Higher exports, investments in R&D, focus on highly regulated markets and tie-ups with multinational pharma giants helped the Maharashtra -based pharmaceutical companies, which play an important role in the overall Indian pharmaceutical sector, to put up a good show during the year ended March 2013.
The leading 50 pharma companies from the state registered EBDITA margins of 23.9 per cent during 2012-13 as against 22.1 per cent and net profit margins of 13.9 per cent as compared to 10.9 per cent in the previous year. These companies rewarded their investors with handsome dividends.
While on one hand the loss of patent and depreciation of rupee against US dollar may boost revenues in the current year, on the other hand, expanded scope of drug price control may have an adverse impact on both revenue and profitability. The global pharmaceutical environment remained volatile and challenging due to lower R&D successes, competition among generic players and gradual decline in realisations. Stringent approval process, quality problems and legal fights also led to increased complexity in the pharma business world.
Despite the above business environment, the state-based listed 50 pharma companies registered healthy performance during 2012-13. The aggregate net sales of Pharmabiz sample of 50 pharma companies improved by 17.9 per cent to Rs 60,775 crore during the year ended March 2013 from Rs 51,549 crore in the previous year. As compared with the sales of leading 100 Pharmabiz pharma companies, the state-based 50 companies contributed 42.6 per cent during 2012-13. Among the 50 companies, 12 companies registered net sales of over Rs 1,000 crore during 2012-13. Further, eight multinational companies have established strong presence in Maharashtra.
The earnings before depreciation, interest, tax and adjustments (EBDITA) of 50 companies improved sharply by 27.1 per cent to Rs 14,510 crore from Rs 11,415 crore in the previous year. Though the raw material cost, including increased/decreased in stock and purchases, moved up by 11.8 per cent, the employees cost went up by 22.5 per cent to Rs 7,961 crore. Other expenditure of 50 companies increased by 16.2 per cent to s 14,751 crore. These companies reduced there interest burden to Rs 1,961 crore as compared to Rs 1,964 crore. Depreciation provision increased by 10.2 per cent to Rs 2,033 crore. With lower interest, its profit before tax and adjustments jumped by 38.3 per cent to Rs 10,516 crore from Rs 7,606 crore in the previous year.
The taxation cost increased sharply by 57.6 per cent to Rs 2,850 crore from Rs 1,808 crore, which put pressure on profit before adjustments during 2012-13. The forex loss of 50 companies reached at Rs 147 crore as against Rs 33 crore. However, these companies gained through other adjustment to the tune of Rs 912 crore as against loss of Rs 173 crore in the previous year as Strides Arcolab and Pfizer registered adjusted income of Rs 721 core and Rs 410 crore respectively during 2012-13. Similarly, Wockhardt's adjusted income stood at Rs 76.16 crore as against its expenditure of Rs 431 crore in the previous year. This inflated bottom line of 50 companies by 50.8 per cent to Rs 8,431 crore from Rs 5,592 crore.
Lupin remained on top among the 50 companies with consolidated net sales of Rs 9,462 crore during 2012-13, followed by Cipla Rs 8,087 crore, Wockhardt Rs 5,609 crore, Glenmark Pharmaceutical Rs 5,012 crore and Piramal Enterprises Rs 3,496 crore. Ipca Laboratories, GSK, Strides Arcolab, Abbott India, Sanofi India, Elder Pharmaceuticals and Unichem Laboratories registered sales above Rs 1,000 core during 2012-13.
The net sales of Maharashtra - based eight multinational companies (MNCs) viz., GlaxoSmithKline Pharma (GSK), Abbott India, Sanofi India, Pfizer, Novartis India, Wyeth, Merck and Fulford India increased by 10.5 per cent to Rs 9,075 crore during 2012-13 from Rs 8,216 crore in the previous year. There net profit increased by 33.8 per cent to Rs 1,725 crore from Rs 1,289 crore as Pfizer shown adjusted income of Rs 410 crore during 2012-13. The net sales of GSK, a leading MNC in the state increased by 11.2 per cent to Rs 2,600 crore as against Rs 2,338 crore in the previous year.
The MNCs have rewarded their shareholders with higher equity dividends during 2012-13. GSK enhanced its equity dividend to 500 per cent from 450 per cent and Pfizer declared higher dividend of 325 per cent as compared to Rs 125 per cent. Abbott, Sanofi and Novartis maintained equity dividend at 170 per cent, 330 per cent and 200 per cent respectively.
Few major companies like Piramal Enterprises, Wanbury, Parenteral Drugs, Twilight Litaka Pharma, Sequent Scientific, Fulford (India), Mangalam Drugs faced rough weather and incurred net loss during 2012-13. Piramal Enterprises' net loss amounted to Rs 227 crore as against a net profit of Rs 112 crore on account of one time charges of Rs 162.80 crore towards acquisition of Decision Resources Group in June 2012. The net loss of Parenteral Drugs increased to Rs 108 crore and that of Wanbury Rs 87 crore, Twilight Litaka Rs 14 crore, Sequent Scientific Rs 64 crore and Mangalam Drugs Rs 12 crore.
Similarly, the net profit of Sanofi India declined by 7.6 per cent to Rs 177 crore during 2012-13. Further, the net profit of few companies like Novartis drop by 21.2 per cent to Rs 120 crore, Wyeth by 10 per cent to Rs 130 crore, Hikal by 45 to Rs 25 crore, Aanjaneya Lifecare by 99 per cent to Rs 0.44 crore.
The state -based companies are investing significant amounts in R&D and getting higher approvals from highly regulated markets like US, Europe and Japan as well as from emerging markets. Lupin received 11 ANDAs approval from US FDA during January-June 2013 and 7 tentative approvals.
Similarly, Glenmark, Ipca Laboratories and Stridies Arcolab and its subsidiaries received approvals for 4ANDAs, 2ANDAs and 5 ANDAs respectively. Wockhardt and Cipla got one approval each during first half of 2013.
Lupin's consolidated R&D investment increased to Rs 771 during the year ended March 2013 and it filed 21 ANDAs for US market. It received approval for 14 ANDAs from US FDA. It has a pipeline of 116 products, of which 29 ANDAs are first-to-file opportunities. Its cumulative number of ANDA filings stood at 176 with 78 approvals received. Further it filed 15 DMFs in US and 10 Marketing Authorisation Application in Europe. Its biotechnology group received its first marketing authorisation for an oncology product.
Glenmark Pharmaceutical is planning to file 15-20 products with international regulatory authorities in the current year and it is spending 8-9 per cent of its turnover on R&D activities. Its 53 products are pending for approval with US FDA and it will get approval for at least 10 products in the current year. It has a pipeline of four molecules in clinical development – both Novel Chemical Entities and Monoclonal Antibodies and most being first-in-class globally.
Strides Arcolab has increased its R&D spending by over 10 per cent to Rs 122 crore from Rs 110 crore. Though Strides Arcolab has registered office in Maharashtra, its 13 manufacturing facilities are located in Karnataka, Nigeria, Italy, Tamil Nadu, Brazil, and Poland. The company filed 69 products in the US and it received 25 approvals in the US and 48 approvals in other developed markets with 135 in emerging markets during the year ended December 2012.
With better performance and investments in R&D, the share price of several companies are moving to near to their highest levels and offering better returns to shareholders. However, the burden of FCCBs, stringent regulatory norms, drug price control, competition, etc., may put pressure on working in the current year. Further, limited success in R&D activities may also impact growth plans.