With stagnant sales during last couple years on account of stringent actions by US FDA against major players, higher input costs, introduction of DPCO and volatile exchange rates, North India listed pharmaceutical companies are facing a rough weather.
However, through a well-defined R&D strategy, few players are gearing up to overcome challenges by strengthening research and innovation capabilities, entry into new geographies and change in organisational structure.
The major listed players having registered office in North India like Ranabxy Laboratories, Jubilant Life Sciences, Panacea Biotec, Nectar Lifesciences, Ind-Swift Group, Venus Remedies, Parabolic Drugs, Morepen Labs and Surya Pharmaceutical suffered setbacks during last couple of years. Ranbaxy Laboratories, Jubilant Life and Panacea faced headwinds from western regulatory authorities over quality. Ind-Swift Group consisting of Ind-Swift Laboratories and Ind-Swift Ltd were hit by stagnant sales. Venus Remedies, Parabolic Drugs and Surya Phama suffered heavy interest burden.
The investors are getting lower returns from these companies in the form of dividend or market price movements. The share prices of all these companies, except Ranbaxy and Poly Medicure, are hitting the nadir.
With sluggish financial performance, the market capitalisation of these companies has come down heavily on Bombay Stock Exchange and institutional as well as retail investors lost heavily. The leading10 pharma companies, with net sales above Rs 150 crore during six months ended September 2014 clocked only 1.3 per cent growth in net sales to Rs 11,088 crore from Rs 10,951 crore in the corresponding period of last year. However, due to lower provision for adjustments and forex losses , the net profit worked out to Rs 123 crore as against loss of Rs 1,297 crore. Even the performance of nine months of few companies was subdued and this trend is likely to continue in the current quarter.
Ranbaxy Laboratories
Ranbaxy Laboratories, a major multinational company under the control of Daiichi Sankyo of Japan, is set to merge with Sun Pharmaceutical Industries in the current quarter. Recently, the U.S. Federal Trade Commission (FTC) completed its review of the proposed acquisition of Ranbaxy by Sun Pharma and granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). Indian institutions and share holders have already offer sanction for the proposed merger. Despite quality problems, Ranbaxy's market capitalization worked out to Rs 30,435 crore mainly due to merger plans.
Ranabaxy's consolidated net sales remained almost stagnant at Rs 8,178 crore during the first nine months ended December 2014 as against Rs 8,193 crore in the corresponding period of last year. It has reduced its net loss at Rs 738 crore from Rs 1,137 crore despite higher interest and tax provision. Its tax provision increased to Rs 968 crore from Rs 186 crore and interest burden burden increased to Rs 427 crore from Rs 391 crore. Its exceptional items in respect of settlement provision, inventory write off, impairnment of goodwill and forex loss amounted to Rs 243 crore as against Rs 1,012 crore in the similar nine months of last year.
“Ranbaxy recorded good growth in India, Russia, APAC and LATAM during the quarter. However, overall sales were impacted by global currency depreciation in some markets. During the quarter, we introduced India's First New Chemical Entity (NCE), Synriam in Africa which is a new and convenient therapy option for patients suffering from malaria.” Arun Sawhney, CEO and managing director, pointed out at the time of announcement of financial performance of the company.
Commenting on the merger with Sun Pharma, Sawhney said, “The merger process is progressing well and we are working towards the completion of the pre-requisites.”
Jubilant Life Sciences
Jubilant Life Sciences, the second largest pharma company in North India failed to improve its performance. For the nine months period ended December 2014, its consolidated net sales improved only by two per cent to Rs 4,253 crore from Rs 4,170 crore in the similar period of last year. However, its net loss touched Rs 100 crore as against a net profit of Rs 10 crore in the last period.
Its pharmaceutical sales declined by 5.1 per cent to Rs 1,920 crore from Rs 2,023 crore and that of Life Sciences ingredients improved by 6.9 per cent to Rs 2,374 crore from Rs 2,221 crore. Pharma sales contributed 45 per cent to revenue mix. Its domestic sales increased by 16 per cent to Rs 1,248 crore from Rs 1,074 crore and its international sales declined by 4 per cent to Rs 3,42 crore from Rs 3,167 crore. Its US sales declined by five per cent to Rs 1,570 crore from Rs 1,650 crore and that of China went down by 19 per cent to Rs 281 crore from Rs 347 crore. Its sales in Europe and Japan declined by one per cent to Rs 891 crore from Rs 904 crore.
Shyam Bhartia, chairman & managing director and Hari Bhartia, co-chairman and managing director, said, “We are happy to report that our overall business performance is showing signs of recovery, post the challenges of last six months. Some of the key businesses witnessed healthy profitable growth from the preceding quarter, led by growth in our radiopharmaceutical business and resumption of operations in CMO business. Our management consolidation of pharmaceuticals and life science ingredients segments is complete with the appointment of separate CEOs to focus on growth in the respective segments. The acquisition of the minorities stake in Jubilant Cadista will help us in consolidating the US generic business.”
Ind-Swift Laboratories
The company had a major setback and its net sales declined sharply by 31.7 per cent during the nine months period ended December 2014 to Rs 499 crore from Rs 731 crore. Its net loss went up to Rs 48.25 crore from Rs 30.02 crore. Interest burden worked out to Rs 88 crore. The company has restructured its fixed deposit scheme and it received extension of time in repayment of these deposits. Few of the fixed deposit holders have approached the court for the repayment of their fixed deposits. Thus the company is passing through a difficult time and the same trend is likely to follow in current year.
Poly Medicure
Poly Medicure, a Rs 300 crore plus medical equipment manufacturing company from New Delhi, has posted improved performance during the nine months ended December 2014. Its net sales improved by 21 per cent to Rs 271 crore from Rs 224 crore in the similar period last year. Its net profit went up sharply by 53.1 per cent to Rs 49 crore from Rs 32 crore. EPS worked out to Rs 22.18 as compared to Rs 14.36 in the last period.
Nectar Lifesciences
Nectar Lifesciences, a Rs 1,700 crore pharma giant from Punjab posted satisfactory financial performance during the first nine months of 2014-15 and its net profit surged by 14.2 per cent to Rs 49.55 crore from Rs 43.38 crore in the similar period of last year. However, its sales improved only by 3.6 per cent to Rs 1,219 crore from Rs 1,177 crore.
The market capitalization of Nectar worked out to Rs 747 crore as its share price s moved in the range of Rs 30-35 on BSE. The company has spend only 3.3 per cent of its sales on R&D during 2013-14. The company has filed 36 DMFs in highly regulated markets. Further it filed 3 more ANDAs with US FDA making the total ANDA submissions to 12 ANDAs.
The company sells a comprehensive range of cephalosporin's and Phytochemicals and is engaged in contract manufacturing of APIs for major pharma players. Its domestic sales reached Rs 960 crore during 2013-14 and its international sales reached Rs 749 crore.
Panacea Biotec
Panacea Biotec failed to improve its bottom line during the nine month period ended December 2014 and its net loss amounted to Rs 33.85 crore as against Rs 34.40 in the corresponding period of last year. It's net sales, however, went up sharply by 36.8 per cent to RS 425.28 crore from Rs 310.99 crore. Its vaccines sales has taken a quantum jump of 129 per cent to Rs 144.38 crore from Rs 62.98 crore. However, it incurred a net loss before interest and tax of Rs 21 crore from vaccines segment. The company significantly reduced its interest burden to Rs 48.19 crore from Rs 108.73 crore. Its market capitalization worked out to Rs 801 crore with share price of Rs 130-132.
The company has played a key role in the polio eradication programme by supplying around 10 billion doses of safe and efficacious oral polio vaccines to government of Indian and through UNICEF in India and abroad in the last 25 years. During the year 2011, it lost its coveted WHO PQ status and suffered heavy setbacks.However, it received approval for pentavalent vaccine (Easyfive-TT) during October 2013 and also received a long-term supply award from UNICEF for period 2014-16 and the supplies have already been initiated early 2014.
Parabolic Drugs
Parabolic Drugs posted unsatisfactory performance during the first nine months ended December 2014 and its net loss increased to Rs 91 crore from Rs 71 crore in the same period last year. Its net sales also declined sharply by 35.8 per cent to Rs 212 crore from Rs 331. Its interest burden worked out to Rs 56 crore and the company will not be able to declare any dividend to its shareholders.
Parabolic Drugs suffered losses during the last couple of years due to declining sales and higher interest burden. It went into short term liquidity issues, and had therefore applied for corporate debt restructuring. The lower selling prices of APIs, slowdown in the domestic & world economy at large and competition put pressure on the company.