The economic slowdown, stiff generic competition in highly regulated market, volatile foreign exchange rates, credit crunch and high interest burden has impacted the Indian pharmaceutical sector during 2008-09. Despite having several odds, the Gujarat based pharmaceutical companies have established their presence in the international market and is now poised to grab future opportunities with investments in facilities, R&D, new products and markets.
The Gujarat Government is also focusing on quality measures and implemented the Schedule M norms strictly. With easy availability of quality raw materials through several small players, the Gujarat pharma industry is well set to capture higher market share in the coming years. Further, conducive infrastructure facilities like power, roads, airport, ports, etc are also luring new players to Gujarat. At the same time the small players are generating huge turnover by supplying necessary raw materials to major ones.
With huge untapped market potential of the country and lucrative international market, other states have also started offering several incentives to players. This has impacted investments in Gujarat during last few years as several pharma players moved to other states. However, the trend is likely to change as the state government has also started offering new schemes to attract investors. Under the 'Vibrant Gujarat Summit' the state signed contracts worth over Rs 600 crore from pharmaceutical and biotechnology units. Currently, Gujarat is contributing around 30-35 per cent of India's pharma market.
Gujarat pharma companies have created strong manufacturing base needed for the contract research and manufacturing services (CRAMS). With high manufacturing cost in the western countries as compared to India, CRAMS activities are gaining more and more importance during last few years. The Gujarat-based companies are well set to grab this opportunity.
The Gujarat- based listed companies like Alembic, Cadila Healthcare, Dishman Pharmaceuticals, Torrent Pharma, Themis Medicare and Lincoln Pharmaceuticals have consolidated their position during 2008-09 despite competition and problems in international markets. Out of these six companies, four companies viz. Alembic, Cadila Healthcare, Dishman Pharmaceuticals and Torrent Pharma achieved net sales of over Rs 1000 crore during 2008-09 and is moving ahead strongly. However, one time major players like Lyka Labs and Ambalal Sarabhai Enterprises are facing many odds.
Besides, few important giants viz, Aventis Pharma, Glenmark Pharma, IPCA Laboratories, JB Chemicals, Jubilant Organosys, Lupin, Pirmal Healthcare, Wockhardt, Zandu Pharma, Jenburkt Pharma, RPG Lifeline have setup their facilities in Gujarat.
Financial highlights for 2008-09
The financial performance of major four companies with net sales above Rs 1000 crore during 2008-09 improved at operational level, though aggregate net profit was under pressure due to foreign exchange losses. The aggregate sales of Alembic, Cadila Healthcare, Dishman Pharma and Torrent Pharma went up by 22.8 per cent to Rs 6,613 crore from Rs 5,385 crore in the 2007-08. Their profit before interest, depreciation, and adjustment increased smartly by 28.8 per cent to Rs 1,281 crore as against Rs 995 crore in the previous year. The net profit, however, was under pressure and improved only by 2.7 per cent to Rs 640 crore mainly due to fall in profit of Alembic during 2008-09 from Rs 112.19 crore in the previous year.
These companies are rewarding their investors by way of higher dividend. Cadila maintained its dividend at 90 per cent for the year 2008-09. Dishman Pharma stepped up its dividend to 60 per cent from 50 per cent and Torrent Pharma increased dividend to 80 per cent from 70 per cent. However, Alembic had to cut down its dividend to 20 per cent from 75 per cent in the last year due to lower profit.
Mixed performance in Q1 of FY'10
During the first quarter ended June 2009, six Gujarat based companies viz., Alembic, Cadila Healthcare, Dishman Pharma, Torrent Pharma, Themis Medicare and Lincoln Pharma, achieved mixed performance. The aggregate net sales of six companies increased by 20.5 per cent to Rs 1,949.52 crore during the first quarter ended June 2009 from Rs 1,617.97 crore in the corresponding period of last year. Their profit before interest, depreciation, taxation and adjustments went up by 32 per cent to Rs 416.04 crore from Rs 315.20 crore. Similarly, their net profit increased by 19.5 per cent to Rs 196.80 crore from Rs 164.66 crore in the last period. Except Torrent Pharma, all companies improved their bottom line in the first quarter of 2008-09. With improvement in international markets, these companies will maintain the growth in current year.
Cadila Healthcare's consolidated net sales for the first quarter ended June 2009 increased by 28.4 per cent to Rs 880 crore from Rs 686 crore in the corresponding period of last year. Alembic's consolidated net sales moved up by 26.7 per cent to Rs 290.64 crore from Rs 229.34 crore and that of Torrent Pharma net sales take a jump of 22.4 per cent to Rs 465.83 crore from Rs 380.49 crore in the similar period of last year.
The consolidated net profit of Cadila saw a growth of 39.2 per cent to Rs 124.79 crore from Rs 89.68 crore in the quarter ended June 2008. However, the net profit of Torrent Pharma declined to Rs 15.12 crore from Rs 49.30 crore. Alembic earned a net profit of Rs 12.25 crore as against a net loss of Rs 4.70 crore in the last period.
Cadila has notched up an overall 66 per cent growth in formulation exports with higher sales in US Europe and the emerging markets. Its sales in the US moved up 81 per cent to Rs 147.90 crore.
Research activities & regulatory approvals
Cadila filed 19 ANDAs and 14 DMFs during 2008-09 taking the cumulative to 92 ANDAs filings and 76 DMFs. It has so far received 43 ANDA approvals. It filed 15 dossiers for new products in the European markets. With this the number of cumulative filings for new products for European markets has reached 54. The group filed its sixth IND application for ZYTI -a novel lipid lowering molecule with the DCGI. It has subsequently filed with the US FDA. The NME is currently in Phase 1 clinical trials.
The year 2008-09 was marked by strategic collaborations and forays into newer markets. The Cadila group signed a new drug discovery and development agreement with Eli Lilly and Company for a collaborative research programme.
Augmenting its research pipeline, the Cadila group filed its 7th IND - ZYD1, a novel GLP-1 agonist molecule with the DCGI. ZYD1 is a novel candidate in the class of anti-diabetic agents known as incretin mimetics and has displayed a better efficacy and safety profile.
Alembic has launched two ANDAs in the US market during the quarter. It filed one ANDA and its cumulative total reached to 20 ANDAs and 32 DMFs till the end of first quarter of 2009-10.
Torrent's R&D expenditure went up sharply by 40 per cent to Rs 37.19 crore during the first quarter ended 2008-09 from Rs 26.56 crore in the corresponding period of last year. The company filed 33 ANDAs and 16 DMFs with US FDA as part of its US operations, of which it received approvals for 11 ANDAs.
Export performance in 2008-09
Cadila Healthcare's top line growth during 2008-09 was driven by 50 per cent jump in formulation exports, 34 per cent growth in API exports and 27 per cent growth in consumer business. The growth in formulations exports was buoyed by 55 per cent growth in sales in the US market, 32 per cent growth in Brazil market and 81 per cent growth in exports to other emerging markets.
The year 2008-09 witnessed the group's foray into Spain with the acquisition of Laboratories Combix and acquisition of majority stake of 70 per cent in Simayla Pharmaceuticals of South Africa through its wholly owned subsidiary, Zydus Healthcare SA PTY Ltd.
Alembic's total exports increased by 45.6 per cent to Rs 430.94 crore from Rs 296.02 crore in 2007-08. Exports to regulated markets increased by 63.4 per cent to Rs 308.85 crore from Rs 189.02 crore. Formulation exports improved to Rs 119.65 crore from Rs 116.52 crore and that of APIs went up to Rs 311.29 core from Rs 179.50 crore.
Torrent Pharma's domestic formulation business recorded sales of Rs 198 crore during first quarter of 2009-10 growing at 15 per cent. Its international sales jumped by 26 per cent to Rs 225 crore. Operations in Brazil registered a growth of four per cent, with revenues growing from Rs 70 crore to Rs 73 crore. Depreciation of Brazilian Real affected the growth. Germany based Heumann operations clocked sales of Rs 68 crore with strong growth of 30 per cent. The company's sales in Europe (other than Heumann), Russia & CIS and rest of the world operations grew 27 per cent with sales of Rs 66 crore rising from Rs 52 crore.
It has made significant investment in product development to support the US, Brazil and European operations.
Thus with higher investment in R&D, higher approvals from regulatory bodies, focus on international market and new product launch in domestic markets may boost operations of Gujarat based pharma players in coming years. Further with the state government support and better infrastructure, Gujarat is poised to attract more players in the filed.