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A weak dose from SmithKline Pharma - Views on News from Equitymaster
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  • Feb 25, 2000

    A weak dose from SmithKline Pharma

    SmithKline Pharmaceutical has reported disappointing results for the year ended December 1999. However, they are in line with the developments that took place during the year.

    (Rs m) 1999 1998 Change
    Sales 3,247.9 2,950.2 10.1%
    Other Income 47.6 52.0 -8.5%
    Expenditure 3,007.1 2,568.3 17.1%
    Interest 10.4 3.9 165.2%
    Depreciation 27.3 18.0 51.5%
    Profit before Tax 335.7 495.6 -32.3%
    Tax 88.5 163.0 -45.7%
    Profit after Tax/(Loss) 247.1 332.6 -25.7%
    Net profit margin (%) 7.6% 11.3%  

    First of all during the budget the government imposed an import duty of 38.5% on Engerix (the Hepatitis B vaccine that the company produces). The company took a hit on the margins rather than increasing the price of the vaccine. The growth of Engerix (which grew by 74% in 1998) was also affected due to competition from the likes of Shanta Biotech (which tied up with Pfizer for marketing).

    Besides, Zevit (B complex vitamin) which contributes around 15% of the turnover was also was also brought under price control during the year. The company was forced to reduce the prices of the product by almost 50%. This hit the turnover and the margins further.

    The company’s flagship over the counter brand (Iodex) has also recorded less than anticipated growth due to competition from the likes of ‘Moov’ and ‘Tiger Balm’. What has actually saved the topline is the continuing growth in Augmentin. This product contributed more than 10% of the company’s turnover during the current year.

    The other product which have done well include Havrix and Varilix, the two other vaccines from the parent’s stable which have grown well and now contribute almost 15% of the company’s turnover. These are expected to lead the growth in the current year.

    Avandia, the parent’s anti–diabetes blockbuster is to be introduced only in the next year i.e. 2001. The vehicle that the parent will use (whether the 100% subsidiary or the listed company) is still open to question.



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