Slowdown Virus Scars Pharma Q4 Numbers

Net profit margins in the pharmaceutical sector have been the lowest in the last quarter of 2000-01 (January-March) compared with the preceding three quarters.

This is despite the sector having posted better results in the same quarter last year.

On an aggregate level, net profit margins (NPM) of 95 pharmaceutical companies were down to 8.7 per cent for the fourth quarter ended March 2001 from 10.1 per cent for the quarter ended December 2000, 11.2 per cent for September 2000 and 9.9 per cent for the June 2000 quarters.

Gross profit margins (GPM) at 14.8 per cent, were at the lower side margin of 14.6 per cent to 16 per cent range in the previous three quarters.

The operating profit margins (OPM) for the fourth quarter were at 18.4 per cent. The lower margins, despite a double digit topline growth, can be attributed to higher provisions for depreciation (up 40.5 per cent) and taxation which increased 35 per cent in the quarter.

Aggregate sales income of these companies increased 14.1 per cent to Rs 3,519 crore, resulting in the sector's bottomline surging 20.3 per cent to Rs 304 crore.

Thus, the sector still presents a vastly fragmented picture, with no firm relation between the topline and bottomline growth.

According to an industry analyst, "The growth is commendable as the Indian pharma industry has yet to see a true liberalisation". The drug price control continues to be a bugbear for the sector.

"Even after two years of the announcement (budget speech, 1999) to ease the rigors of price control, the government is still to take a constructive step in that direction", feels an industry observer.

Interestingly for pharma majors, the fourth quarter proved to be a mixed bag. For Ranbaxy Laboratories, income from technology licensing to a tune of Rs 23.3 crore saw its net profit jump 46.8 per cent to Rs 57.4 crore even as sales income rose 20 per cent.

Cipla, banking on its early entry into the generics market and presence in majority of the therapeutic segments, has cushioned its performance. Sales income increased 51.4 per cent and net profit increased 18.2 per cent.

However, a drop in other income saw Glaxo's net dip 27.9 per cent, though its sales income rose 6.1 per cent.

On the other hand, Nicholas Piramal's net profit dipped 2.5 per cent, even as sales income went up 26.8 per cent.

Hoechst Marrion Russel posted a rise of 59.9 per cent in net profit, with just 10.8 per cent increase in sales income.

This was due to a over 300 per cent increase in other income and lower interest payment for the quarter.