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The leading 100 Indian pharmaceutical companies have registered poor financial performance during the year ended March 2018 on account of US FDA actions in respect of quality norms, a challenging US generic pricing environment, price cuts, stiff competition, implementation of Goods & Services Tax (GST), litigation provisions and exchange rates. Despite receiving significant higher ANDA approvals from US FDA during 2017, the Indian majors failed to generate higher revenues and profits during 2017-18.
The net sales of Pharmabiz sample of 100 listed pharmaceutical companies increased marginally by 3.3 per cent in 2017-18, lowest growth in last five years, to Rs.2,07,447 crore from Rs.2,00,810 crore in the previous year. Among the top 100 companies, 35 companies registered pharmaceutical sales over Rs.1,000 crore during 2017-18, and of them, 7 companies registered sales over Rs.10,000 crore which includes Sun Pharmaceuticals Industries, Aurobindo Pharma, Lupin, Cipla, Dr Reddy's Laboratories and Cadila Healthcare. Top ten companies with net sales of Rs.5,000 crore or more, (excluding Piramal Enterprises) contributed 61 per cent to aggregate sales of 100 companies.
We have excluded Piramal Enterprises, a Rs.10,631 crore well diversified company, from the list of seven major companies as its pharmaceutical sales were at Rs.4,449 crore. Piramal is engaged in pharmaceutical, financial services and healthcare insights & analytics. Merck and Dr Lal PathLabs have entered for the first time in top 35 companies with net sales of over Rs.1,000 crore.
The net sales of 13 companies improved by over 20 per cent and another 20 companies registered sales growth between 10-20 per cent. However, 31 companies achieved only single digit sales growth during 2017-18 which includes majors like Aurobindo, Cipla, Alkem Labs, Torrent Pharma, Biocon, Ipca Laboratories, Strides Shasun, Sanofi India and Natco Pharma. The net sales of remaining 36 companies declined during 2017-18 which includes important entities like Sun Pharma, Lupin, Dr Reddy's Laboratories, Wockhardt and GlaxoSmithKline Pharma (GSK).
Sun Pharma remained on top among the 100 companies with net sales of Rs.26,066 crore during 2017-18. However, its net sales declined by 13.9 per cent from Rs.30,264 crore in the previous year. Aurobindo Pharma climbed to second place with net sales of Rs.16,233 crore, displacing Lupin to third spot as Lupin's net sales declined by 9.1 per cent to Rs.15,560 crore. Cipla and Dr Reddy's Labs (DRL) maintained their fourth and fifth rank with sales of Rs.14,751 crore and Rs.13,802 crore. Cipla's sales increased marginally by 3.3 per cent and that of DRL declined by one per cent. Cadila achieved strong growth of 26.5 per cent in sales and maintained its ranking.
During 2017-18, Dr Lal PathLabs, Eris Lifesciences, Thyrocare Technologies and Hester Bioscienes entered the Pharmabiz study of 100 companies for the first time. However, Orchid Pharma, Sterling Biotech and Wanbury were omitted as these companies failed to declare financial results.
Their earnings before interest, depreciation, tax and adjustments (EBIDTA) and net profit declined by 3.3 per cent and 11.8 per cent respectively. The raw material cost including purchases and stock adjustments increased only by 6.2 per cent to Rs.74,653 crore from Rs 70,300 crore. Employees' cost increased by 10.5 per cent to Rs.37,775 crore from Rs.34,192 crore and other expenditure remained almost same at Rs.54,641 crore.
Sun Pharma's EBIDTA declined by 39.8 per cent to Rs.6,447 crore from Rs.10,712 crore in the previous year and that of Lupin declined by 28.3 per cent to Rs.3,874 crore from Rs.45,99 crore. Glenmark also suffered heavy setback and its EBIDTA declined by 17.7 per cent to Rs.1,706 crore from Rs.2,074 crore. Wockhardt, Strides, Vivimed Labs, Neuland Laboratories, Venus Remedies, etc also received blow and their EBIDTA declined significantly. However, Cadila Healthcare, Piramal Enterprises, Abbott India, Natco Pharma, Pfizer, Marksans Pharma, Sequent Scientific, Suven Life Sciences, Novartis India, Caplin Point Labs, Thyrocare Technologies, RPG Life Sciences, DRL, Gufic Biosciences, Opto Circuits, Vimta Labs, Medicamen Bioteh, Samrat Pharmahem and Brawn Biotech registered solid growth over 30 per cent during 2917-18.
The interest burden of 100 companies increased by 23.5 per cent to Rs.6,684 crore from Rs.5,413 crore in the previous year mainly due to higher interest cost of Piramal Enterprises. The interest cost of Piramal Enterprises increased by 46.6 per cent to Rs.2,978 crore from Rs.2,030 crore due to its activities in the financial services. Excluding interest cost of Piramal Enterprises, the interest cost of 99 companies increased only by 9.6 per cent to Rs.3,706 crore from Rs.3,382 crore. Few major companies like Cipla, Jubilant Life, Ipca, Alembic Pharma, Ind-Swift Laboratories, etc managed to reduce interest cost, but the interest cost of Sun Pharma, Lupin, Cadila Healthcare, Piramal Enterprises, Torrent Pharma, Biocon, Indoco Remedies, etc increased significantly and put pressure on overall working.
Depreciation provision increased by 17.1 per cent to Rs. 11,104 crore during 2017-18 from Rs.9,485 crore in the previous year. The profit before tax and adjustments of 100 companies declined by 13.2 per cent to Rs.29,562 crore from Rs.34,053 crore. However, lower tax provision of Rs.4,189 crore during 2017-18 as against Rs.6,931 crore in the previous year impacted favourable net profit before adjustments and it declined by 6.4 per cent to Rs.25,373 crore from Rs.27,122 crore.
The net profit after adjustments nosedived to Rs.22,516 crore from Rs.25,526 crore as several major companies like Sun Pharmaceuticals Industries, Lupin, Dr Reddy's Laboratories, Glenmark Pharmaceuticals, Biocon, Wockhardt and Strides Shasun received setback. However, among the top 20 companies, few top players like Cadila Healthcare, Jubilant Life Sciences, Aurobindo Pharma, Cipla, Abbott India, Natco Pharma, etc., managed to improve their financial performance during 2017-18. Sun Pharma has made exceptional provision of Rs.950 crore towards an antitrust litigation relating to a product Modafinil during 2017-18. Similarly Lupin has made impairment provision of Rs.1,464 crore on certain intangible assets acquired as part of the Gavis group acquisition. Wockhardt has provided Rs.358 crore towards settlement of litigation matter with Teva Pharma.
The equity capital of 100 companies stood at Rs.3,740 crore as at the end of March 2018 and their reserves and surplus amounted to Rs.1,97,330 crore. Thus, the Indian pharma companies have built up strong financial position over the years and may be able to invest higher funds in R&D activities. With higher investments in R&D, these companies are well set to push their presence in the international market, especially in US. During the first half ended June 2018, Indian companies secured 125 ANDA approvals from US FDA and also secured 22 tentative approvals. Several companies who suffered due to US FDA actions in the last couple of years are well set to resolve issues and set to enter US market in a big way.
Despite sluggish profitability, several companies declared handsome equity dividend to their stakeholders. Sun Pharma declared equity dividend of 200 per cent, followed by Lupin (250), Cipla (150), Dr Reddy's Laboratories (400), Cadila Healthcare (350), Piramal Enterprises (1250), Glenmark (200), Jubilant Life (300), Alkem Labs (650), Torrent (100), Abbott India (500), Alembic Pharma (200), GSK (350), Sanofi India (710), Pfizer (200), Granules, Bliss GVS, Caplin Point Labs, Vimta Labs, Hester Biosciences and J B Chem (100), Merck (150), Vinati Organics (225), for the year 2017-18.
Financial Highlights of 100 Cos
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