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SmithKline Pharma: A weak prescription

Jun 15, 2000

SmithKline Beecham has been undergoing a tough time since the last 12 months. The 38% duty on Engerix its Hepatitis B vaccine coupled with the price control imposed on its B complex vitamin Zevit put paid to the topline growth over the last year. Its flagship brand Iodex continues to face tough competition from the likes of Paras Pharma’s ‘Moov’, Elder Pharma’s ‘Tiger Balm’ and ‘Amritanjan’.

There have been press reports in the past that the company is introducing its new anti–meningitis vaccine via its 100% subsidiary SmithKline Beecham Asia. Interestingly, this company has no manufacturing facility. Thus it even gets Crocin and Eno (the two other brands under its control) manufactured by SmithKline Pharma which derives a manufacturing fee for the same.

At present, however there are unconfirmed reports of ‘Avandia’ its block buster anti–diabetes drug being introduced through SmithKline Beecham Asia. If these turn out to be true the only source for the company to improve its topline would also vanish.

Particulars (Rs m) FY99 FY00E
Sales 3,295.0 2,636.0
Net Profit 247.0 129.0
EPS (Rs) 8.4 4.4
P/E   33.6

Though the overall pharmaceutical sector is likely to grow by at least 10%, SmithKline Pharma’s topline is expected to show a de–growth of 20% in the current year. The stock quotes at a price of Rs 147 (Rs 445/128) and is unlikely to fly, unless the parent introduces new products through its listed subsidiary.


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