Larger pharma companies witness muted gains in Q2; smaller ones are in robust health
Moneylife Digital Team 25 October 2010

Belying market expectations, pharmaceutical companies have turned in a mediocre performance for the September quarter

The pharmaceuticals industry is expected to deliver a sturdy performance as growth prospects remain strong, say analysts. Domestic growth is expected to be around 15%-20%. However, many large pharma companies that have declared their results for the September quarter do not paint such a bright picture at this point.

So far, 18 pharma companies have come out with their results. The sales growth across these companies averaged a modest 10% for this quarter compared to the corresponding quarter last year. Operating profit growth also remained unimpressive at 12%. However, the numbers are still far better than those clocked during the previous quarter.

At Dr Reddy's Laboratories although sales rose a decent 15% over last year, operating profit fell by 7%. Piramal Life Sciences also posted negative growth during the September quarter. Sales tanked by 67% while operating profits shrunk 19% in this period. Piramal Healthcare reported a 24% drop in sales over the corresponding quarter last year and operating profit shrunk by 149% due to the hiving-off of its formulations division to Abbott Laboratories last year. Biocon and Cadila Healthcare were among the larger pharma companies to deliver decent results for the quarter. While Biocon's sales and operating profits surged 14% and 48% respectively, Alembic's revenues and profits climbed 29% and 31% respectively. Meanwhile Cadila Healthcare registered a 15% jump in sales and a 31% rise in operating profit for the September quarter.

Smaller pharma companies, however, turned in a robust performance during the quarter. Sun Pharma Advanced Research was the best of the lot, clocking 328% growth in revenues and 251% spike in operating profits. Indoco Remedies registered 41% and 59% rise in sales and operating profits respectively in the September quarter. Venus Remedies was also impressive, clocking revenue growth at 15% and operating profit growth at 32% over the corresponding quarter last year. Unichem Laboratories clocked a decent 16% growth in sales and 7% rise in profits.

Multinational companies have been reporting indifferent performance for many years. Pfizer failed to give any indications of a turnaround, reporting a decent 13% growth in sales and a 4% gain in operating profit. Fresenius Kabi Oncology, the New Delhi based multinational company, also disappointed investors. A 3% rise in September quarter sales was accompanied by a 29% fall in operating profits.  
Generics manufacturers are expected to perform well in the coming few years as patent expiries present significant opportunities for domestic players to capture overseas markets. Domestic formulations were also expected to witness sturdy pick-up in demand. However, the September quarter performance has failed to reflect this anticipated growth, which should be of concern for investors.

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