BSE Healthcare index of 22 major pharmaceutical companies declined by 27 per cent during the fiscal year 2008-09 to 2830 points from 3848 points as at the end of 2007-08. However, the BSE Sensex of 30 companies declined by 37.9 per cent to 9708 pointes during the same period.
Overall poor sentiment, lower earnings, adverse marketing conditions, foreign exchange losses and lower than expected returns from R&D investments have been primarily responsible for the poor performance of pharmaceutical shares during the fiscal year ended March 2009.
The BSE Healthcare index reached at its 52-weeks peak level at 4602 on June 18, 2008 and then moved down to its lowest level at 2491 points on March 6, 2009. The volatile movements with share prices moving southward mark the trading. The foreign financial institutions also turned their back and moved away from Indian bourses. Ranbaxy scrip closed at Rs 165.60 on March 31, 2009 as against Rs 438.75 on the same day last year. Similarly, Dr Reddy's Laboratories scrip came down to Rs 488.65 from Rs 590.95 and Glenmark Pharma to Rs 157.80 from Rs 490.70. Cipla maintained its price level at Rs 219.75 and Lupin scrip closed at higher level at Rs 689.20 as against Rs 493.90 on March 31, 2008.
According to analysts, the foreign exchange losses, US FDA action against Ranbaxy and delays in acquisition of Taro Pharmaceutical by Sun Pharmaceutical dampened the investors' sentiment. Further, the heavy burden of debt for Wockhardt has also impacted the market movements as at the end of fiscal 2008-09. The analysts said that liquidity crunch will further give negative impact on working. There is no possibility to immediate improvement in economic indicators and fiscal deficit is increasing day by day. The general elections are round the corner and likely to give some adverse outcome.
As per the Pharmabiz study of 50 major companies for the first nine months of 2008-09 the net profit declined by 18 per cent to Rs 4,615 crore from Rs 5,630 crore in the corresponding period of last year, though their net sales increased by 27 per cent. Further, the interest burden of pharma segment will likely to go up by more than 50 per cent in the current year. Thus the overall performance of Indian pharmaceutical segment will be under pressure.
The overall economic conditions in the world market will also impact the foreign exchange earnings and it will be difficult to maintain the same momentum achieved in the last two years. More and more consolidation will take place in coming years. However, cost effective generic products, clinical trials and CRAMS will assist the Indian pharma segment. Meanwhile, MNCs will spread their operations in India and strengthen their marketing activities, the analysts said.