A Pharmabiz study of the performances of the country's 30 leading pharmaceutical companies during the first half of the financial year 2017-18 shows some worrisome trends on the profitability and sales fronts. As per the study, the net profits of several of these companies declined by a whopping 40 per cent in the first half of 2017-18, mainly on account of repeated US FDA observations, implementation of GST and price cuts. Adverse exchange fluctuations and competition in the overseas and domestic markets put additional burden on the profitability of these companies which was also reflected in their declining market capitalisation resulting in heavy loss to the investors. EBIDTA of these companies have declined by 18.8 per cent to Rs 18,258 crore from Rs 22,485 crore and net profit fell sharply by 41.7 per cent to Rs 8,196 crore from Rs 14,062 crore.  The net profit declined sharply due to setback suffered by pharma majors like Sun Pharma, Lupin, Dr Reddy's and Cadila Healthcare. Further the net profit of few majors like Alkem Labs, Jubilant Life Sciences, Torrent Pharma, Biocon, Strides Shasun, Divi's Labs, Ipca Labs, Alembic Pharma, Pfizer, Dishman Pharma, J B Chemicals, Vivimed Labs and Aarti Drugs also declined by double digit during the first half. Wockhardt incurred a net loss of Rs 413 crore as against a net profit of Rs 33 crore. The net profit of Sun Pharma declined due to lower formulation sales in US which declined by 45.4 per cent to Rs.4,251 crore from Rs.7,785 crore. Its net profit declined by 86 per cent to Rs.679 crore from Rs.4,739 crore due to settlements with certain plaintiffs related to the Modafinil antitrust litigation in US. The net profit of Lupin declined by 47.3 per cent to Rs 813 crore from Rs 1,544 crore in the same half of last year as its sales in US declined sharply by 32 per cent in the second quarter ended September 2017.

What is more disturbing is the declining trend in net sales of these sample of 30 companies. The Pharmabiz study shows that the aggregate net sales of these companies have declined by 2.5 per cent during the first half ended September 2017 to Rs 84,343 crore from Rs 86,524 crore as few majors like Sun Pharma, Lupin, Torrent Pharma, Wockhardt, Biocon, Divi's Labs, Ipca Labs, Alembic, Dishman Pharma, Nectar Lifesciences, Vivimed Labs and Aarti Drug received setback in sales growth. Further, Dr Reddy's net sales remained flat and that of Aurobindo, Cipla, Alkem and others registered only single digit growth. The net sales of Sun Pharma declined to Rs 12,757 crore from Rs 15,756 crore on account of lower sales in US. Similarly, Lupin's net sales declined by 10.2 per cent to Rs 7,681 crore from Rs 8,553 crore. Wockhardt suffered another setback and its net sales declined 11.2 per cent to Rs 1,913 crore from Rs 2,155 crore and that of Divi's Labs went down by 15.4 per cent to Rs 1,711 crore from Rs 2,023 crore.  Now, these companies are staring at the possibility of the same scenario during the second half of this financial year also in respect of sales and profit growth. Though these companies are launching new products and getting approvals from US FDA and others, resolving the quality issue with the US FDA could be a daunting task. So, it is time the Indian pharma companies pull up their socks and rework their strategies to face the emerging challenges on the global quality front. Sooner these companies do it, better for their survival in the years to come.