The Indian pharmaceutical segment is going ahead strongly with huge investment in expansion, R&D, aggressive marketing and mergers and acquisitions. The 75 leading pharma companies pushed their top line as well as bottom line during 2005-06 as compared to performance of top 15 international companies. Availability of talent pool, skilled labour, cost effective manufacturing process, cheap raw materials, lower interest rates and strong government support led to improvement in financial performance during the period.
As per the audited/un-audited reports, the net profit of 75 top listed pharmaceutical companies in the country has registered a 27% growth in 2005-06 over the previous year. Continuing investments in cGMP facilities, focus on R&D, thrust on exports and mergers and acquisitions are the main factors that have contributed to this outstanding performance.
During the financial year, the standalone net sales of these companies moved up by 18.4 per cent. The top ten companies in terms of pharmaceutical sales dominated the overall scene by contributing around 50% of aggregate sales of 75 companies.
A study conducted by Pharmabiz on 75 companies for the year FY 2005-06 revealed that the net profit moved up to Rs 5,136 crore from Rs 4,045 crore in the previous year. The net profit margins i.e., net profit as percentage of net sales, improved to 14.2 from 13.3 per cent. The net sales of 75 companies went up by 18.4 per cent to Rs 36,093 crore from Rs 30,478 crore. Except two companies viz., Ranbaxy Laboratories and Krebs Biochemicals, all other companies reported positive growth in net sales during 2005-06. Though, Morepen Laboratories suffered setback, its figures are not strictly comparable on account of different set of year ending period.
The top ten companies in terms of pharmaceutical sales dominate the overall working and their share worked out to around 50 per cent of aggregate net sales of 75 companies and around 55.1 per cent of aggregate net profit. The net sales of top ten companies viz., Ranbaxy Laboratories, Cipla,
Dr Reddy's Laboratories, Lupin, GSK, Aurobindo, Nicholas Piramal, Sun Pharma, Cadila Healthcare and Wockhardt, reached at Rs 17,896 crore during 2005-06 as against Rs 15,180 crore in the previous year, registering a growth of 17.9 per cent. Similarly, their net profit increased sharply by 24.7 per cent to Rs 2,832 crore from Rs 2,271 crore.
The net sales of ten listed MNCs i.e., GSK, Aventis Pharma, Pfizer, Novartis India, Abbott India,AstraZeneca Pharma, Fulford India, Merck, Wyeth and Solvay Pharma, improved only by 9.4 per cent to Rs 5,046 crore during 2005-06 from Rs 4,612 crore in the previous year. Though the sales growth was slow, their net profit moved up by 27.7 per cent to Rs 1,105 crore from Rs 865 crore. This growth is mainly due to sell of fixed assets by the GSK, from which it generated a non-recurring income of Rs 195 crore during 2005-06.Companies like Dr Reddy's Laboratories, Orchid Chemicals, Lupin, Panacea Biotec, etc. raised their net profit by more than 100 per cent during 2005-06. DRL's net profit went up more than 222 per cent to Rs 211.13 crore from Rs 65.46 crore on account of higher exports and reduction in R&D expenditure. Orchid Chemicals' net profit saw a growth of 167 per cent to Rs 82.90 crore and that of Lupin's net profit by 117 per cent to Rs 182.72 crore. Besides these majors, companies like Suven Life Sciences, Ankur Drugs, Surya Pharmaceuticals, Ahlcon Parenterals Venus Remedies, Natco Pharma and Hiran Orgochem achieved excellent growth of more than 100 per cent in bottom line during 2005-06.
However, Ranbaxy Laboratories suffered a major setback during 2005-06 and its net profit declined sharply by 56.2 per cent to Rs 231.42 crore from Rs 528.47 crore. Its net sales also declined by 2.6 per cent to Rs 3405.81 crore from Rs 3497.62 crore. Similarly, Biocon, an Rs 675-crore plus biotech giant received major jolt with fall in net profit to Rs 133.48 crore from Rs 174.39 crore, decline of 23.5 per cent. MNC's like Abbott India, Aventis and Solvay also could not improve their earnings and the same were declined by 42 per cent, 2.3 per cent and 22 per cent respectively.
The net profit of Ipca Laboratories slid by 20.7 per cent to Rs 63.98 crore and that of Ind-Swift went down by 32.1 per cent to Rs 17.64 crore. Some companies like Dabur Pharma, Themis Medicare, Aarti Drugs, Vimta Lab, Ind-Swift Laboratories suffered setback during 2005-06.
RPG Life Sciences turned the corner and earned a net profit of Rs 19.68 crore during 2005-06 as against a net loss of Rs 4.67 crore in the previous year. Kopran and Morepen Laboratories managed to reduce their net losses to Rs 4.23 crore and Rs 23.09 crore respectively. Nicholas Piramal, Glenmark and Divi's managed to achieve nominal growth in profitability. Nicholas' net profit improved marginally by 0.5 per cent to Rs 170.35 crore.
The other income of 75 companies increased sharply by 35.5 per cent to Rs 1848 crore from Rs 1363 crore mainly significant rise in the other income of DRL, Matrix Laboratories, Sun Pharmaceuticals, Aurobindo, GSK, Lupin, Nectar Lifesciences, Novartis and Cipla. The other income of Matrix went up to Rs 158.57 crore from Rs 15.52 crore and that of Sun Pharma increased to Rs 484.34 crore from
Rs 227.71 crore. DRL's other income increased to Rs 132.12 crore from Rs 71.34 crore. Cipla's other income went up by 60 per cent to Rs 131.10 crore from Rs 81.98 crore and that of Lupin's moved up by 286 per cent to Rs 72.51 crore from Rs 18.77 crore.
Ranbaxy's other income declined by 28.6 per cent to Rs 205.85 crore. Wyeth and Abbot India's other income also came down steeply by 74 per cent and 52.8 per cent
to Rs 14.86 crore and Rs 20.30 crore respectively.
The raw material cost after adjusting increase and decrease in stock went up by 21.3 per cent to Rs 17,251 crore during 2005-06 from Rs 14221 crore. With focus on aggressive marketing and R&D, the staff cost of 75 companies increased by 12.8 per cent to Rs 3141 crore from Rs 2785 crore. The pharmaceutical companies managed to keep other expenditure in control during 2005-06. The other expenditure increased by 16.2 per cent to Rs 9647 crore. Thus the total expenditure of 75 companies increased by 18.6 per cent to Rs 30039 crore from Rs 25311 crore in the previous year.
The earnings before interest, depreciation, taxation and extra-ordinary items (EBDIT) increased by 21 per cent to Rs 7902 crore from Rs 6530 crore. DRL, Aurobindo, Lupin Nectar Lifesciences, Panacea and Wyeth reported strong growth in EBDIT but Ranbaxy, Glenmark, Dabur Pharma, Biocon and Abbott received setback during 2005-06. The interest burden went up by 14.4 per cent to Rs 587 crore from Rs 513 crore and depreciation provision increased by 17.5 per cent to Rs 1229 crore from Rs 1046 crore. The profit before tax and extra-ordinary items moved up by 22.4 per cent to Rs 6086 crore from Rs 4971 crore.
Extraordinary income amounted to Rs 229 crore in 2005-06 as against Rs 116 crore in the previous year. Nicholas shown a non-recurring income of Rs 27.96 crore, Ranbaxy Rs 49.10 crore, Unichem Laboratories Rs 11.82 crore and GSK Rs 195.80 crore. Pfizer and Cadila incurred non-recurring expenditure of Rs 11 crore and Rs 23.37 crore respectively. Thus the overall impact of non-recurring items was positive and assisted the growth in net profit during 2005-06.
With the better growth in profitability, several companies recently announced bonus issues and stepped the equity dividend rate. Cipla issued bonus share in the ratio of 3:2, Cadila Healthcare, DRL, Lupin and Torrent Pharma issued bonus shares in the ratio of 1:1. Several companies, especially MNCs, declared hefty dividends to their shareholders. GSK paid equity dividend of 280 per cent, Abbott, 175 per cent, AstraZeneca 200 per cent, Novartis 300 per cent, Aventis 160 per cent and Pfizer100 per cent. Indian companies like Cadila, DRL, JB Chemicals, Jubilant Organosys, Nicholas, Panacea Biotec, Ranbaxy, Sun Pharma Wockhardt and Divi's Lab also declared handsome dividend of 100 per cent or more during 2005-06.
Considering the overall financial performance for 2005-06, the first quarter of 2006-07 will likely to end with better note as the Indian Pharma companies are well set to launch new products in the international market with filing of higher numbers of DMFs and ANDAs. The integration of recently acquisitions by Indian companies is going on and it will help them to boost earnings. The long term outlook seems encouraging with focus on R&D, higher revenues from contract manufacturing and research (CRAMS), mergers and acquisitions and aggressive entry into new markets.to Rs 14.86 crore and Rs 20.30 crore respectively.The raw material cost after adjusting increase and decrease in stock went up by 21.3% to Rs 17,251 crore during 2005-06 from Rs 14221 crore. With focus on aggressive marketing and R&D, the staff cost of 75 companies increased by 12.8 % to Rs 3141 crore from Rs 2785 crore. The pharmaceutical companies managed to keep other expenditure in control during 2005-06. The other expenditure increased by 16.2% to Rs 9647 crore. Thus the total expenditure of 75 companies increased by 18.6% to Rs 30039 crore from Rs 25311 crore in the previous year.
The earnings before interest, depreciation, taxation and extra-ordinary items (EBDIT) increased by 21 per cent to Rs 7902 crore from Rs 6530 crore. DRL, Aurobindo, Lupin Nectar Lifesciences, Panacea and Wyeth reported strong growth in EBDIT but Ranbaxy, Glenmark, Dabur Pharma, Biocon and Abbott received setback during 2005-06. The interest burden went up by 14.4 per cent to Rs 587 crore from Rs 513 crore and depreciation provision increased by 17.5 per cent to Rs 1229 crore from Rs 1046 crore. The profit before tax and extra-ordinary items moved up by 22.4 per cent to Rs 6086 crore from Rs 4971 crore.
Extraordinary income amounted to Rs 229 crore in 2005-06 as against Rs 116 crore in the previous year. Nicholas shown a non-recurring income of Rs 27.96 crore, Ranbaxy Rs 49.10 crore, Unichem Laboratories Rs 11.82 crore and GSK Rs 195.80 crore. Pfizer and Cadila incurred non-recurring expenditure of Rs 11 crore and Rs 23.37 crore respectively. Thus the overall impact of non-recurring items was positive and assisted the growth in net profit during 2005-06.
With the better growth in profitability, several companies recently announced bonus issues and stepped the equity dividend rate. Cipla issued bonus share in the ratio of 3:2, Cadila Healthcare, DRL, Lupin and Torrent Pharma issued bonus shares in the ratio of 1:1. Several companies, especially MNCs, declared hefty dividends to their shareholders. GSK paid equity dividend of 280 per cent, Abbott, 175 per cent, AstraZeneca 200 per cent, Novartis 300 per cent, Aventis 160 per cent and Pfizer100 per cent. Indian companies like Cadila, DRL, JB Chemicals, Jubilant Organosys, Nicholas, Panacea Biotec, Ranbaxy, Sun Pharma Wockhardt and Divi's Lab also declared handsome dividend of 100 per cent or more during 2005-06.
Considering the overall financial performance for 2005-06, the first quarter of 2006-07 will likely to end with better note as the Indian Pharma companies are well set to launch new products in the international market with filing of higher numbers of DMFs and ANDAs. The integration of recently acquisitions by Indian companies is going on and it will help them to boost earnings. The long term outlook seems encouraging with focus on R&D, higher revenues from contract manufacturing and research (CRAMS), mergers and acquisitions and aggressive entry into new markets.