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The financial performances of top 100 listed pharmaceutical companies was badly impacted adversely during the year ended March 2017 on account of quality problems with US FDA, price cuts by governments in domestic and international markets, adverse exchange rates and competition. Despite higher investments in research and development by several pharma companies, the limited success and lower returns on these investments put additional burden on their working. These companies recorded single digit sales and profit growth during 2016-17.
The net sales of Pharmabiz study of 100 companies improved only by 8 per cent to Rs. 2,06,899 crore during 2016-17 from Rs. 1,91,602 crore in the previous year. The net sales of 27 companies declined during 2016-17, 36 companies registered single digit sales growth, 19 companies achieved growth of above 20 per cent and 18 companies posted growth between 10-20 per cent. Earnings before interest, depreciation, taxation and adjustments (EBIDTA) improved only 7.4 per cent to Rs. 50,410 crore from Rs. 46,919 crore and net profit improved by 5.9 per cent to Rs. 26,893 crore from Rs. 25,397 crore.
The restricted growth impacted market capitalisation of these companies during last couple of months. Due to poor financial performance, the BSE Healthcare index of 67 leading pharma companies has underperformed as compared to BSE Sensex. The investors. sentiment was affected and several prominent scrips tank to their new low level. However, few new product launches, entry into new markets and better dividend payout assisted to maintain present share price levels.
Among the Pharmabiz sample of 100 companies, five companies viz., Sun Pharmaceutical Industries, Lupin, Aurobindo Pharmaceuticals, Cipla and Dr Reddy's Laboratories (DRL) reported sales above Rs. 14,000 crore during 2016-17. Total 34 companies crossed Rs. 1,000 crore mark in sales with three companies viz., Laurus Lab, Indoco Remedies and FDC appearing for the first time in this group. The net sales of these 34 companies worked out almost 90 per cent of net sales of Pharmabiz sample of 100 companies. The sales of 34 major companies with net sales above Rs. 1,000 crore improved by 8.3 per cent to Rs. 1,85,754 crore during 2016-17 as compared to Rs. 1,71,568 crore in the previous year.
Sun Pharma maintained its leading position with net sales of Rs. 30,264 crore as compared to Rs. 27,888 crore in the previous year. Lupin climbed to second spot, displacing DRL which is facing quality issues with US FDA. Lupin achieved strong growth of 24.4 per cent in net sales to Rs. 17,120 crore. Aurobindo and Cipla registered sales growth of 8.3 per cent and 5.8 per cent to Rs. 14,845 crore and Rs. 14,280 crore respectively. DRL's net sales declined by 9 per cent to Rs. 14,081 crore from Rs. 15,471 crore in the previous year. Among the first 34 major companies Natco Pharma has reported highest sales growth of 91.2 per cent to Rs. 2,065 crore from Rs. 1,080 crore driven primarily due to the sales of generic oseltamivir product in the USA market and continued growth of domestic formulations business. Lupin, Glenmark Pharmaceuticals, Piramal Enterprises and Strides Shasun reported over 20 per cent growth. However, net sales of DRL, Torrent Pharma, Wockhardt, Alembic Pharma, Pfizer and Nectar Lifesciences declined among the top 34 companies. Piramal's pharmaceutical sales worked out to 46.5 per cent of its aggregate sales followed by financial services 39.2 per cent and other 14.3 per cent.
Among the medium size, with sales between Rs. 100 crore to Rs. 999 crore, the sales of Sequent Scientific, Bliss GVS Pharma, Caplin Point Labs and Aarey Drugs & Pharma registered strong growth of over 45 per cent in sales during 2016-17. Hikal, IOL Chemical and Pharma, Morepen Laboratories, Neuland Laboratories, Poly Medicure, Bal Pharma, Amrutanjan Health Care, Sun Pharma Advance Research Company, Vimta Labs, Denis Chem Lab and Jenburket Pharma achieved sales growth of over 10 per cent. However, the sales of Panacea Biotec, Sterling Biotech, Anuh Pharma, Marksans Pharma, Ind-Swift, Parenteral Drugs and Lyka Labs declined over 10 per cent. Claris Lifesciences has sold its major part of business during 2016-17 and not included in the Pharmabiz study. Similarly, Sharon Bio-Medicine has changed year ending and Smruthi Organics was delisted from exchanges.
During the last couple of years, several pharma companies were suspended from trading from stock exchanges which includes Arvind Remedies, Amar Remedies, Ankur Drugs, Elder Pharma, Jupiter Bio, Surya Pharma. Twilight Litaka, etc.
Among the major companies, the earnings before interest, depreciation, tax and adjustments (EBIDTA) DRL declined by 31.9 per cent to Rs. 2,644 crore, and that of Cadila Healthcare declined by 16.9 per cent, Torrent Pharma 45.9 per cent, Wockhardt 75.6 per cent, Alembic Pharma 39.1 per cent, GlaxoSmithKline Pharma (GSK) 17.9 per cent, Pfizer 13.2 per cent and Indoco Remedies 6.7 per cent during 2016-17. The EBDITA of Natco Pharma went up strongly by 153 per cent to Rs. 697 crore. Similarly, Glenmark Pharma, Piramal Enterprises, Strides Shasun, Ipca Laboratories and Vivimed Labs also registered significant growth of over 40 per cent in EBIDTA. Sun Pharma, Lupin, Biocon, Sanofi India, Ajanta Pharma, Lalurus Laboratories and Syngene International registered growth of over 15 per cent during 2016-17.
The other income and other operating income of 100 companies increased by 9.6 per cent to Rs. 7,380 crore from Rs. 6,731 crore in the previous year. The raw material cost, including purchases and stock adjustments, increased by 7.3 per cent to Rs. 73,297 crore from Rs. 68,309 crore. Employees cost went up by 12.2 per cent to Rs. 34,987 crore from Rs. 31,176 crore and other expenditure increased by 7 per cent to Rs. 55,585 crore. Thus, the total expenditure of these companies increased by 8.2 per cent to Rs. 1,63,869 crore during 2016-17.
Depreciation provision went up by 21.6 per cent to Rs. 10,323 crore from Rs. 8,486 crore. There interest cost increased by 16.4 per cent to Rs. 6,145 crore from Rs. 5,281 crore. However, taxation provision declined by 6.3 per cent to Rs. 6,935 crore from Rs. 7,402 crore. Total adjustments including foreign exchange gains/loss, worked out to Rs. 114 crore as against Rs. 353 crore. Equity capital of 100 companies increased by 5.1 per cent to Rs. 3,256 crore from Rs. 3,099 crore and their reserves & surplus increased by 13.8 per cent to Rs. 1,71,678 crore from Rs. 1,50,866 crore in the previous year.
Several companies from Pharmabiz sample have declared handsome equity dividend to shareholders during 2016-17. For instance, Piramal Enterprises declared equity dividend of 1,050 per cent, Alkem Labs 750 per cent, Sanofi India 680 per cent, Ajanta Pharma 650 per cent and Divi's Laboratories 500 per cent. Despite lower profit, DRL declared equity dividend of 400 per cent and Cadila Helathcare 320 per cent.
The financial performance for the first quarter ended June 2017 and second quarter ended September 2017 will be under pressure due to GST implementation and price cuts announced in the 2016-17. Further, quality issues with US FDA and adverse currency fluctuation may put additional burden on working in the first half of 2017-18. So far, the major companies like DRL, Lupin, Wockhardt, GSK, Jubiilant Life, Biocon and Alembic registered significant setback in profits during the first quarter ended June 2017. Wockhardt registered net loss of Rs. 410 crore in June quarter. However, Glenmark, and Priamal posted better growth in first quarter. Focus on new product launches in international market and higher approvals from regulatory bodies may generate more revenues in the current year.
Highlights 100 cos : 2016-17
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