Stock Watch

The year 2005 saw a host of Indian pharma companies in deal with foreign firms. Mergers, acquisitions and strategic alliances were the order of the day. With contract research and manufacturing services (CRAMS) opening doors to Indian pharma, domestic pharmaceutical exports are expected to grow by 30 percent, touching a new high of Rs 21,685 crore this financial year.

The year 2006 will continue to see large number of global pharmaceutical majors outsourcing the manufacturing activity to Indian pharma companies, which enjoy much lower costs than their western counterparts.On the policy front, the government has proposed reduction of excise duty on all pharma products from 16 percent to eight percent. This will be favourable for pharma companies that have a major chunk of their turnover coming from the domestic market.

The draft National Pharmaceutical Policy has proposed a complete exemption of cancer drugs from all types of central levies excise duty, import duty and has also said that states would also be asked to exempt these medicines from all types of state and local levies.

The government has set ceilings on trade margins, migrated to a uniform regime of MRP and has done away with branded generics. The new MRP based excise duty regime threatens the existence of many small scale pharma units, especially in the states of Andhra Pradesh and Maharashtra that were involved in contract manufacturing for the larger established players.

Taking the case of specific stocks, companies like Sun Pharmaceuticals, Cipla, Wockhardt and Lupin have been in the news during the past year. Let's take a closer look at them.

Cipla posted a net profit of Rs 95.9 crore for the second quarter ended September 2004, up 38 percent over the same period a year ago, while net sales rose 29 percent to Rs 581.4 crore. Exports contributed to 40 percent of total sales against 38.7 percent last year.

Revenues from international trade were up 31.6 percent to Rs 241.7 crore. The maximum growth in the exports was in the formulations segment, which saw an increase of over 76 percent to Rs 157.9 crore.

Cipla recently signed up a global supply deal with the $10 billion German drug maker Boehringer Ingelheim. The product development and manufacturing pact involves development and supply of Boehringer’s hypertension drug, Telmisartan.

The company is also planning to start supplies of Tamiflu to some Asian and European countries from January.

Cipla is currently trading at Rs 441.15 on the BSE, has gone up by 38.35 percent approximately in the last one year.

Sun Pharmaceuticals, the speciality pharma company is ranked sixth among all Indian pharma companies with a 3.31 percent market share. In the Indian market, the company is a leader in niche therapy areas of psychiatry, neurology, cardiology, diabetology, gastroenterology, orthopedics, with a rank among the top three companies. The company makes speciality bulk actives and formulations across 11 cities in India.

The company's wholly owned subsidiary, Sun Pharmaceutical, Michigan recently acquired Able Labs in the US for $23.15 million. This is Sun Pharma's fourth acquisition in the US, the other three being the acquisition of Caraco in 1997, the acquisition of two brands from Women's First Healthcare in 2004, and the purchase of a dosage form plant at Bryan, Ohio earlier in September this year.

In the regulated US market, Sun and its subsidiary Caraco continued to make rapid strides. As of end September, Sun and Caraco had a total of 37 ANDAs pending approval with the USFDA. Approvals and launches should take place over the next two to three years, providing visible US operations.

Sun Pharmaceuticals is currently trading at Rs 681.05 on the BSE, has gone up by 23 percent approximately in the last one year.

Lupin reported a 158 percent rise in net profits for the quarter ended September 30, 2005 at Rs 452 million, up from Rs 175 million in the corresponding period last year. Gross revenues for the quarter increased by 32 percent to Rs 4,191 million. Driven by buoyant off-take in the US market with the launch of Ceftriaxone vials for injection, the company's exports revenues grew 42 percent to Rs 1855 million. Domestic revenues also kept up the growth momentum with an increase of 24 percent to reach Rs 2,337 million. EBITDA increased by 127 percent to Rs 763 million as against Rs 336 million in the previous year.

During the quarter the company spent Rs 231 million on R&D expenses taking the total R&D spend during H1 2005-06 to Rs 418 million representing six percent of net revenues.

The company filed three ANDAs, two COS and one DMF. It received two ANDA approvals viz. for Lisinopril Tablets and Cephalexin suspension respectively during the quarter under review.

Lupin is currently trading at Rs 769 on the BSE, has gone up by 12 percent approximately in the last one year.

January 24, 2006