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US FDA actions, DPCO hit sales & profits of top 30 cos in first half of 2016-17

Sanjay Pingle, Mumbai
Monday, November 21, 2016, 08:00 Hrs  [IST]

Repeated US FDA actions against leading Indian pharmaceutical companies, price control and adverse foreign exchange rates have started hitting their overall sales and bottom lines. The Pharmabiz study of 30 top Indian pharma companies in the first half of the current year clearly reflects adverse trend. The sales of these 30 companies account for almost 75 per cent of sales of Pharmabiz study of 100 companies during 2015-16.The growth in top line as well as bottom line of several companies remained single digit or negative during first half of 2016-17.

The outlook for the whole year 2016-17 appears to be tough for the Indian pharma majors on account of dismal performance during first half. However, recent firming up of currencies against Indian rupee, R&D investments and new product launches may boost export performances to some extend..

The net sales of 30 Indian pharma companies increased only by 9.4 per cent to Rs.87,197 crore during the first half ended September 2016 from Rs.79,684 crore in the corresponding period of last year and earnings before interest, depreciation, tax and adjustments (EBIDTA) improved marginally by 8.2 per cent to Rs.23,394 crore from Rs.21,628 crore. The other operating income of these companies moved up sharply by 32 per cent to Rs.2,097 crore from Rs.1,590 crore, which aided to push EBIDTA growth.

Though the raw material cost, employees cost and other expenditure remained under control, interest cost went up sharply, which put pressure on profits. The profit before tax and adjustments improved only by 3.7 per cent to Rs.17,480 crore from Rs.16,864 crore. Interest burden increased by 21.6 per cent to Rs.2,051 crore from Rs.1,687 crore. Their net profit, after tax but before adjustments, increased only by 4.4 per cent to Rs.13,987 crore from Rs.13,398 crore as the tax provision remained almost same at Rs.3,493 crore as against Rs.3,467 crore in the similar half of last year.

Adjustments in respect of foreign exchange gains or losses and others assisted well and net profit of 30 companies registered a growth of 12.5 per cent to Rs.14,152 crore from Rs.12,581 crore. The foreign exchange gains amounted to Rs.14 crore as against a loss of Rs.105 crore in the last period. Further income form other adjustments was at Rs.104 crore as against a loss of Rs.751 crore. The equity capital stood at Rs.1,870 crore.

Though Sun Pharma, Lupin, Aurobindo Pharma, Piramal Enterprises, Strides Shasun, Ipca Laboratories, Biocon, Ajanta Pharma, Syngene International, achieved satisfactory growth rates, the working of few majors like Dr Reddy's Laboratories, Torrent Pharma, Jubilant Life Sciences, Wockhardt, Vivimed Labs and Marksans Pharma put pressure on top line as well as bottom line during first half ended September 2016.  

Among the 30 companies, the net sales of Dr Reddy's Laboratories (DRL), Torrent Pharma, Jubilant Life Sciences, Wockhardt, Vivimed Labs and Marksans Pharma declined during the first half ended September 2016. DRL's net sales declined by 12.1 per cent to Rs.6,714 crore from Rs.7,642 crore due to quality problem with US FDA. If things continue in the next half, DRL may loos its 'second highest' pharma tag in 2016-17 and Lupin may grab the second position. The net sales of Torrent Pharma also declined by 17.7 per cent to Rs.2,919 crore and that of Wockhardt dropped by 10.1 per cent to Rs.2,129 crore.

Further the net sales of other majors like Cipla, Cadila Healthcare, Alembic Pharma, Pfizer, Granules India, Aarti Drugs and FDC improved marginally during the first half. Cipla's net sales remained almost stagnant at Rs.7,228 crore as against Rs.7,171 crore and that of Cadila's remained at Rs.4,553 crore as compared to Rs.4,534 crore with marginal growth of 0.8 per cent and 0.4 per cent respectively.

EBIDTA of Cipla, DRL, Cadila Healthcare, Torrent Pharma, Wockhardt, Divi's Laboratories, Alembic Pharma, GlaxoSmithKline Pharma, Pfizer, Vivimed Labs, Indoco Remedies, Sequent Scientific and Marksans Pharma declined during the first half. The EBIDTA of DRL declined by over 50 per cent to Rs.1,128 crore from Rs.2,267 crore and that of Torrent Pharma moved down by 52.9 per cent to Rs.836 crore from Rs.1,775 crore in the corresponding half of last year. The EBIDTA of Marksans Pharma dropped by 86 per cent to Rs.15 crore from Rs.104 crore. Wockhardt's EBDITA declined by over 39 per cent to Rs.220 crore and that of Alembic Pharma declined by 30.1 per cent to Rs.336 crore. The poor performance by these companies put pressure on aggregate working of Pharmabiz sample of 30 companies. We have not included Sanofi as its year ending is December. Further, Nectar Life Sciences and Abbott India did not declared their results for first half.

The net profit after tax and adjustment of Sun Pharma, Strides Shasun (after merger of Shasun), Ipca Laboratories and Biocon increased by over 100 per cent during the first half ended September 2016. Even Lupin, Dishman Pharma, Syngene International, Aurobindo Pharma, Piramal Enterprises, Pfizer, Ajanta Pharma Granules India and Aarti Drugs reported healthy growth of over 25 per cent in bottom line. However, DRL, Cipla, Cadila Healthcare, Torrent Pharma, Wockhardt, Alembic and Marksans Pharma put pressure and reported de-growth in net profit.




 

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