Cadila Healthcare, a Rs 2350 crore plus Ahmedabad based pharma company, ranking currently at 9th among the Indian pharmaceutical companies is set to achieve a sales of over $1 billion (Rs 4350 crore) by 2010. It has set a sales target of over $3 billion (Rs 13,000 crore) by 2015 with spreading of its business operations in highly regulated and semi-regulated markets, higher filings, investment in R&D as well as joint ventures and acquisitions. The company has, however, address issue like stiff competition in generics, adverse exchange rates, price control policy and limited success in R&D output to achieve these targets.

The Cadila Healthcare scrip of Rs 5 is currently moving in the price range of Rs 300-320 on Bombay Stock Exchange (BSE) with market capitalisation of around Rs 4000 crore. The scrip touched to its 52-weeks peak level at Rs 378 in July 2007. Thereafter, with significant volatile movements in capital market, the scrip touched to its lowest level at Rs 202 on January 2008. Now, the scrip is going steadily in upward direction. Currently, promoters hold 72.02 per cent of its total equity capital of Rs 62.80 crore and Indian public is holding only 6.84 per cent. Mutual Funds, Banks, FIs, FIIs, NRI and OCBs are holding remaining share holding of 21.14 per cent.

The company's consolidated net sales for the year ended March 2008 increased by 26.9 per cent to Rs 2266 crore from Rs 1786 crore in the previous year. The international revenues increased to Rs 875 crore from Rs 605 crore and its domestic sales increased to Rs 1489 crore from Rs 1270 crore registering a growth of 44.6 per cent and 17.2 per cent respectively. Exports contribution in total sales improved to 37 per cent in 2007-08 from 32.3 per cent in the last year and contribution of domestic sales went down to 63 per cent from 67.7 per cent. Thus, the company is strengthening its international business through setting up more subsidiaries and joint ventures abroad. There are 18 subsidiaries or joint ventures included in consolidated working during 2007-08.

Cadila has performed well in US market through its subsidiary - Zydus Pharmaceuticals (USA) Inc., despite severe price pressure on account of generic competition. It launched seven new products including paroxetine, amlodipine and day-1 launch of carvedilol. It registered a sales growth of 80 per cent to Rs 257 crore ($64 million) during 2007-08 and earned a net profit of RS 14.2 crore.

The company also established its strong presence in France through its subsidiary Zydus France SAS. The French subsidiary achieved turn the corner in 2007-08 and registered a net profit of Rs 12.9 crore on sales of Rs 164.7 crore with the help introduction of 10 new products. It has fully divested it branded formulations business in the last year to focus more on generic business. Cadila is exporting 18 products manufactured in India to France, accounting for over 20 per cent of the total sales.

Cadila acquired Quimica e Farmaceutica Nikkho do Brasil Ltda (Nikkho) in Brazil during 2007-08 and entered into branded generic market. Cadila has successfully integrated the business operations of Nikkho and achieved revenue of Rs 123 crore with 14 launched products and nearly 50 registered products. Cadila is also intensifying its presence in Japan through acquisition of Nippon Universal Pharmaceuticals Ltd. The company is also registered turnover growth of 8 per cent in Asia Pacific, Africa and CIS markets.

The domestic branded formulations business increased by 13.4 per cent to Rs 1110 crore from Rs 979 crore in 2006-07. It launched 35 new molecules and over 25 line extensions in the domestic formulations market, of which 10 were the first to be launched in India. New products contributed about 3 per cent. Its subsidiary Liva Healthcare, acquired in 2006-07, launched 10 new products in dermatology segment. Cadila is increasing its presence in fast-growing segments of cardiology (CV), diabetology, respiratory and women's healthcare. The sales of CV contributing around 21 per cent and that of Gastroenterology product worked out to16 per cent. Female healthcare product contributed 11 per cent to total sales.

The API business managed a growth of 16 per cent during 2007-08 despite significant price pressure in the domestic and international market. The company developed and manufactured 7 new product, including rimonabant, clinitapride, anegralide and pantoprazole (for captive consumption). It filled 8 new DMFs with US FDA, taking the cumulative filings to 59.

The consolidated net profit improved only by 10.2 per cent to Rs 257.6 crore from Rs 233.8 crore in the previous year, mainly due to higher taxation, provision for VRS and interest burden. The taxation provision went up by 89 per cent to Rs 61.3 crore from Rs 32.4 crore and interest burden increased by 50.2 per cent to Rs 33.5 crore.

The earning per share worked out to Rs 20.50 as against Rs 18.62 in the previous year. The book value improved to Rs 84.57 as compared to Rs 68.91. With small rise in profitability as compared to growth in net sales, the net profit margins declined to 11.4 per cent from 13.1 per cent in the previous year. The returns on capital employed also improved to 20.8 per cent from 20 per cent. The company management stepped up its equity dividend to 90 per cent from 80 per cent paid in the 2006-07.

Cadila has incurred a R&D expenditure of Rs 133.4 crore during 2007-08 as against Rs 134.4 crore in the previous year. This worked out to 6.8 per cent of turnover as against 8.8 per cent in last year. The company filed 18 new ANDAs with US FDA, taking the cumulative ANDA filings to 78, of which 44 are now pending for approval. The company launched only 15 ANDAs out of total approval of 34 ANDAs. The company filled 17 dossiers for new products for the French market.

The company's lead compound ZYH1, for treating dyslipidemia, and ZYI1, for treatment of inflammatory disorders and pain, reached in the phase II clinical trials. Similarly, ZYH2, the lead compound for diabetes is undergoing phase I clinical trials. Its ZYO1, the lead compound for treating obesity and related diseases has completed phase I clinical trials.

Thus, Cadila has improved its overall business during 2007-08 and moving towards its targets of Rs 4350 crore by 2010. However, looking at current slow down in US markets and stiff competition in the generics, the targets look to be at higher side. Unless some major acquisitions or mergers or launch of a blockbuster, this target is difficult to achieve. -API business is also likely to be under pressure for next two to three years. View Table Information