Pfizer Ltd’s June quarter earnings reflect the impact of slower sales growth in the domestic market. The industry appears to be facing slower offtake in some categories and competition-led pressure on prices is also visible in certain others.
Most large companies have increased their sales force, products and geographic coverage as they attempt to drive up sales. In a conference call, Pfizer’s management said that according to figures provided by IMS Health Information and Consulting Services India Pvt. Ltd, the company’s sales growth was about 14% during the June quarter, similar to the industry growth rate, which is down from a peak of 20% seen in the previous fiscal year.
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Pfizer said slower industry growth is seen in the anti-infective segment, which is growing at about 12.5% and the respiratory segment, which is growing at about 10.5%. For the company, sales of Corex have risen by about 19%, while those of Becosules have been flat.
Pfizer’s growth has been contributed to significantly by volumes, which rose 11%. Its financials show that sales grew similar to IMS numbers, rising 14%, while other operating income rose 55%. The latter represents income from clinical trials-related services and commission income received from Wyeth Ltd, whose products are marketed by Pfizer.
New products contributed about 3% to sales and represent sales of branded generics introduced in the past two years. It has introduced four new products during the quarter, and proposes to keep up the momentum.
Pfizer’s operating profit margins were down slightly because of higher increase in material costs and other expenditure, led by higher advertising costs. But healthy sales growth, higher other income, lower tax, and exceptional expenditure a year ago, all came together to contribute to the 19% growth in net profit.
That would easily qualify as excellent profit growth for a multinational pharmaceutical company. But investors are expecting more, it would appear. The stock had touched a 52-week high of Rs 1,636 end-July, rising by about 60% from its December levels and by 28% since June. The underlying premise behind this optimism, that its marketing efforts and growing product portfolio will drive growth, is valid. The 14% growth in the June quarter was better than the 12% growth seen in 2010-11. But if industry growth is slowing, it may affect Pfizer’s growth, too. Moreover, another sword hangs over its head, the possible loss of its animal health division to a global restructuring plan by Pfizer Inc. This division contributes about 12% to Pfizer India’s revenue. These two factors should make the company’s investors a little cautious. Its stock has fallen by about 4% in a week.
Graphic by Sandeep Bhatnagar/Mint
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