The Hindu Business Line : Drug companies will continue to face hard times

Bitter pill
The worst hit among them would be export-oriented drug companies
‘Several drug companies will take at least a 10 per cent hit on profitability’

P.T. Jyothi Datta

Mumbai, July 21

Hard times are here to stay for drug-makers at least for another three months, with the strong rupee and increasing cost of Chinese imports expected to take a combined toll.

Already reeling from these twin-factors, several drug companies are likely to take a 10 per cent hit on their profits in the current quarter too, say pharma industry representatives.

The worst hit among them would be export-oriented drug companies and those with few subsidiary companies overseas.

Cipla, for instance, reported a 30 per cent drop in net profit for the three months up to June, caused by the appreciating rupee and expensive Chinese imports. With half its revenues coming from exports, Mr Amar Lulla, Cipla’s Chief Executive Officer, told Business Line that profits in the current quarter too would take a hit.

Recently, China reduced export subsidy on several items across sectors. And this would hike input costs on pharmaceutical ingredients by 5 to 18 per cent, observed Mr Ranjit Kapadia, research-head, PCG-Prabhudas Lilladher.

Drug-makers Cipla, J.B. Chem, Unichem, Hikal, Hetero, Divi’s, Strides, Aarti Drugs, Aurobindo, Pfizer and GlaxoSmithKline are likely to be affected by the rupee appreciation or the cost of Chinese imports, or both, he said.

In fact, the Pharmaceuticals Export Promotion Council (Pharmexcil) has written to the Prime Minister, Dr Manmohan Singh, and the Union Commerce Minister, Mr Kamal Nath, seeking even-handed treatment in the Centre’s recently announced relief-package.

The Pharmexcil Chairman, Mr D.B.Mody, has asked the Centre to extend to the pharmaceutical industry the relief package announced for exporters in nine sectors, including textiles and engineering.

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