Quarterly Results

Innovator's loss is the generic makers' gain

Katya Naidu - Mumbai

This quarter, Indian generic makers can't get the smile off their lips. Dr Reddy's is riding high on generic sales and has reported a remarkable surge in net profit amounting to 199 percent. Moreover, the revenues have also crossed the psychological $1 billion milestone. "Fiscal 2007 has been a truly extraordinary year for Dr Reddy's in many ways. For the first time in the history of Dr Reddy's, we have crossed $1 billion in revenues. Starting as an API manufacturer, Dr Reddy's has grown into a vertically integrated global pharmaceutical company with activities spanning the entire pharmaceutical value chain," said G V Prasad, CEO, Dr Reddy's Laboratories.

The Q3O7 revenues increased by 160 percent to Rs 15.4 billion as against Rs 5.9 billion ($134 million) in Q3 FY06. While there have been marginal increases in revenues from branded formulations business and API business by 18 percent and 29 percent respectively; it is the revenues in international markets which takes the cake with a 241 percent increase. They also contributed 86 percent to total revenues as compared to 65 percent in Q3 FY06. However, the event of the quarter remains the 180-day marketing exclusivity that it received for the generic version of Zofran Ondansetron Tablets which has captured 55 percent share of the total market.

An upward momentum

As international markets remain major revenue earners for domestic companies, Ranbaxy's growth too was powered by sales from North America and the BRICS markets which together accounted for 65 percent of total sales as against 61 percent in the corresponding period. These markets posted combined sales of $869 million, recording an increase of 25 percent. The international business recorded sales of $1,060 million, up 18 percent and contributed 79 percent to total sales. Commenting on the continuing positive performance of the company, Malvinder Singh, CEO and Managing Director, Ranbaxy, said, "We have had an extremely good year with robust sales across markets of US, BRICS, Africa, Latin America, Middle East and the Asia Pacific. Revenues from expanded market reach, new product flow, and acquisitions have kicked in. At the same time, our focus on streamlining costs and underlying organisational structures is leading to greater efficiencies, very much in tune with the dynamics of a fast changing global market place. I believe, Ranbaxy is well positioned to gain from the opportunities emerging in the global generics space."

Amongst the highlights of the quarter, Ranbaxy received USFDA approval to manufacture and market Atenolol Tablets which has an annual market size of $134 million as a part of the strategic alliance with Ipca Laboratories. The company was also approved to manufacture and market Simvastatin Tablets in the US, the total market size for which amounts to $4.2 billion. The conclusion of integration with Terapia has contributed to its growth in the Romanian market which is close to 50 percent. This successful acquisition has definitely put the company as the frontrunner in the race to takeover of Merck's generic business which has come up for sale.

Research pays

The success stories of Indian pharmacos are not exclusive to generic companies. Research based Glenmark Pharmaceuticals too flaunts a three digit growth of 118 percent in consolidated revenues for Q3 FY07. The consolidated profits for the quarter were Rs 1,889.82 million; while the net profit from the base business stood at Rs 615.93 million.

The company's Latin American operations, comprising Glenmark Farmacêutica Ltda and Servycal SA posted revenues of Rs 292.03 million for Q3, reflecting an increase of 116 percent. "On the generics and branded generics front, we are happy with the buoyant growth shown by our US and Latin American businesses and we expect them to contribute significantly to the overall revenues. We remain committed to NCE research and are confident of achieving the aggressive targets we have set out," said Glenn Saldanha, Managing Director and CEO of Glenmark.

Its strong pipeline of IPR which is driving the company's valuation, Oglemilast which is indicated for asthma/COPD is shortly expecting the top line results. Further, the company clinched a 190 million Euros deal with Merck KGaA, Germany for the development, registration and commercialisation of a molecule for Type II diabetes. It received an upfront payment of 25 million Euros from its partner towards the end of the same quarter.

Amongst other fast movers, Shasun Chemicals and Drugs' revenues grew by 86.54 percent. Lupin reported an increase of 28 percent in total formulation sales from the advanced markets (North America and Europe). It has also received ANDA approvals for Trandolapril tablets and Sertraline HCl tablets during the quarter. Biocon's Q3 FY07 registered a 26 percent growth in PAT over Q3 last year. Research Services and biopharmaceuticals delivered strong growth for the company supported by statin exports to the US market and technology and licensing revenues. Elder Pharma which has bagged marketing deal for Roche's osteoporosis drug Bonviva, has posted a 35.68 percent increase in net profit and 25.97 percent rise in sales. Strides Arcolab recorded a consolidated global revenue of Rs 760 crore as against Rs 533 crore recorded the previous year, registering an increase of 43 percent. JB Chemicals has registered a growth of four percent in net sales.

Legal hassles over Gleevec and a key product Tegrital coming under price control during the period under review has affected the sales of Novartis which declined marginally by 0.7 percent over the previous comparable period. The generics business recorded sales of Rs 34.1 crore showing a decline of 24.6 percent which due to less participation in low margin tender business.

However, the OTC business continued to perform well growing by 11.4 percent. Cipla which is also challenging the inclusion of Salbutamol, Theophylline, Ciprofloxacin and Norfloxacin under price control has posted a marginal 5.2 percent growth in net profit. The reasons fopr which are quoted as a decline in sales from export revenues.

katya.naidu@expressindia.com