Mumbai: India’s Rs 1 trillion drugs and pharmaceuticals industry reported a widely varied financial performance for the January-March quarter.
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The blame for poor performance fell on a changed tax regime, the volatile currency and regulatory hurdles, though many survived the impact of these through operational efficiency, better product mix and, in some instances, one-time opportunities.
The combined net profit of the top 19 companies in the healthcare index on BSE rose nearly 57% to Rs 4,538 crore in the March quarter. Their combined revenue grew by about 30% to Rs 24,000 crore.
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Top drug makers, including Ranbaxy Laboratories Ltd, Sun Pharmaceutical Industries Ltd, GSK Pharma Ltd, Cipla Ltd, Strides Arcolab Ltd and Glenmark Pharma Ltd, posted significant growth ranging from 30% to 400% for the three months. But Dr Reddy’s Laboratories Ltd, the country’s second largest drug maker by income, posted only a 2.5% increase in net profit, at Rs 343 crore, despite a 31% growth in sales, at Rs 2,658 crore, during the quarter. And seven other leading drug makers—Lupin Ltd, Biocon Ltd, Cadila Healthcare Ltd, Aurobindo Pharma Ltd, Orchid Chemicals and Pharmaceuticals Ltd, Piramal Healthcare Ltd saw their profits fall, while the country’s sixth largest drug maker, Wockhardt Ltd, made a net loss during the quarter.
Lupin’s quarterly net profit fell about 30% to Rs 156 crore despite a 25% growth in sales as its tax expenditure went up significantly.
Two of its manufacturing plants that operated in special economic zones (SEZs) had to start paying taxes during the quarter as the tax-exemption period for SEZs ended in December. “This new tax cost and a mandatory price reduction in the Japanese generic drug market mainly contributed to the drop in net profit,” Nilesh Gupta, group president and an executive director at Lupin, said while announcing the results in May.
But Lupin, with Rs 6,960 crore in revenue in fiscal 2012, improved its ranking among local drug makers, moving up to the fourth position in terms of sales, replacing Cipla after Ranbaxy, Dr Reddy’s and Sun Pharma.
Ahmedabad-based Cadila Healthcare, or Zydus Cadila, reported a 4.52% drop in its quarterly consolidated net profit to Rs 170.88 crore, mainly on account of foreign exchange losses. Kiran Mazumdar Shaw-led Biocon posted a 3% decline in quarterly net profit at Rs 97.8 crore on account of a rise in research and development expenditure.
And Orchid Chemicals reported lower-than-expected numbers for the fourth quarter on account of lower growth in sales and higher interest expenditure, Angel Broking Ltd said in a research report.
Hyderabad-based Aurobindo Pharma’s net profit fell almost 14% to Rs 108 crore. Aurobindo’s chief executive N. Govindarajan blamed the decline on the US Food and Drug Administration’s alert on the company’s factory in Hyderabad, high cost of materials, inflation and a notional loss related to restating foreign currency borrowings.
Cipla’s overall results were in line with expectations, with a 36% growth in net profit at Rs 292 crore during the January-March quarter. “This was primarily led by extended seasonality, which boosted its respiratory franchise, mainly in anti-asthma sales. The segment was further benefited from the field force effectiveness,” brokerage Proactive Universal Group Securities said in a report. Cipla’s sales increased 8.7% to Rs 1,814 crore.
Ranbaxy posted a significantly high growth in net profit for the January-March quarter mainly due to a one-time opportunity it had in the US market, where it launched a copy of the world’s largest selling drug Lipitor. Ranbaxy posted a four fold increase in net profit at Rs 1,246 crore. The drug maker, which follows a January-December fiscal, launched the generic drug in the US in December under a six-month marketing exclusivity.
It earned Rs 345 crore in foreign exchange gains during the quarter.
Mumbai-based Sun Pharma also reported a high net profit growth, driven by significant growth in its domestic and international business and by the impressive profit posted by its Israel subsidiary Taro Pharmaceutical Industries Ltd.
India’s generics-driven drugs industry maintained its annual growth at a compounded average rate of 16-17% during fiscal 2012. The local industry, which has about 15,000 active drug makers, including small, medium and large ingredients as well as formulation making units, also saw an impressive performance from mid-sized companies such as Ipca Laboratories Ltd, Indoco Remedies Ltd and Hikal Ltd during the quarter because of emerging opportunities in the domestic as well as international markets.
The country’s drug industry is expected to sustain the growth, owing to its global competitiveness, according to Balaji Prasad, India healthcare and pharmaceuticals analyst, at Barclays. “We do not share the general market apprehension of a steep dip in the revenue trajectory as the patent expiry opportunities recede post-2015, and we believe that growth opportunities abound in the US and other global pharma markets,” Prasad said in his latest report.
Graphic by Venkatesulu/Mint
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