Maharashtra - based pharmaceutical companies are gearing up to tap lucrative international markets like the US, Europe, Japan, besides emerging markets by investments in research, new cost -effective products and tie-ups. These players are building strong product pipeline through higher approvals from regulated authorities.
The overall Indian pharmaceutical segment is dominated by Maharashtra- based entities on account of huge investment in facilities and new technology. Further, these companies are adopting flexibility in operations and restructuring business activities to overcome several odds like competition, slowdown in global economy, expiration of patents, adverse exchange fluctuations and limited success from R&D area.
The listed 50 pharmaceutical companies, with registered office located in Maharashtra, have grabbed the share of 40 per cent in net sales of Pharmabiz sample of major 100 Indian players. The net sales of 50 Maharashtra- based companies increased by 16.6 per cent to Rs 48,695 crore during the year ended March 2012 from Rs 41,747 crore in the previous year. Lupin climbed to first rank by registering strong net sales growth of 22 per cent to Rs 6,960 crore in 2011-12 as compared to Rs 5,707 crore in the previous year. This was followed by Cipla with net sales of Rs 6,808 crore, Wockhardt Rs 4,614 crore and Glenmark Pharmaceuticals Rs 4,021 crore. Strides Arcolab, registered office in Navi Mumbai and corporate office at Bangalore, posted noteworthy sales growth of 48.9 per cent to Rs 2,525 crore with fifth largest company in Maharashtra. There are 12 companies having net sales of above Rs 1,000 crore during 2011-12.
The EBDITA of 50 companies increased by 15 per cent to Rs 10,904 crore from Rs 9,478 crore in the previous year. The interest cost of these companies increased only by 5.3 per cent to Rs 1,363 crore from Rs 1,294 crore and depreciation moved up 20.1 per cent to Rs 1,684 crore from Rs 1,402 crore. The staff cost also increased by 30 per cent to Rs 5,801 crore from Rs 4,834 crore. Profit before tax and adjustment surged to Rs 7,857 crore from Rs 6,782 crore, a growth of 15.9 per cent. The taxation provision of 50 companies increased sharply by 36.1 per cent to Rs 1,981 crore from Rs 1,456 crore, which put pressure on bottom line.
The net profit before adjustments improved only by 10.3 per cent to Rs 5,876 crore from Rs 5,326 crore. These companies incurred foreign exchange loss of Rs 80 crore during 2011-12 as against gain of Rs 162 crore in the previous year. Other adjustments amounted to Rs 910 crore as compared to 701 crore. Thus after providing for taxation and adjustments, the net profit increased only by 2.1 per cent to Rs 4,886 crore from Rs 4,787 crore in the previous year.
The eight multinational companies (MNCs) maintained their contribution of 17 per cent to total net sales of 50 companies during 2011-12. The net sales of eight MNCs, viz, GlaxoSmithKline Pharma, Abbott India, Aventis Pharma, Pfizer, Novartis India, Wyeth, Merck and Fulford (India), increased by 10.5 per cent to Rs 8,270 crore from Rs 7,482 crore in the previous year. The figures are not strictly comparable as Pfizer and Wyeth reported figures for 16 months in the last year. The net profit of eight MNCs amounted to Rs 1,287 crore as against Rs 1,466 crore.
We have not included two pharma majors from Mumbai viz Piramal Healthcare and J B Chemicals in our sample of 50 companies mainly due to significant higher exceptional items recorded in the 2010-11 by selling part of their business activities. Piramal Healthcare sold its formulation business to Abbott and J B Chemicals sold its OTC business and few brands to Jonson & Jonson. Due to sale of business, the financial figures are not strictly comparable with huge exceptional items.
The cash rich Piramal Healthcare Ltd has decided to change its name to Piramal Enterprises Ltd with investments in financial services, Vodafone India and acquisition of Indiareit Fund Advisors & Indiareit Investment Management. Further, the company demerged NCE research unit from Piramal Life Sciences Ltd (PLSL) into Piramal Healthcare during 2012. The NCE R&D unit of Piramal Life Sciences was demerged into Piramal Healthcare and this has created strong pipeline of 17 drugs with 11 drugs in clinical trials phase. The R&D activities are focused on four therapeutic areas viz., cancer, diabetes, inflammation and infectious diseases.
Recently, Piramal Healthcare acquired Decision resources Group (DRG), a US based company in the healthcare information segment for Rs 3,400 crore. With this acquisition, the company will benefit from DRG's stable revenue base of high value offering that enable customers to make fully-informed investments and cost containment decisions in early phase of life sciences life cycle.
J B Chemicals and Pharmaceuticals (JBCPL), a Rs.850 crore plus Mumbai- based pharma major, has sold its Over The Counter (OTC) business in Russia and CIS to the wholly - owned subsidiary of Johnson & Johnson for total consideration of Rs.939 crore. Further, the company has sold its world-wide rights and registrations of three OTC brands viz., Doktor Mom, Rinza and Fitovit to J&J's subsidiary namely Cilag GmbH International for an additional consideration of Rs.6.07 crore.
To cater to the enhance d demand in regulated markets, Maharashtra based pharma companies are investing funds in R&D and expansion. Lupin's revenue expenditure on R&D increased to Rs 523 crore from Rs 483 crore in the previous year and worked out to 7.5 per cent of net sales. It has created one of the best generic product pipelines and has filed 25 ANDAs during FY'12 with the US FDA. The cumulative number of ANDA filings now stands at 173 with 64 approvals received. Lupin received 16 approvals during 2011-12 and it launched 11 products in the US. It entered into the oral contraceptives market. Ipca Laboratories is setting up a new research centre at Kandivli, for biotech research & development activities and also setting up a new R&D centre in Gujarat.
Cipla, the second largest pharma company in Maharashtra, has invested Rs 324 crore in R&D during 2011-12. It's venture into stem cell-based products is under progress with a major investment in Stempeutics Research Pvt Ltd., Bengaluru. Currently, clinical trials for regulatory approvals for certain therapeutic areas are underway in India and Malaysia. The launch of the stem - cell based products is expected in next three years. The company is setting up additional R&D facilities at Vikhroli and Patalganga in Maharashtra. The operations of these units will commence in current year. It is also setting up API facilities at Patalganga, Bengaluru and Kurkumbh with total investment of around Rs 500 crore.
Glenmark Pharmaceuticals has concluded the out-licensing deal with Sanofi for its novel monoclonal antibody for US$ 613 million. It has already received $50 million as an upfront payment. This its sixth out-licensing deal and it has created strong pipeline The company's R&D expenditure increased to Rs 79.65 crore during 2011-12 from Rs 65.92 crore in the previous year.
Ajanta Pharma has also contributed to development of pharmaceutical segment in Maharashtra. Its consolidated net sales increased to Rs 677 crore during the year ended March 2012 from Rs 499 crore in the previous year, a growth of 35.7 per cent. Its net profit also increased by 52.4 per cent to Rs 77 crore from51 crore. Its exports contributed more than 60 per cent to its revenues from emerging markets of Asia, Middle East, Africa and Latin America. The company is now planning an investment of Rs 400 crore to set up two new facilities in next 24 months.
Wockhardt, a debt ridden pharma major, has posted strong performance during the year ended March 2012 and its consolidated net profit went up by 279 per cent to Rs 342.71 crore from Rs 90.52 crore in the previous year. Its EBDITA also improved by 57 per cent to Rs 1,463 crore from Rs 932 crore. The company's consolidated net sales increased by 23 per cent to Rs 4,614 crore from Rs 3,751 crore. With strong improvement in profits, its earnings per share improved significantly to Rs 31.31 from Rs 8.27 in the previous year.
Indoco Remedies, a Rs 550 crore plus pharmaceutical company from Mumbai, has suffered a minor setback in profitability during the year ended March 2012 and its net profit declined by 9.4 per cent to Rs 46.34 crore from Rs 51.12 crore. However, its EBDITA moved up by 23.1 per cent to Rs 86.84 crore from Rs 70.56 crore. The earnings per share worked out to Rs 37.72 as against Rs 41.60 in the last year. The R&D expenditure increased to Rs 10.80 crore from Rs 9.34 crore.
Besides these listed companies, there are several major unlisted and small & medium-scale pharma companies contributing to the growth of pharmaceutical segment in Maharashtra. The overall better infrastructure facilities, connectivity, availability of talent pool and government policies are playing a positive role in development of this segment. However, during last few years several pharmaceutical units moved out of Maharashtra on account of labour problems, power shortage, pollution, real estate rates and lack of tax concessions.