Ranbaxy, Dr Reddy's spoil pharma party

India's top pharmaceuticals companies, Ranbaxy Laboratories and Dr Reddy's Laboratories, together dragged down the financial results of the pharmaceuticals industry to a new low in the quarter ended September 2004.

The industry's combined sales growth rate hit a new low of 4.69 per cent while its net profit growth rate was down by 0.33 per cent -- the first time in the last 12 quarters that the growth rate in net profits dropped.

Ranbaxy and Dr Reddy's have been posting declining net profits in the last four consecutive quarters, while their sales have dropped three quarters in a row.

But excluding these two pharmaceutical companies, sales of the 40-odd pharmaceutical companies studied by the Business Standard Research Bureau were up 7.81 per cent, while net profits were up 18.58 per cent.

Ranbaxy and Dr Reddy's suffered on both the domestic and export fronts. Ranbaxy's domestic sales for the quarter ended September 2004 were up by a marginal 1.9 per cent while its exports declined 5.7 per cent. As a result of the lower sales, Ranbaxy's net profit declined by 31.1 per cent in the quarter.

Dr Reddy's sales were down 4.49 per cent, largely on account of a 14.44 per cent decline in the sales of active pharmaceutical ingredients and drug intermediates. As a result, its net profit declined by 62.75 per cent to Rs 38.93 crore (Rs 389.3 million) in the quarter.

The sales growth rates of Nicholas Pharmaceuticals, Lupin Labs, Aurobindo Pharmaceuticals, Wyeth Ltd, Fulford, Zandu Pharma and Krebs Biochem too declined.

The profitability of second-line pharmaceutical companies too dipped.

Lupin reported a 66.2 per cent decline in net profit before extraordinary items, Aurobindo's net profit slipped 92.04 per cent, Novartis profits are down 17.88 per cent, FDC's profits are down 34.9 per cent and Fulford's profits are down 13.68 per cent.

Small and medium-sized pharmaceutical companies, however, posted encouraging results. Aventis Pharma, Glenmark, Alembic Pharma, Wyeth, Ind Swift Laboratories and Vimta Labs reported that their net profits doubled on the back of good export earnings.

The other noticeable performances: Cipla's sales were up 28.38 per cent and net profit up 37.92 per cent; Glaxo Smithkline Pharma's sales were up 18.86 per cent and net profits were up 36.96 per cent, excluding other income; Matrix Laboratories' sales moved up 20.22 per cent, while its net profits went up 30.77 per cent; Elder Pharmaceutical's sales went up 20.53 per cent and net profits shot up 31.4 per cent; and Ind Swift Lab's sales were up 21.53 per cent and net profits climbed 68.3 per cent.