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Pharma Updates

News and Interesting Articles from the Pharma World:
 
 
 
 
 
 
 

Ranbaxy minus Singh Parivar

(from the Financial Times)
 
Half a decade after his grandfather set up Ranbaxy, Malvinder Mohan Singh, chairman, CEO & MD handed in the reins of the company, paving the way for what many in the industry say will be a new era in the Indian pharma industry. His resignation was only a matter of time, once he sold his majority stakes in the company last year to Japanese pharma giant Daiichi Sankyo.
 
His sale last year was seen as a savvy move to cash in rather than do battle in an increasingly regulated environment. Mr Singh however leaves the company after a tough year. The company’s annual performance showed a net loss of over Rs 1,032 crore (year ending December 2008) compared to a net profit of Rs 617.72 crore in the previous year. But forex losses due to hedging and the rupee becoming weaker affected not just Ranbaxy; there were a host of other Indian pharma players (and indeed companies across other sectors too) which gambled and lost their bets as the world economy went into a tail spin post September last year.
 
Analysts say that Daiichi Sankyo was not however prepared for their new acquisition continuing to be under the US Food and Drug Administration’s (US FDA’s) scanner for violations concerning falsification of data. With some of Ranbaxy’s products still under a US FDA imposed ban, there are always fears that other regulatory agencies might follow suit. Industry observers point out that culturally, the Japanese have their own style of working and would prefer full control of their assets. Hence the move to re-fashion the board.
 
For a company priding itself as research player of some global repute, the Japanese company is said to have been very concerned that its reputation would also suffer in the long run. The proverbial straw which broke the camel’s back was most probably Daichi Sankyo’s realisation and subsequent announcement in the first fortnight of this month, that its full-year profit would be below its previous projections. Evidently, the Ranbaxy buy and its subsequent inability to recoup losses thanks to continuing fall in US sales, was dragging the balance sheet of Japan’s third largest pharma company. It had at the time, indicated that it would step in to oversee Ranbaxy operations and a fortnight later, we are seeing the results of this increased involvement.
 
Ranbaxy & the Singh Family:
 
Although they did not start the company, the Singh family has been central to its success and owns most of the equity. Bhai Mohan Singh joined the company as a partner in 1951 when it was a distributor and led it through its early growth and subsequently into manufacturing. His son, Parvinder Singh, joined the company in 1967 becoming managing director in 1982 and chairman in 1993. It was his vision to transform Ranbaxy into an international company based on research rather than simply carrying on with local low-cost manufacturing.
 
When he died suddenly the company was lead by non-family members, D.S Brar and then Brian Tempest, a European. Malvinder Singh, one of Parvinder’s two sons, was appointed President (pharma) and an Executive Director at the time of Tempest’s appointment. Tempest then became Chief Mentor & Executive Vice Chairman of the Board and Malvinder the CEO whilst another European, Peter Burema, is President of the Global Pharmaceutical Business.
 
 

Foreign loans did not work for Wockhardt

  
Pharma major, Wockhardt, has been in the news for a while. This was after a flurry of events. Its chairman Habil Khorakiwala resigned 
elevating his son, Murtuza Khorakiwala to the post of Managing Director.

The company also went in for a CDR (corporate debt restructuring). If that was not enough, Wockhardt also postponed the announcement of its results for the quarter and the year ended December 31, 2008. That is expected on April 25 after the process of auditing its accounts is completed.

The background

Wockhardt is the seventh largest pharma company in India with an annual turnover of Rs 2653 crore. It has five research centres and 15 world-class manufacturing plants dotting various countries. All these are compliant with international regulatory standards such as the USFDA (Unites States Food and Drug Administration), Medicines and Healthcare Products Regulatory Agency (MHRA) or any of the other global regulatory bodies. It has end-to-end integrated capabilities for its products which starts off with the manufacture of the oral and sterile APIs (Active Pharmaceutical Ingredients) and fixed dosage formulations across various therapeutic areas.

Wockhardt’s global footprint is across key markets like USA, UK, France, and Germany. It also has subsidiaries in US, UK, France and Germany making it the largest pharma company in Europe. Since 2006, the company has been on an overseas acquisition spree.

Among them were the buyouts of Ireland-based Pinewood Labs in 2006, Negma Laboratories in France and the US-based Morton Grove Pharma in 2007. These ambitious debt-funded acquisitions have led to high-leverage assets that are not performing. Besides, the pharma business in the European market is facing pricing pressure as the market is movimg from a branded generics to an unbranded one.

With its international operations not very profitable, the company’s strong domestic branded formulations is likely to be the major growth driver over the next few years. The strategy of in-licensing niche global products for sale in India is likely to work well for them.

What went wrong?

High levels of gearing, foreign loans, interest payments and pricing pressure have not worked well for Wockhardt. This kind of leverage is not normal for a company belonging to a defensive sector like pharma which is less capital intensive and largely a cash generator. Added to this, the IPO of Wockhardt Hospitals was called off in 2008. Today, Wockhardt is burdened with a debt of Rs 3,400 crore on its balance sheet. With a market capitalisation of a mere Rs 834 crore and a choppy global financial market, a restructuring debt exercise for Wockhardt may not be very easy.

“In view of the adverse market condition, liquidity constraints and debt burden, the Board decided to make a reference to the CDR cell through ICICI Bank for financial restructuring of the debts of the company through CDR mechanism,” is what the press release from the company states.

How the company will restructure this debt is unknown. A mail sent to the company went unanswered. Of the debt, $110 million (Rs 550 crore) of FCCBs are coming up for repayment later in October this year. Besides, the founders of Wockhardt have pledged 53.94% of the total number of outstanding shares of the company, according to a company filing with the BSE.

“Besides restructuring debt, Wockhardt has three businesses — domestic, exports and biotech. With cash rich MNCs interested in a lot of these businesses, it may make sense to divest some of these,” says Sarabjit Kour Nangra, VP- Research, Angel Broking. Media reports point to the fact that Wockhardt is looking to selling a stake in Wockhardt Hospital. That could be one more option. All in all, there is clearly a long drawn battle for Wockhardt in the time to come. 

 

 
 

Generics face patent barrier

 
The generic industry is in trouble again, and the issue is now becoming a major non-tariff barrier against developing countries like India.
 
Two large drug consignments of generic major Cipla were seized in Netherlands by its customs authorities recently. The two drugs on the way to Peru are generic versions of blockbuster medicines used in mental health Rivastigimine (manufactured by Novartis), and Olanzapine (by Eli Lilly).
 
Confirming this, when contacted, Cipla joint managing director Amar Lulla said: "Big Pharma is in extreme distress, and is working on a multi-pronged strategy to keep generics out. These include defining legitimate generics as counterfeit and various litigations".
 
The drugs while in transit to Peru were held at Rotterdan port because they infringed patents in EU.
 
Sources said that recently many essential drugs have been held at European ports on way to Africa or Latin America from India, by EU customs for intellectual property (IP) infringement or labelling them "counterfeits."
 
Recently, customs authorities in Netherlands seized big consignments of legitimate generic medicines by Dr Reddys and Ind-Swift, which were also in transit. India is a source of affordable life saving medicines for many African and developing countries, and companies use the established trading route passing through EU ports for supplying essential medicines to millions across the world.
 
It is learnt that the government has raised objection on the issue to the Dutch authorities as it has a major impact on trade. Experts believed that drugs are being seized because of certain EU regulation. Europe had passed regulations in July 2003 authorising custom action against goods on grounds of intellectual property infringement. The regulation says "concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights".
It adds "Customs authorities should also be able to take action against counterfeit goods, pirated goods and goods infringing certain intellectual property rights which are in the process of being exported, re-exported or leaving the Community customs territory". Lulla added, "There has been a lot of noise on the issue. So it may get resolved soon as there is a rethink on the issue".
Experts say that it is not only a humanitarian issue where access of medicines gets affected, but also become a non-tariff trade barrier to block legitimate generics from developing countries.
Brazil, along with India and some other southeast countries, recently raised the issue at the World Health Organisation executive board when Dr Reddy's consignment (headed to Brazil) was held.
 
 
 
 

Pharma retail market grows 15% in Jan ' 09

(Article: Times of India)
The domestic pharma retail market has started the year with a bang, recording nearly 15% growth in January. The market had grown by nearly 10% during January-December 2008, and over 13% in December alone.
There was no major change in rankings of pharma companies in January in terms of market share, with Cipla garnering the largest, followed by Ranbaxy and GlaxoSmithKline at third position, according to consulting company, ORG-IMS. Piramal Healthcare was ranked fourth, followed by Zydus Cadila at the fifth slot in terms of market share.
 
During January, Pfizer moved up two ranks to the 10th position among companies with the largest retail sales in the market. Abbott (rank 12), Dr Reddy's Labs (rank 14), Intas Pharma (rank 18) and Micro Labs (rank 20) gained one rank each, as against December last year.
 
The domestic retail market valued at Rs 2,908 crore in January, has been recording a growth for the last three consecutive months since November 2008, after a slight blip in October.
The value growth for 12-month period ended January (moving annual total basis) was 9.9%, which is almost the same as December's growth of 9.8% (as per December MAT). Industry experts pointed out that pharmaceuticals and healthcare are recession-proof sectors, and will keep growing at a steady pace over the next few months.
In January, pain killer drug, Spasmo-Proxyvon was the highest gainer in ranks, amongst the largest selling drugs, moving up from the 24th slot in December to the 18th. The other major gainers are vitamin supplement Revital, having moved up from the 11th slot in December to seventh position in January, and iron supplement Dexorange, gaining four ranks (rank 11 as per January '09). Zinetac used to treat peptic ulcer moved up three slots to the 14th position, up from rank 17 in December.
Among the therapeutic areas, cardiovascular segment recorded a 14% growth, while anti-infective medicines grew 10% during the month. 
 
 
 

Only 6 drug majors post better results 

 (Article: Business Standard)
In a continuing trend for the previous two quarters, foreign currency fluctuations and mark-to- market losses are affecting profits of India's drug makers, despite increase in net sales ranging between 4.5 and 42 per cent for most of the firms during the three-month period.

While, net profit was down for nine prominent firms such as Glenmark, Cipla, Lupin and Piramal Healthcare, six companies, which include heavy weights such as Ranbaxy, Jubilant, Matrix, Panacea Biotec, Shasun and Orchid, fell into the red in the quarter ended December 2008. Major companies such as Wockhardt, Glaxosmithkline, Aventis Pharma and Strides Arcolab are yet to announce their results for the quarter.

"The domestic market continues to grow and those who have long-term supply contracts and product pipeline in the US and Europe will not suffer in the near or long term future. The business and future prospects for companies vary on a case to case basis, based on contracts and products they have committed," said Hitesh Gajaria, executive director, KPMG India.

"The worst (due to forex losses) should be over for most companies and on a broader basis, the top line should grow by 15-20 per cent for all the companies in the coming quarter," said Sarabjit Kaur Nagra, vice-president, research, Angel Broking.

The worst performer for the quarter was Ranbaxy Laboratories, which posted a consolidated net loss of Rs 915 crore as against a net profit of Rs 787 crore in the previous year. The company incurred a loss of Rs 353 crore in the previous quarter and a flat Rs161 crore net profit in the second quarter. However, Ranbaxy maintained its position as the largest drug company in India with an annual sales turnover of Rs 7,251 crore and a growth of 8 per cent over the previous year.

However, Dr Reddy's Lab, the second-largest domestic drug maker in terms of sales, bounced back with 156 per cent jump in net profit and 50.5 per cent jump in revenue for the third quarter. This was mainly due to exclusive gains from the launch of an authorised generic version of GlaxoSmithKline's Imitrex (Sumatriptan Succinate) in the US since November, based on an out-of-court settlement. Its net profit was down by 52 per cent and 26 per cent respectively in the previous two quarters.

Affected by forex losses, Cipla, the third-largest Indian drug company, had a moderate 6.1 per cent jump in net profit, whereas its net profits were down by 21 per cent in the previous quarter and 17 per cent in the first quarter of 2008-09. The company had to account for Rs 42 crore as loss for the quarter on revaluation of forward contracts, outstanding debtors and foreign currency loans, which was Rs 104.50 crore and Rs75 crore respectively in the previous two quarters.

"In this changing market, those who innovate and focus on speciality products and add value to their business by judicious investments in marketing strategies will gain. The companies will have to re-invent their business models to sustain growth in future," said Dr R B Smarta, managing director of Interlink Marketing Consultancy.

Sun Pharma's net profit was up only 28 per cent for the quarter, compared with 135 per cent and 121 per cent in the immediate previous quarters. Though its international revenues grew well, the performance of its US subsidiary Caraco was subdued for the quarter due to slowdown in the US.

While Piramal Healthcare and Lupin had a lacklustre performance for the quarter as against fairly good numbers in earlier quarters, Hyderabad-based Aurobindo recovered to post profits, compared with Rs 38.42 crore in Q2 2008-09. Glenmark, which is now facing the issue of lack of additional income from drug outlicensing deals, had its net profit down by 71 per cent, compared with 56 per cent and 102 per cent growth in net profits in the previous quarters.

However, the problems of companies such as Jubilant, Orchid, Shasun, Matrix and Panacea are continuing. Jubilant, which went in for a couple of costly acquisitions in the US in the recent years, posted a Rs 88 crore loss for the quarter, mainly triggered by a forex loss of Rs 131 crore. The company had losses of Rs 62.37 crore in the previous quarter and its net was down to just Rs 12.76 crore (Rs 142.86 crore in previous year quarter in the first quarter of 2008-09).

Chennai-based Orchid is facing competition for its cephalosporin products in the US and could not post either higher sales or profits.

Forex losses are pressurising Chennai-based Shasun, which posted a net loss of Rs 19 crore for the quarter and Rs 31.53 crore in the corresponding previous quarter.

Panacea Biotec also posted losses for the current and the previous quarters.

 

 

A Bitter-Sweet Pill: Financial performance of pharma companies

Four leading pharma companies-Cipla, Dr Reddy's Laboratories (DRL), Piramal Healthcare and Ranbaxy-announced their results last week for the quarter ended December '08. As expected, the quarterly profits of these companies suffered on account of forex losses. The rupee had been very volatile in the entire December '08 quarter and depreciated 4% at the end of it.

This led to forex losses for the export-driven pharma companies either in the form of hedging losses, markto-market (M-T-M) losses on forward contracts or M-TM losses on foreign currency loans. In case of Ranbaxy, forex losses along with restatement of financial performance as per Accounting Standard 30 severely impacted its results. The company has posted a huge loss for the second consecutive quarter.

Growth in revenues was in double digit for all the companies. Ranbaxy being the only company reporting the lowest sales growth of about 10%. The ban imposed by US FDA has affected the company's revenues coming from the US market. DRL witnessed a super-normal growth of 49% in revenues, thanks to the exclusivity, the company enjoyed from the authorised generic version of GlaxoSmithkline's drug Imitrex. The drug contributed to more than half to the company's topline increase. Also, DRL gained from Ranbaxy's loss, as the latter had failed to receive approval for its generic version of Imitrex from US FDA during the quarter.

Despite the economic slowdown and uncertainty in earnings, the revenues have grown in double digits. However, the growth has not been as strong as seen in the earlier quarters of the year. DRL's case is an exception here. The extra-ordinary business opportunity enabled it to post a smart recovery in its otherwise sagging financials.

Except DRL, all the other companies have witnessed contraction in their operating profit margins. At 2,657 bps, the contraction has been the starkest in case of Ranbaxy, while the lowest in case of Piramal Healthcare at 120 bps.

Among the entire gamut of companies, Cipla followed by Piramal Healthcare look the most promising. Cipla with its less risky business model of forging alliances in international markets and its dominant presence in the domestic market is a safer bet. Piramal Healthcare, too, with its strong foothold in the domestic market and diversification into contract manufacturing, contract research and diagnostic services business, holds a better promise than companies like Ranbaxy and DRL.

Future is uncertain as far as DRL and Ranbaxy is concerned. Ranbaxy has to work to get its US FDA ban lifted and rework at building business in United States, one of its biggest markets. DRL has to adjust itself to the price eroding tender-model in Germany and start showing profitable growth.

If Ranbaxy is successful in seeking approval for its generic version of Imitrex, it is likely that it would eat into the super-normal revenues and profits enjoyed by DRL right now. Investors need to wait for another couple of quarters before taking this call on India's big pharma companies.

The companies whose results are still awaited-Sun Pharma and Lupin-are the ones to watch out for. Sun Pharma, with no FCCBs on its books and less aggressive hedging policies, can lead the pack of the best performers in the sector. Lupin is likely to gain traction from its overseas

 

 

 

ORG IMS - Latest Indian Pharma Market Stats 

 
Medicine sales rise by 10%

  

Sale of medicines to consumers grew 9.8% to Rs 34,000 crore in the calender year 2008, compared with 13.4% in 2007. The slowdown is largely due to consumers shifting to cheaper brands and stockists not keeping enough products. Also, drug companies did not spend as much as on marketing initiatives in the second half of 2008, as they did in the same period previous year.

  

For the December month, industry sales rose 13.3%. This is the second consecutive monthly growth after the industry witnessed possibly its first sales decline in the October last year. In October, sales declined by 1.2%, but bounced back to register a 6.8% growth in November, according to figures compiled by research-based consultancy firm ORG IMS.

 

These figures are compiled from the data collected from wholesalers and represents the trend of the industry, and not the actual sales of over five lakh retailers across the country. The slowdown in drug sales in 2008 comes despite the popular perception that the drug industry is recession-proof and is an attractive investment opportunity during downturns.

 

Incidentally, the global sales of prescription generics drugs has also slowed down significantly to 3.6% in the October 2007-September 2008 period, compared with 11.4% in the same period a year ago, as per data available with the US-based IMS Health.

 

During the year, cardiovascular system recorded a 14% value growth in the Indian market, while anti-infectives registered a growth to the tune of 10%.

 

There is no change in the ranking of the top three companies from past year. Cipla continues to maintain its market leadership, followed by Ranbaxy Laboratories and GlaxoSmithKline (GSK). Delhi-based Mankind Pharma broke into the top 10, registering a growth of over 32% during the year.

 

Among the top products, Pfizer's cough syrup Corex is the top selling drug in the country with over Rs 160 crore annual sales. Novartis painkiller Voveran is the second best selling drug, while Piramal Healthcare (earlier Nicholas Piramal's) cough drug Phensedyl takes the third spot. However, ORG IMS maintains that the industry is independent of the global slowdown. Indian firms expect a strong domestic demand with a 11-14% growth in the next few years.
 
 

Molecule of the Month - Levetiracetam / Keppra ®

 
Four Indian drug firms on Friday received US drug regulator FDA's nod to sell generic (and cheaper) versions of epilepsy drug Keppra (Levetiracetam) in the US. This will see Lupin, Aurobindo Pharma, Orchid Chemicals and Glenmark fighting for the $1.1 billion drug pie along with US-based firms such as Roxanne, Mylan and UCB (the original drug owner).
The last of UCB's patents related to generic Levetiracetam (brand name Keppra) expired on January 14, paving the way for generic competitors to receive approvals and subsequently launch their own versions for US wholesalers and pharmacies for Levetiracetam tablets in multiple strengths.
The drug is prescribed for the treatment of partial seizures and epilepsy for adults and children and had sales of about $1.1 billion for the 12 months to September 2008, data from IMS Health showed. While generic major Mylan had a 2-month headstart earlier than others, Indian firms are well-prepared to encounter the competition and are choosing to take the partnership route: In fact, some like Glenmark and Lupin have already started selling the drug. "Our US subsidiary has initiated shipment of the product through the partnership with Invagen Pharmaceuticals. Marketing and distribution of Levetiracetam tablets in mul-tiple strengths has aready commenced," a Glenmark spokesperson said.
Another firm, Orchid pharmaceuticals has tied up Actavis to market this product and will launch the product very soon', a spokesperson of Orchid said. Industry experts feel that local partners help the Indian firms to reduce time-to-market these drugs as company can devote resources on either distribution, or manufacturing to optimise revenues.
 
 
 

Pfizer-Wyeth merger mixed bag for India

The $63 billion (Rs 3.1 lakh crore) merger plan involving Pfizer and Wyeth, the two drug-making giants, may have mixed effects on India's own manufacturers. 
Industry analysts feel that while suppliers of active pharmaceutical ingredients (API) could have one less global giant to supply to, contract research and manufacturing (CRAMS) companies could reap rich benefits. API is the basic chemical for most medicines.
 
Pfizer has said that there would be rationalisation of manufacturing and sourcing activities from all over the world. "This may include cutting down on its own manufacturing capacity, in which case CRAMS players stand to benefit," said Sarabjet Kaur Nagra, analyst, Angel Broking.
 
API suppliers to Pfizer and Wyeth, including Cipla and Aurobindo Pharma, may need to renegotiate their deals with the merged entity, said an analyst on condition of anonymity.
Indian manufacturers are favoured by foreign drugmakers for lower costs and higher efficiencies as far as supply of API and contract manufacturing is concerned. Most analysts, however, feel that the Indian patient has little to gain, or lose, from the deal.
 
India arms of both companies are small compared with India's own drug makers. Pfizer India's sales were at Rs 770 crore last year, while Wyeth clocked close to Rs 350 crore in an industry of Rs 25,000 crore. Growth in both companies has been slow, and new product launches have been few and far between. This is not expected to change much.