antibiotic adjuvant entity Elores.
Venus received market authorization for its generic broad spectrum antibiotic injectable Meropenem. The company has become the first pharma firm to get marketing approval for Meropenem in Gulf and it has also signed MoU for Elores with South African pharmaceutical firm. The company's medicine research centre has signed an MoU with Baba Farid university to undertake collaborative research projects and academic programmes.