1-4 September, 2006 Pragati Maidan, New Delhi, India
    Pharma Cos To Post Robust Sales Growth In June Quarter






Large cap pharmaceutical companies, barring Ranbaxy Laboratories, are expected to post a robust growth of around 20% in both topline and bottomline for the quarter ended June this fiscal, on the back of new generic opportunities in the US, increased M&A activity and better product portfolio. However, mid-caps and multinational companies (MNCs) may post a subdued performance this quarter.

With products worth $30 billion set to lose patent in the US market alone in CY 2006, new opportunities will open up for the Indian generic players. Successes on patent challenges include Dr Reddy’s (for Simvastatin and Proscar) and Ranbaxy (for Simvastatin 80 mg). Also, the bigger players are expected to supplement overall growth through M&As. However, Ranbaxy, despite its acquisition of three companies - Ethimed NV of Belgium, Romania’s Terapia and the unbranded generic business of Allen S.p.A (a division of GlaxoSmithKline), in Italy - may see only a 5% growth in topline.

Ranbaxy’s acquisitions were of smaller in size, compared to Dr Reddy’s acquisition of Germany’s Betapharm for 480 million euros. Analysts expect Dr Reddy’s to see a 50% growth in bottomline this quarter. Moreover, Ranbaxy continues to have a major marketing presence in the US, where companies are still facing a squeeze on margins. “Competition hasn’t eased in the US,” Sarabjit Kaur Nangra of Angel Broking was quoted saying in a newspaper article“Although there are a large number of patent expiries in US, the upsides could be capped on back of presence of large numbers of players, especially increased number of low-cost Indian manufactures,” she adds.

“For MNC pharmacos, we believe that CY 2006 could turn out to be lacklustre as benefits of new launches will get fully reflected only during CY 2008,” Kaur adds. MNCs in India also depend more on domestic sales, which can be a dampener. Mahesh Sawant of Frost & Sullivan, however, believes that in the domestic market, pharma companies with strong product portfolio will grow above the industry growth rate.

“For MNC pharma companies, the key will be improved product mix, reduced dependence on drugs under the DPCO control and cost efficiencies at the operating level. For domestic companies, the pricing pressure hampering margins will have to be offset by a continuous flow of products to the markets,” says Sawant.

Date: 18-Jul-2006

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