The pharmaceutical sector in India reported excellent overall results in the first half of 2005-’06 although some of the top companies performed quite badly. As per a PHARMABIZ study, the standalone net profit of 50 pharma companies moved up by 32.4 per cent to Rs 1735 crore from Rs 1310 crore in the corresponding first half of last year. Similarly, their standalone net sales increased by 19.9 per cent to Rs 12,011 crore from Rs 10,016 crore in the same period of previous year.
The study of 50 listed pharma companies, with net sales above Rs 20 crore during the first half of 2005-’06, showed distinct improvement in domestic as well as international operations. These companies are going ahead with their investments in R&D activities to capture higher market share in the lucrative international market. Major companies like Ranbaxy Labs, Wockhardt, Indoco Remedies, GlaxoSmithKline, Pfizer and a few others are not included in the study due to different set of year ending.
Click to view the First half performance of 50 companies
The top ten companies, with net sales of Rs 400 crore or more, among the sample of 50 companies managed to push their net sales by 18.5 per cent to Rs 7214 crore during the first half ended September 2005 from Rs 6087 crore in the corresponding period of last year. The aggregate net sales of top 10 companies worked out to 60.1 per cent of the total sales of 50 companies during the first half. Cipla remained on top with net sales of Rs 1334.51 crore during the first half as against Rs 1110.80 crore in the corresponding period of last year. This was followed by Dr Reddy’s Laboratories with Rs 1032.46 crore, Lupin Ltd with Rs 757.20 crore, Nicholas Piramal India with Rs 719.62 crore and Sun Pharmaceutical with Rs 667.49 crore. The net sales of Cipla, Dr Reddy and Lupin went up by 20.1 per cent, 23.9 per cent and 27.8 per cent respectively. Nicholas Piramal’s net sales improved only by 3.3 per cent.
The net sales of Venus Remedies and Suven Life Sciences, relatively small companies in the sample of 50 pharma companies, went up sharply by over 100 per cent during the first half of 2005-06. Venus Remedies’ net sales touched to Rs 35.98 crore from Rs 14.19 crore, a rise of 153.6 per cent. Similarly, net sales of Suven Life increased by 121.3 per cent to Rs 27.73 crore from Rs 12.53 crore. Besides, Panacea Biotec, Marksans Pharma (formerly known as TASC Pharma), Ind-Swift Laboratories, Surya Pharmaceuticals, Hiran Orgochem and Vivimed Labs marked the net sales growth of above 50 per cent during the first half.
Few major companies like Nicholas, Aurobindo Pharma, Biocon, Matrix Laboratories, Glenmark Pharmaceuticals, Shasun Chemicals and Divi’s Laboratories failed to clinch the double-digit growth in net sales during the first half.
Aurobindo’s net sales increased only by 8.3 per cent to Rs 600.14 crore from Rs 554.24 crore in the last period. Biocon Ltd, the Rs 650-crore Bangalore based biotechnology company, suffered heavy setback during the second quarter ended September 2005 due to pricing pressure in European Statins market. Its net sales increased marginally by 0.6 per cent to Rs 332.64 crore from Rs 330.80 crore. Matrix Laboratories sales moved up only by 3.9 per cent to 328.71 crore from Rs 316.47 crore. Its exports increased by 12.2 per cent to Rs 154.81 crore, but its domestic business declined to Rs 173.90 crore from Rs 178.44 crore. Glenmark Pharmaceuticals net sales increased marginally by 1.7 per cent to Rs 263.22 crore due to the damage sustained to depletion of its inventory following the torrential rains in July and shutdown of 3-weeks of one of the modules at the company’s API manufacturing plant at Ankleshwar.
The other income of 50 pharmaceutical companies went up sharply by 59 per cent to Rs 526.03 crore during the first quarter ended September 2005 from Rs 330.72 crore in the corresponding period of last year. The significant growth is due to sharp rise in other income of Dr Reddy’s Laboratories, Lupin, Sun Pharmaceuticals, Cadila Healthcare, Aurobindo Pharma, Matrix Laboratories and Novartis India. Sun Pharma’s other income increased due to rise in share of income from firm to Rs 194.99 crore from Rs 106.71 crore. Further, it earned a net interest income of Rs 32.74 crore during the first half of 2005-06 as against nil in the last period.
Lupin’s other income went up to Rs 21.88 crore from Rs 5.08 crore in the corresponding period of last year. This includes insurance claims to the tune of Rs 3.98 crore towards destruction of fixed assets and inventories of the company, located at Mumbai, due to the floods, which occurred in July 2005. Dr Reddy’s Lab earned licence fees of Rs 26.60 crore during the first half, which inflated its other income to Rs 46.91 crore from Rs 35.90 crore. Novartis India’s other income touched to Rs 42.05 crore from Rs 16.28 crore due to profit on sales of certain structures and portion of land at Goregaon for Rs 17.30 crore. Matrix Lab has shown Rs 13.46 crore as income from potential patent infringement suit during the first half, which inflated its other income to Rs 27.86 crore from Rs 8.70 crore in the previous period.
The raw material cost of 50 companies increased 12.9 per cent to Rs 5965.43 crore from Rs 4935.48 crore. Further, staff cost went up by 14.8 per cent to Rs 942.43 crore from Rs 821.25 crore. Other expenditure, including R&D expenditure moved up by 12.9 per cent to Rs 2951.52 crore from Rs 2614.28 crore in the previous period. Few companies like Dr Reddy’s, Lupin, Nicholas Piramal, Sun Pharma and Matrix Lab have given details about R&D expenditure. The R&D expenditure of Dr Reddy’s Lab declined to Rs 78.63 core from Rs 115.15 crore in the similar half of last year. The R&D expenditure of Lupin, Nicholas and Sun increased to Rs 41.83 crore, Rs 28.69 crore and Rs 42.33 crore respectively. Matrix’s R&D expenditure increased to Rs 11.92 crore from Rs 5.77 crore.
Thus the modest growth in cost of raw material, staff cost and other expenditure as compared to significant growth in other income, pushed the profit before interest, depreciation, taxation and adjustments (EBDIT) by 25.4 per cent to Rs 2702 crore during the first half ended September 2005 from Rs 2152 crore in the corresponding period of last year. There was noteworthy improvement in EBDIT by companies like Dr Reddy’s Lab, Lupin, Panacea Biotec, Ind-Swift Laboratorie, Wanbury Ltd, Vivimed Labs, Marksans Pharma, Venus Remedies, Hiran Orgochem and Surya Pharmaceuticals. However, major companies like Nicholas Piramal, Jubilant Organosys, Aurobindo Pharma, Biocon, Matrix Laboratories, Glemmark Pharma, Wyeth and Divi’s Laboratories suffered heavy setback.
The interest burden of 50 companies increased by 11.6 per cent to Rs 225.59 crore from Rs 202.11 crore in the previous period. The depreciation provision went up by 20.1 per cent to Rs 414.12 crore during the first half of 2005-06 from Rs 344.73 crore. The profit before taxation and adjustment improved by 28.8 per cent to Rs 2067 crore from Rs 1605 crore. The taxation provision increased by 13.3 per cent to Rs 342.89 crore. The new Fringe Benefit Tax, introduced in the last budget worked out to Rs 17.14 crore for the fifty companies during the first half.
The net profit after non-recurring adjustment of Rs 31.54 crore for the first half (Rs 12.81 crore in the last period), worked out to Rs 1736.06 crore as against Rs 1322.27 crore in the similar period of last year, registering a growth of 31.3 percent. Though, Dr Reddy’s Lab, Lupin, Orchid Chemicals, Panacea Biotec, Marksans Pharma, Ind-Swift Laboratories, Surya Pharma, Dishman Pharmaceuticals, Avon Organics, Venus Remedies and Ahlcon Parenterals achieved growth of more than 75 per cent, few companies like Jubilant Organosys, Aurobindo Pharma, Biocon, Matrix Lab, Glenmark, Wyeth, Mangalam Drugs, Ankur Drugs, and Vinati Organics received major setback in net profitability during first half.
The implementation of expansion programme, focus on R&D, filing of DMF and ANDAs in regulated markets and cost effective products will give necessary boost to earnings in the remaining period of 2005-06. The contract research and contract manufacturing activity is gaining ground and the Indian companies have established their strong image in the international market. The income from these activities will likely to go up in the coming months.
Click to view the Highlights of Half yearly performance for 50 cos: September 2005 & 2004