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Health problems for antibiotic companies - Views on News from Equitymaster
 
 
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  • May 3, 2000

    Health problems for antibiotic companies

    The overall formulation market has grown by only 9.2% during the last year and the current year is expected to be only marginally better. Most of the pharmaceutical companies with the exceptions of Dr Reddy’s Laboratories (among Indian pharma companies) and E Merck (among MNC companies) have shown lacklustre performance in the first quarter of the current year.

    Therapeutic areas Ranbaxy Dr Reddys Glaxo Cipla Hoechst
    Marion
    Wockhardt
    Antibiotics 50% 19% 26% 43% 28% 19%
    Analgesics/NSAIDs 8% 18% 7% 5% 24% 25%
    Anti–ulcerants 4% 25% 7% 3%    
    Anti–hypertensives   24% 1% 9% 10% 4%
    Vitamins
    & Expectorants
    14%   26% 1%   14%
    Anti–diabetics         11%  
    Anti–asthamatics     2% 17%    
    Anti–allergic 1% 3%     9%  

    *NSAIDs: Non steroidal anti-inflammatory drugs

    The one indication of the performance could be the product portfolio of the respective companies. Companies where antibiotics contribute substantially to the turnover have witnessed a struggle to maintain margins. Say, for example companies such as Ranbaxy and Cipla where antibiotics contribute over 40% to the turnover have witnessed a decline in the margins.

    A classic example of the company bucking this trend is Dr Reddy’s Laboratories where its anti–ulcerant and anti pain segments have grown by over 25% and have helped the company report a 16% growth in both topline and bottomline.

    Multinationals such as Glaxo and Hoechst Marion Roussel despite a relatively lower proportion of revenue accruing from antibiotics vis-à-vis their Indian counterparts such as Ranbaxy and Cipla have a higher proportion of revenue from drugs coming under price control (60% plus) and this explains the sedate growth in profits.

    The stagnating margins for antibiotic companies are mainly due to the fact that the demand for antibiotics is being met by unbranded generics and this trend is expected to continue for the forseeable future.

     

     

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