1-4 September, 2006 Pragati Maidan, New Delhi, India
    Indian Drug Cos Reel Under US Pricing Pressures
Ranbaxy and Sun Pharma take big hit




In spite of new product launches, the US pharmaceutical generic market continues to reel under pricing pressure, increasing competition and rising operating costs.

Contrary to industry expectations, pricing pressure in the US has further increased in the year ended March ’06, hitting Indian pharma companies like Dr Reddy’s, Ranbaxy and Sun Pharma, which get a significant chunk of their revenues from the US.

The pricing pressure in the US generic market is casting a long shadow on Indian companies’ performance, with Ranbaxy in the front line. The domestic pharma major, which gets over 30% of its revenues from the US, has seen a drop in its consolidated gross profit margins to 57.9% in ’05, from 64.8% in ’04. Results in the first quarter ended March ’06, showed no sign of recovery, as gross margins fell further down to 47.2%, as against to 51.1% in last year’s corresponding quarter.

Sun Pharma was not better off, as its US subsidiary, Caraco Pharma Labs, recorded a staggering Rs 49 crore operating loss for the year ended March ’06, compared to a Rs 31-crore loss in the last financial year. Net sales were, however up 29% at Rs 381 crore, contributing to 31% of the company’s total revenues.

Increase in costs was however primarily due to R&D non-cash expenses associated with technology transfer agreement with Sun Global and increased development activities. Caraco’s gross profit margins dropped to 49.4% in the year ended March ’06, from 58% in the last financial year.

In order to counter pricing pressures, the company has been aggressive in filing Abbreviated New Drugs Applications (ANDAs) to increase its new products flow in the US.

Caraco filed 10 ANDAs during the year and currently has 14 ANDAs awaiting FDA approval. Sun Pharma filed 14 ANDAs during the year and has 30 pending for approval.

In spite of poor performance in the US, Sun Pharma continues to record a strong overall performance. The company has posted a good set of numbers for the year ended March ’06, thanks to a strong performance in the domestic market.


Date: 17-Jun-2006

Back