IHS Global Insight Perspective | |
Significance | Aurobindo Pharma (India) has reported sales growth of 24.6% year-on-year (y/y), with operating profit and net profit standing at 1.7 billion rupees and 1 billion rupees respectively for the three months ending 30 September. Over the same period, Wockhardt (India) has reported a mere 2% y/y increase in sales, with net losses growing by 196% y/y. |
Implications | Aurobindo's strong foothold in the U.S. and anti-retroviral (ARV) markets has boosted sales for the quarter, with profits benefiting from reduced expenditure and foreign-exchange gains. Meanwhile Wockhardt's sales are suffering on account of divestments to reduce the large amount of debt on its books. |
Outlook | Aurobindo's growing portfolio will continue to yield positive results for the firm in the forthcoming quarters, however sales in South Africa may be dampened by the loss of an ARV tender and the loss of generic exclusivity in the abacavir market. Wockhardt's priorities to reduce debt will see lacklustre sales in the short-to-medium term, while it becomes a lucrative acquisition option for several pharma majors. |
Aurobindo Pharma Q2 Results
Indian generic firm Aurobindo Pharma's sales for the three months ending 30 September 2009—the second quarter of fiscal year (FY) 2009/10—stood at 8 billion rupees (US$186.9 million), up year-on-year (y/y) by 24.6%. The formulation business was the leading revenue-generator for the firm, contributing 49% of gross sales, on account of the firm's strong U.S. and anti-retroviral generics business. Active pharmaceutical ingredients were next at 46% of the gross revenue contributions due to the sale of semi-synthetic penicillin (SSP) and cephalosporin bulks drugs.
Total expenditure for the quarter stood at 7 billion rupees, an increase of 16.2% y/y. The higher growth in sales compared to expenditure, and a foreign-exchange gain of 55.4 million rupees, has seen Aurobindo Pharma report operational and net profits of 1.7 billion rupees and 1 billion rupees respectively over the period in question.
Sales for the first six months of the FY 2009/10 stood at 17 billion rupees, an increase of 24.6% y/y. Operating profit and net profit over the same period stood at 3.3 billion rupees and 2.7 billion rupees respectively.
Aurobindo Pharma: Selected Financial Results 2009/10 (Consolidated and unaudited in mil. Rupees) | ||||
Q2 | % Change | H1 | % Change | |
Net sales | 8,826.4 | 24.4 | 17,354.0 | 24.6 |
Expenditure | 7,126.0 | 16.2 | 1,4029.2 | 16.02 |
Profit from operations | 1,7004 | 77.0 | 3,324.8 | 81.2 |
Net profit | 1,031.9 | n/m | 2,697.7 | n/m |
Source: Aurobindo Pharma n/m=not meaningful | ||||
Wockhardt Q3 Results
Meanwhile, Aurobindo Pharma's domestic counterpart Wockhardt's financial results are not so promising. Over the third quarter this year, the latter's sales stood at 9.2 billion rupees, up y/y by a mere 2.2%. Total expenditure stood at 7.4 billion rupees, an increase of 4.6% y/y. The firm has reported mark-to-market losses of 2.84 billion rupees for the quarter, pushing the company into loss. Losses before and after tax stood at 415 million rupees and 579 million rupees. Over the three months under review, losses on both these parameters have grown by 146% and 198% y/y respectively.
Wockhardt: Selected Financial Results 2009 (Consolidated and unaudited in mil. Rupees) | ||
Q3 | %Change | |
Sales | 9,227 | 2.2 |
Total expenditure | 7,408 | 4.6 |
R&D expenditure | 149 | 7.2 |
Loss before tax | -415 | -149.5 |
Loss after tax | -579 | -197.6 |
Source: Wockhardt | ||
Outlook and Implications
The quarter in question has been another promising one for Aurobindo. Reduction in expenditure and foreign-exchange gains have seen the firm report profits, after losses in the corresponding quarter in FY 2008/09.
The United States has always been a strong market for Aurobindo Pharma, and the quarter in question is no exception. New launches, such as generic carisoprodol, risperidone, and an additional dosage form of zidovudine have boosted sales of this segment over the quarter. Other new launches included generic amlodipine besylate and metformin in Switzerland. In the future, although the firm's large and growing generic portfolio guarantees revenues, sales in South Africa will be dampened by the loss of a US$400-million tender and the entry of other generic firms into the abacavir market. However, the recent acquisition of Trident Life Sciences as part of a venture into injectables will boost the firm's sales over the medium-to-long term.
Meanwhile, it was no surprise that Wockhardt continues to struggle given the large amounts of debt on its books. With a debt-restructuring exercise under way, the firm's bottomlines over the quarter have benefited from the completion of the sales of its animal health business. Such divestments are set to further reduce the firm's debt, along with the divestment of the firm's nutrition business and a part of its hospital empire (see India: 29 July 2009: Abbott in US$130-mil. Acquisition Deal for Wockhardt's Nutrition Business in India and India: 25 August 2009: Debt-Ridden Wockhardt Divests Half of Its Hospital Empire to Fortis Healthcare). However, industry insiders have revealed to IHS Global Insight that the nutritional business divestment has run into problems with stakeholders, and the completion of this may take longer than expected. In the future, further divestments may follow. In the meantime, the struggling company is attracting several suitors, with media reports that Pfizer is in acquisition talks to buy out the biotech firm.