Some Highs, Some Lows
The outcome of constand efforts in R&D and impressive manufacturing performance are starting to show some positive impact on the balance sheets of Indian pharma companies, as proved int he second quarter results of financial year 2010-11. But there were some disappointments as well. Usha Sharma analyses the top line as well as bottom line figures
Many large domestic pharmaceutical companies have declared their results for the second quarter of financial year 2010-11 (FY11) and reported moderate gains. By the time this issue went to press, approximately 18 pharma companies had come out with their Q2FY11 results. Sales growth across these companies averaged close to 10 percent for this quarter compared to the corresponding quarter last year. Operating profit growth over the same period was also reported as 12 percent. Hitesh Gajaria, Executive Director, KPMG puts his analysis and says, “Leading pharma players like Dr Reddy’s Laboratories (DRL), Piramal Life Sciences, Biocon and Cadila reported moderate profits and decent results whereas medium size pharma companies reported much better figures, depicting robust growth. On an average note figures however are better than those clocked in the previous quarter.”
Comparing the performance highlights, he mentions that, “DRL reported a growth in sales of 15 percent over last year while the operating profit fell by seven percent. In against same quarter Piramal Life Sciences reported negative growth during the quarter with a drop in sales of 67 percent and a fall of 19 percent in operating profits. It reported a 24 percent fall in sales and 149 percent drop in operating profit. This was of course due to the acquisition of its formulations division by Abbott. However, Biocon’s sales and operating profits rose by 14 percent and 48 percent respectively. Similarly, Cadila Healthcare reported a 15 percent increase in sales and a 31 percent rise in operating profit for the quarter.”
|“Domestic formulations are also expected to witness an increase in demand and show good profits along with the contract manufacturing segment. Over all the domestic growth is expected to be around 15 percent to 20 percent”
– Hitesh Gajaria Executive Director
He continues on to medium size pharma companies commenting that, “Indoco Remedies reported a 41 percent and 59 percent rise in sales and operating profits respectively and Unichem Laboratories also reported a decent 16 percent rise in sales and 7 percent rise in profits.”
Whereas multinational companies, like Pfizer reported a decent 13 percent growth in sales and a four percent gain in operating profit, Fresenius Kabi Oncology reported a three percent growth in sales and a 29 percent fall in operating profit. GlaxoSmithKline Pharmaceuticals net sales were up 14 percent, profit after tax (PBT) and before exceptional items grew by 14 percent. The moderate figures for the big pharma companies are likely due to increasing competition in the market and the increasing SG&A (selling, general and administrative) expenses that cut the margins.
Another trend emerging is that companies engaged in manufacturing drugs for lifestyle diseases have reported better figures. For example Biocon’s focus area of diabetes is a major reason for its impressive growth curve.
Major driving factors of the current quarter
According to Gajaria, a major driving factor that is not limited to this quarter alone is M&As. Consolidation in the pharma sector is a dominant trend. M&As help to increase scale and cut costs. In the Indian market this is driven by the domestic generics and manufacturing capabilities. He also observes that formulation players have done well in Q2. The penetration of health insurance is probably a good driver of India’s pharma formulations market growth. India is a generic dominant market and companies with a generic base and a major focus on their cost efficient and quality manufacturing are bound to do well. Also the contract manufacturing segment is showing good growth and companies with a significant focus on this segment have also performed well in the quarter.
Q2 FY11 results in a nutshell
|“The impact of the new developments would be felt in the next quarter and we expect further consolidation of our new revenue and profits”
– Bafna Mahaveer Chand Chairman and Managing Director
Bafna Pharmaceuticals, a Chennai-based manufacturer and exporter of drug formulations reported impressive performance for Q210. Revenues of the company rose by 35 percent to Rs 2279.79 lakh from Rs 1688.04 lakh for the same period last year. With this, the total revenue during the first half rose by 44.96 percent to Rs 4433.12 lakh. The company’s net profit increased to Rs 128.99 lakh from Rs 123.83 lakh for the same quarter of the previous fiscal year. With this the net profit for the first half of the current fiscal shot up by 27.39 percent to Rs 279. 79 lakh as against Rs 219.62 lakh for this corresponding period of last year.
Commenting on the financial performance of the company, Bafna Mahaveer Chand, Chairman and Managing Director, Bafna Pharmaceuticals said, “This has been a very encouraging first half for Bafna with the revenue up by 44.96 percent and PAT up by 27.39 percent. The recent Australian TGA approval has boosted our plans for expanding in the Australian market and provide momentum to our already growing business worldwide. We are confident that taking this growth forward, we will be able to achieve our long term vision of dominating our product categories worldwide. The impact of the new developments would be felt in the next quarter and we expect further consolidation of our new revenue and profits.”
The company’s net profit jumped by 47 percent to Rs 94.01 crore from Rs 63.88 crore in the same period of last fiscal. Its net sales went up by 20 percent to Rs 519.04 crore from Rs 430.79 crore.
The company’s formulations business revenue stood at Rs. 397.04 crore in Q2 FY11 as against Rs 309.24 crore in Q2 FY10, growth of 28 percent. The revenue from Indian formulations business at Rs 221.94 crore in Q2 FY11 as against Rs 171.49 crore in Q2 FY10, growth of 29 percent. Ipca’s export formulations business increased by 27 percent to Rs 175,10 crore in Q2 FY11 as against Rs 137.75 crore in Q1FY10.
Dr Reddy’s Laboratories
DRL’s unaudited financial results under International Financial Reporting Standards (IFRS)showed consolidated revenues at Rs 18.7 billion in Q2 FY11 versus Rs. 18.4 billion ($412 million) in Q2 FY10, a year-on-year growth of two percent.
Revenues from Global Generics for Q2 FY11 are at Rs13.7 billion, a year-on-year growth of eight percent. Revenues from PSAI are at Rs 4.6 billion in Q2 FY11, a year-on-year decline of 14 percent. Profit after tax for Q2 FY11 is at Rs 2.9 billion, represents 15 percent to revenues and a year-on-year growth of 32 percent. During the quarter, the company launched 41 new generic products, filed 21 new product registrations and filed 13 drug master files (DMFs) globally.
Piramal Healthcare Limited (PHL)
The company’s net profit for the quarter ended 30 September 2010 was higher at Rs 125.4 billion as compared to Rs 1.1 billion in Q2 FY10. This includes a net exceptional income of Rs. 162.2 billion primarily towards sale of the businesses mentioned earlier. The results of Q2FY11 have been impacted by sale of domestic formulations business and shareholding in Piramal Diagnostic Services Pvt. Ltd. (PDSL). Total Operating Income on consolidated basis for Q2FY10 was lower by 24.8 percent compared to Rs 7.5 billion over Q2 FY2010. Operating Loss was Rs 254 million as compared to Operating profit of Rs 1.8 billion in Q2FY2010.
Piramal have also announced that subsequent to completion of the sale of its domestic formulations business and its shareholding in PDSL ., the Board of Directors considered and approved, subject to the approval of the members of the company, and such other approvals/consents, as may be necessary, the buyback of the company’s equity shares. The board of directors, after considering various alternatives, including dividend and/or buy-back of shares, has approved a buy-back proposal as it is a more tax efficient method of maximising value to shareholders. The buyback will be done for a maximum of 41.8 million shares (representing 20 percent of the total number of shares) at a price of ` 600 per equity share. In June, 2010 PHL announced sale of its shareholding in it’s subsidiary – PDSL to Super Religare Laboratories for a consideration of ` 6 billion. This deal was closed on 23rd August 2010.
RPG Life Sciences
|“The company has performed well and we are confident of keeping the momentum going in the year ahead”
– Ajit Singh Chouhan Managing Director
RPG Life Sciences
In its unaudited financial results for quarter ended September 30, 2010 RPG Life Sciences, an RPG group company, announced that its company’s net sales grew up by 22 percent and stood at Rs 50.66 crore in the quarter ending September 30, as against Rs 41.43 crore in the corresponding quarter of the previous year. Its PBT grew by 47 percent to Rs 5.48 crore from Rs 3.74 crore during the same period. “The company has performed well and we are confident of keeping the momentum going in the year ahead,” said Ajit Singh Chouhan, Managing Director, RPG Life Sciences.
|“We have seen good growth in the Latin America and the Central Eastern Europe region. All this has added significant momentum for the business. The API business has also gained traction and we are seeing good growth every quarter”
– Glenn Saldanha Chief Executive Officer and Managing Director
Glenmark Pharmaceuticals Ltd (GPL), the research-led global integrated pharma company declared its consolidated revenue for the quarter. It was at Rs 7,24.26 crore as against Rs 5,90.32 crore an increase of 23 percent. The consolidated net profit for the second quarter stood at Rs 111.62 crore as compared to Rs 80.88 crore for the previous corresponding quarter, an increase of 38 percent.
Commenting on the results Glenn Saldanha, Chief Executive Officer and Managing Director, Glenmark Pharmaceuticals said, “During the quarter, Glenmark’s income saw impressive growth buoyed by our largest businesses – India and the US, where new product launches assisted growth and also helped us increase market share across operating therapeutic categories. In addition, we have seen good growth in the Latin America and the Central Eastern Europe region. All this has added significant momentum for the business. The API business has also gained traction and we are seeing good growth every quarter.”
He further added, “For the remaining part of the year, we expect demand conditions to further improve which will aid further growth in all operating markets. During the last quarter we launched seven new products in the US and also received several ANDA approvals. We will also continue our aggressive launch of new products across all branded generics markets”.
The company’s net sales from operations stood at Rs 1370 crore, grown 16 percent over Q2 FY10. Its domestic branded generic sale went up by 36 percent to Rs 641 crore.
Dilip Shanghvi, Chairman and Managing Director Sun Pharma said,“As witnessed in the first six months of this fiscal, our base business continues to progress well in line with our expectations. Pace of product approvals remains good. While the business is set to deliver the expected growth as announced at the beginning of the year, the larger task ahead is revitalising Taro’s business. Even as we handle this and the challenges related to GMP compliance, we expect to emerge as a much stronger company with an expanded product portfolio and a larger international presence.”
SPARC, a subsidiary company of Sun Pharmaceutical Industries Ltd achieved net profit of Rs 8.82 crore during the second quarter ended September 2010 as against a net loss of Rs 7.49 crore in the corresponding period of last year. Its income from operations went up sharply to Rs 25.97 crore from Rs 6.07 crore.
|“This quarter’s business performance was fuelled by a strong business performance in the US and Japan, solid domestic growth and increased activity in all key pharmerging markets including South Africa and Australia. Our performance this quarter not only consolidates our existing presence in these markets but also leaves us strategically poised to further strengthen our position in the global generics and branded
– Dr Kamal K Sharma Managing Director
The company’s net profits grew by 34 percent to Rs 2,150 million during Q2, FY 11, as compared to Rs 1,603 million (Q2 FY 10). Its net sales went up by 26 percent to Rs 14,051 million during Q2, FY 11, up from Rs. 11,147 million (Q2, FY 10)
Commenting on the performance, Dr Kamal K Sharma, Managing Director, Lupin , said, “Lupin’s sustained growth performance over the last 18 quarters is not only a reflection of the strong business philosophy guiding us, but also a vindication of our robust vertically integrated business model, that continues to unlock increasingly higher revenues, profitability and strong sustainable growth across all business segments and markets. This quarter’s business performance was fuelled by a strong business performance in the US and Japan, solid domestic growth and increased activity in all key pharmerging markets including South Africa and Australia. Our performance this quarter not only consolidates our existing presence in these markets but also leaves us strategically poised to further strengthen our position in the global generics and branded formulations space. Going forward, we will continue to focus on high value niche therapy segments in both our existing and potential markets of operation and also look at maintaining our market leadership in these segments.” ” Lupin’s cumulative ANDA filings with the US FDA rose to 132 with the company having received 45 approvals to date. Cumulative filings with the European regulatory authorities stands at 82 with the company having received 38 approvals to date.
|“Being the first quarter of the year for us it is difficult to comment anything on such a short span, however since the plans that were implemented and the achievements that we were able to see we are confident of achieving our target of Rs 1 billion in revenue for the year”
– Rajesh Sharma General Manager, Finance and Supply Chain
Anglo French Drugs and Industries
Rajesh Sharma, General Manager, Finance and Supply Chain, Anglo French Drugs and Industries Ltd explains the current trend in industry saying, “During the quarter ending September 10 our achievement had been as per the expectations and plans. Being the first quarter of the year for us it is difficult to comment anything on such a short span, however since the plans that were implemented and the achievements that we were able to see we are confident of achieving our target of Rs 1 billion in revenue for the year. With the industry and sector’ showing a nearly 10 percent growth being an up-cycle from single digit growth in the previous year, we are confident of achieving a level much higher. We are pegging our expectations of revenue growth between 25 -30 percent during the full fiscal year. This will be possible through consolidation of existing products, through ethical promotions, new product launches and strongly focusing on expanding market both in domestic and international. Additionally in our R&D facility we have already development few products for companies in Russia and are currently having tie-up with one of the biggest generic company in Africa for development of their products.”
Granules India, a vertically integrated formulation manufacturer, posted revenue of Rs 117.9 crore and a net profit of Rs 4.5 crore. “We are continuing to diversify revenue from a division and product standpoint. The company commercialised several finished dosage contracts this year and the division contributed nearly 20 percent of our revenue. From a product perspective, we have increased sales from ibuprofen, metformin and guaifenesin derived products. We will continue to take the necessary steps to increase the revenue mix from our portfolio of products so we are not dependent on one product.” said C Krishna Prasad, Managing Director of Granules.
He explained, “We are pleased with our quarterly results. We are continuing to make progress on diversifying revenue from a division and product standpoint. Our finished dosage division, which is the cornerstone of our growth strategy, contributed nearly 20 percent of our revenue. Also, during the quarter, we received US FDA approval for our first ANDA. From a product perspective, we have increased sales from ibuprofen, metformin and guaifenesin derived products which makes us less reliant on any one particular product. Prasad added, “We will continue to work closely with our customers, particularly finished dosage customers, to ensure we are fulfilling their requirements so we can commercialise our products as quickly as possible.”
The company’s net sales went up by 26 percent to Rs 112.6 crore from Rs 882.6 crore. Commenting on the company’s performance, Ramprasad Reddy, Chairman, Aurobindo Pharma said, “Our business have been progressing satisfactorily and resulted in improved performance during the quarter. The recent commercialisation of the large formulations Units in Jedcherla SEZ near Hyderabad and New Jersey will further strengthen the operations of the company going forward.”
Looking ahead, Gajaria projects that, “Generics manufacturers are likely to exhibit decent growth in the coming few years as patent expiries present opportunities for domestic players to strengthen their presence in overseas markets. Domestic formulations are also expected to witness an increase in demand and show good profits along with the contract manufacturing segment. Over all the domestic growth is expected to be around 15 to 20 percent.”