The Maharashtra-based companies, playing a dominant role in the Indian pharmaceutical scene, are forging ahead with a focus on highly regulated market and emerging markets. Huge investments in research and development and world class cGMP facilities leveraging on CRAMS income, in-licensing, partnerships, acquisitions & mergers, thrust on biotechnology as well as clinical trials have played an important role in their growth. With better infrastructure facilities, favourable industrial policies and easily available talent pool, these pharma companies have created a strong brand image in the international market.
Almost all the MNCs have established their presence in the state and new MNCs are likely to enter in Maharashtra with partnership in R&D or marketing. Out of 13 MNCs in India, nine MNCs have established strong presence in Maharashtra. However, Indian companies are giving a tough time to MNCs on account of size of their manufacturing facilities. The pharmaceutical companies in the state are also offering better returns to their investors in the form of dividend or better market realisation on the stock markets.
Financial performance
The 50 listed pharmaceutical companies, with net sales over Rs 35 crore, have recorded net sales growth of 22.2 per cent during the year ended March 2009 to Rs 39,408 crore as against Rs 32,251 crore in the previous year. The sales worked out to around 50 per cent of Pharmabiz sample of leading 100 Indian pharmaceutical companies in 2008-09. Higher exports to regulated markets, enhanced approvals in the US and Europe, higher income through CRAMS and setting up of new subsidiaries in international market helped to improve their operations despite several odds. These companies have successfully overcome major problems like stiff competition in generics, stringent approval systems in highly regulated markets and volatile exchange rates.
The earnings before depreciation, interest, taxation and adjustment (including foreign exchange losses) (EBDITA) of Maharashtra based 50 pharma companies moved up by 15.3 per cent to Rs 10,040 crore from Rs 8,710 crore in the previous year. The net profit, however, was under pressure due to adjustments relating to foreign exchange losses. The net profit of these companies declined by nine per cent to Rs 5,812 crore from Rs 6,387 crore in 2007-08. The strong financial position pushed their market capitalization at significantly higher level during last couple of months.
Due to significant appreciation of US dollar against the Indian rupee during 2008-09, several companies incurred heavy forex losses as well as losses on account of FCCBs. Piramal Healthcare’s forex loss touched Rs 82 crore and that of Wockhardt’s loss amounted to Rs 710 crore. Glenmark has shown exceptional expenditure of Rs 116.95 crore and Ipca Laboratories reported forex loss of Rs 76.15 crore. This has impacted the overall profitability of these companies during 2008-09.
There were nine companies viz., Cipla, Sun Pharmaceutical Industries, Lupin, Wockhardt, Piramal Healthcare, Glenmark Pharma, GlaxoSmithKline Pharma, Ipca Laboratories and Sterling Biotech, with net sales above Rs 1,000 crore during 2008-09. Though the registered office of Sun Pharma is located in Gujarat, its R&D centre, manufacturing plant and corporate office are located in Maharashtra. Cipla remained at top with net sales of Rs 4,973 crore followed by Sun Pharma (Rs 4,272 crore), Lupin (Rs 3,775 crore) and Wockhardt (Rs 3,593 crore) during 2008-09.
High presence in regulated markets
The export earnings on FOB of 15 Maharashtra-based companies went up by 15.9 per cent to Rs 8,911 crore during the year ended March 2009 from Rs 7,689 crore in the previous year and remained as net foreign exchange earner for the country. Their imports on CIF basis increased by 4.9 per cent to Rs 3,455 crore as against Rs 3,295 crore in the previous year. Cipla’s exports has taken a quantum jump of 30.5 per cent to Rs 2,743 crore from Rs 2,102 crore and that of Lupin’s moved up by 16.7 per cent to Rs 1,582 crore from Rs 1,356 crore in the previous year. Sun Pharma, Ipca Laboratories, Piramal Healthcare and Wockhardt also notched up export earnings of over Rs 500 crore with better growth rates.
Glenmark has commissioned its injectables facility near Buenos Aires, Argentina and has transformed itself into a global hub for Glenmark Generic Ltd for manufacture and supply of lyophilized and liquid injectables used in oncology.
Mergers and acquisitions
These companies are spreading their business operations through mergers and acquisitions. During the year 2008-09, Lupin acquired four companies in Germany, Australia, South Africa and Philippines. All these acquisitions are doing well and were well-timed in terms of market entry. Recently it has acquired US rights for Antara (Fenofibrate capsules 43 mg, and 130 mg) for a total consideration of US$ 38.61 million from Oscient Pharmaceuticals. Sun Pharma’s US subsidiary Caraco Pharma has acquired Chattem Chemicals Inc, US during 2008-09. Earlier Wockhardt had acquired major companies like Wallis Laboratories, UK, Morton Grove Pharmaceutical in the US and Pinewood Laboratories in Ireland.
During March 2009, Piramal Healthcare acquired Minrad International and RxElite Holdings Inc. to enhance its presence in the niche Inhalation anaesthetics segment. It renewed a contract with Pfizer which formed about 25 per cent sales of Morpeth, UK facility. The company also acquired the marketing rights for 38 countries of the blood plasma volume expander – Haemaccel from PlasmaSelect AG, Germany. Meanwhile, Piramal has shutdown its facility at Huddersifield in UK and move the work to Digwal and Morpeth.
Research and development
With several products going off-patent in next couple of years, the Maharashtra-based pharmaceutical companies are focusing more and more on R&D activities and filing new ANDAs as well as DMFs in the US, Japan, Europe and emerging markets. The cost- effective new products or line extensions are helping these companies. They are working on innovation and new product development for global markets. With the help of R&D centres, they are undertaking projects in innovative research and technology for new chemical entities or new molecules and novel drug delivery systems. The major focus is on therapies like CNS, oncology, neurology, cardiology, diabetology, respiratory, gastro intestinal, dermatology and treatment for asthma, ENT, anti-infective etc.
Despite risk of uncertainty regarding results and considerable longer time for final outcome, the R&D expenditure of 10 leading Maharashtra based companies increased by 10.4 per cent during 2008-09 to Rs 1,057 crore from Rs 958 crore in the previous year. Lupin’s R&D expenditure went up by 38 per cent to Rs 266.91 crore and that of Cipla’s touched to Rs 252 crore. Sun Pharmaceutical and Piramal Healthcare have de-merged their R&D activities into separate companies during 2008-09. The consolidated R&D spending of Sun Pharma increased to Rs 332 crore from Rs 299 crore in the previous year.
Lupin has decided to develop biotechnology business into a high growth business and set up facilities for its bio-availability and bio-equivalence clinical studies. Its BioResearch Centre at Pune became fully operational in January 2009. This facility is also accredited as a biotech centre by the Bioinformatic Centre of the University of Pune. Lupin has seven proteins in different stages of development. Wockhardt has three biotech products in India and has developed a strong pipeline. It has launched Glaritus, a recombinant long acting human insulin analogue. Its WCK 2349 and WCK 771 molecules have entered into phase I and phase II respectively. Recently, Wockhardt received the tentative approval from the US FDA for marketing the 0.4 mg capsules of tamsulosin hydrochloride, which is used for treating Benign Prostatic Hyperplasia (BPH or non-cancerous enlargement of prostate).
Glenmark Pharma has restructured its business model to focus on specialty and generics as separate business into Glenmark Pharmaceuticals Ltd (GPL) and Glenmark Generics Ltd (GGL).
These companies have filed several ANDAs and DMFS with US FDA with several approvals. For instance, Lupin filed 28 ANDAs and received 34 approvals during 2008-09. Its cumulative figure of ANDA approved reached at 90 and still 56 are pending for approval. Glenmark filed 22 ANDAs and received 11 approvals during 2008-09. It filed 10 DMFs also. Glenmark launched 20 products in the US and five products in EU. Wockhardt received 23 approvals and Ipca Laboratories for nine ANDAs. Sun and its Subsidiary filed 38 ANDAs and got approval for 18. Its total approved ANDAs reached at 69 and 107 are still pending.
Aggregate net under pressure in June quarter
The financial performance of 50 pharma companies in Maharashtra during the quarter ended June 2009 was not up to the mark. Though the aggregate net sales increased by 14 per cent to Rs 10,080 crore from Rs 8,842 crore in the corresponding period of last year, their net profit dwindled by 31.8 per cent to Rs 1,141 crore from Rs 1,674 crore. This is basically due to sharp set back to major companies like Wockhardt, Sun Pharmaceutical, Glenmark Pharma, Indoco Remedies, Sun Pharma Advance Pfizer, Merck and Sterling Biotech during the June 2009 quarter. However, Cipla, GSK, Ipca Laboratories, Lupin, Piramal Healthcare and Plethico Pharmaceuticals have achieved strong growth in topline as well as in bottomline.
With a significant improvement in stock market indices, several pharma companies have reached at their yearly highest level recently and offering good returns to investors. Even the mid-sized pharma companies are also in limelight.