Pharma sector gains from Re-rise

The appreciation of the rupee might have brought in its share of woes for exporters and traders alike, but for the pharmaceutical sector with in-licensing agreements in place, its time to make hay. Even as the IT, jewellery and textile firms are tearing at their hair with each rise of the rupee and the consequent load on their revenues, several domestic drug firms are laughing all the way to the bank.

Several domestic firms such as Ajanta Pharma, IPCA Labs, Lupin, Elder Pharma and Nicholas Piramal have benefitted due to the rupee appreciation. While Elder has some 28 deals in place, Ajanta Pharma and IPCA are in to technology transfer and Lupin is involved in bringing in raw material, so all the firms score. Since Nicholas Piramal also exports its drugs, the effect is not that dramatic.

Analysts said that companies that have adopted an in-licensing model are in for a windfall of at least 18-20% (the same as the percentage fall in dollar against the rupee) as they pay out hefty amounts for purchase of raw material from the international partner. The full impact of the swell in profit would be visible during the current year.
Since the purchase of raw material is fixed in dollar terms, slide in dollar has taken the wind out of the sail for most MNCs. For example, an Indian drug company which has to pay, say $1,00,000 towards purchase, would have paid Rs 48-49 lakh a year ago. Now, the firm would have to shell out only Rs 40 lakh.

The Rs 9 lakh saving would kick into play for just one in-licensing agreement. Most domestic pharma firms have a minimum of five such agreements in place.

The in-licensing model allows a pharma company to manufacture and sell products of the foreign partner in India officially without any kind of patent infringement. It’s a win-win situation, since the Indian company is able to get its hands on the technological know-how, and in some case, the raw material too, while the foreign company is able to get a toe-hold in the huge Indian market.

Alok Saxena, director, Elder Pharm said, “We have about 28 in-licensing deals in place. Almost 45% of turnover comes from more than 65 in-licensed products. Given the scenario, we would be able to show better margins and net benefit to bottomline, as our forex outgo shall decline and the cost of our products will become cheaper.”

Nicholas Piramal’s CFO, N Santhanam gives a different take. “We have some in-licensing agreements in place, but they don’t form a very large percentage of sales. Though some companies are in the US, in terms of in-licensing pacts, revenues would be less than 2% of sales.”

Cipla becomes the largest pharmaceutical retailer in India

Cipla has emerged as the largest pharmaceutical retailer in the country. Dr Y K Hamid owned pharma major finally left behind pharmaceutical major Ranbaxy to emerge as the number one pharmaceutical retailer in the Indian market. Cipla is up 1.86% in yesterday’s trade on the NSE after it edged past Ranbaxy Laboratories to become the No 1 retail company in the domestic pharma space. This was revealed by a survey carried out by ORG. For the 12-month period ended May, it has raced ahead of Ranbaxy.

For the year ended May 2007, Cipla is the market leader with a 5.05% market share followed closely by Ranbaxy at 5.04%. Glaxo SmithKline came in a distant third with a 5% market share. For May, Cipla’s market share was 5.05% against 4.82% for Ranbaxy. It may be interesting to note that on a monthly basis, Cipla has been the market leader for the last three months.

Cipla, Ranbaxy, and GSK have been the frontrunners for the top slot for some years now. Ranbaxy has been the dominant player, leading the market since July last year. GSK briefly held the top position earlier this year but Ranbaxy regained the numero uno position in March for the 12-month period, only to be replaced by Cipla in May.

Cipla fares better when it comes to revenue from domestic market. Its revenue from domestic market is about Rs 20 million more than Ranbaxy. According to ORG figures, the market shares of majors such as Cipla, Ranbaxy, and GSK have either remained stable or have marginally gone down from around 5% over the past few years.

Reliance, Cipla in talks for buy out

Mukesh Ambani’s Reliance Group is understood to be interested in acquiring pharmaceutical firm Cipla as part of its expansion in the life sciences space.

Group company Reliance Life Sciences (RLS) is believed to be negotiating a deal but officials of both the companies have dubbed these reports as “speculation”.

“It is totally baseless,” Cipla Joint Managing Director Amar Lulla said when asked about the matter.

Yet, industry sources said negotiations between the two parties were in a fairly advanced stage and the possibility of making an announcement in the next few weeks could not be ruled out.

RLS had announced its intention to get into generics space and planned to invest about Rs 1,000 crore on expanding capacities and foray into contract manufacturing.

It had outlined inorganic as one of the paths for growth and earlier this year picked up 74 per cent stake in UK-based biotech firm GeneMedix. It had also formed a partnership with US-based fund MPM Capital.

On the other hand, Cipla has been one of leading Indian pharmaceutical companies with exports to over 160 countries. Last fiscal, the company recorded a turnover of Rs 3,667 crore with a new profit of Rs 661 crore. It has seven manufacturing at Baddi, Goa, Kurkumbh, Patalganga, Vikhroli, Bangalore and Mumbai.

Cipla edges Ranbaxy in India market

Cipla has edged past Ranbaxy Laboratories to become the No. 1 company in the domestic pharma retail market. It pipped Ranbaxy for the 12-month period ended May 2007 while Ranbaxy was the market leader in terms of domestic marketshare for the 12 months ended in March and April.

According to ORG figures, for the year ended May 2007, Cipla is the market leader with 5.05% marketshare closely followed by Ranbaxy Laboratories at 5.04%. Glaxo SmithKline (GSK) is at the third position with 5%. For the month of May alone, Cipla’s marketshare was 5.05% against Ranbaxy Laboratories 4.82%. Incidentally, on a monthly basis, Cipla has been the market leader for the last three months.

Cipla, Ranbaxy and GSK have been the top contenders for the top slot for some years now. Ranbaxy has been the dominant player, leading the market since July last year.

GSK briefly took the top position earlier this year but Ranbaxy regained the No.1 position in March for the 12-month period, only to be replaced by Cipla in May.

Cipla, however, downplayed its new position. “The ORG figures are taken from a small sample and give a broad indication of the industry trend, ” company joint MD Amar Lulla told ET.

ORG figures are based on the sales data of around 15,00 chemist stores across the country. When contacted, a Ranbaxy Laboratories spokesperson said, “We are confident of being No 1.”

In terms of revenue, the marginal difference of 0.1% in market share means that Cipla’s revenue from domestic market is about Rs 2 crore more than Ranbaxy Laboratories in retail sales. The market share ranking is, however, different from the revenue ranking of pharma companies. That’s because overseas revenue constitutes a large portion of the overall revenue of the big pharma companies. In revenue terms, Dr Reddy’s Laboratories is the largest pharma company followed by Ranbaxy.

While Cipla, Ranbaxy and GSK have been jokeying for the top position in the domestic retail market for the past few years, a domestic acquisition by any one of them would give that company an unassailable lead. Ranbaxy has been eyeing an acquisition in the domestic market for a while now.

ORG figures do not include the Rs 7,000 crore hospital sales, and therefore the market share in retail sales may differ from the overall market share.

According to ORG figures, Mankind Pharma is the fastest growing pharma company in the top 50. As a matter of fact, while the market shares of majors such as Cipla, Ranbaxy Laboratories and GSK have either remained stable or have marginally gone down from around 5% over the past few years, small and mid size pharma companies have made a significant presence in the market. Mankind with 2% market share (ranked 15%) and Elder and Emcure Pharma with one percent each have made it to the top 30.