Domestic & Export Sales

Financial performance of the Indian drug and pharmaceutical industry, Imports and Exports

The financial quarterly performance of the Drugs and Pharmaceuticals Industry for quarter ended, March 2015 and the year 2015-16 (up to December 2015) is given below. The figures reported in the table show the percentage change in the respective items of income, expenditure, profitability etc as compared to the corresponding period the previous year.

As per CMIE estimates, Sales of the Drugs and Pharmaceuticals Industry registered a (y-o-y) growth of 12-14%, 14-69%, and 11.46% respectively, during the years 2012-13 to 2014-15. Net sales of the Drugs and Pharmaceuticals Industry grew by 14.91% (y-o-y) in the March 2015 quarter but declined to 9.24% (y-o-y) in the June 2015 quarter.

In the September 2015 quarter, net sales witnessed an upturn, at 17.01% (y-o-y), and at 16.74% (y-o-y) for the December 2015 quarter. The profitability of the industry improved during the said period. A healthy sales growth combined with an over three-fold rise in operating profits helped the industry to earn net profits equivalent to 13.1 % of income. In the December 2014 quarter, the industry had incurred a net loss equivalent to 8.4 % of income.

Most of the leading drug manufacturers posted higher sales during the quarter under review as compared to the corresponding year-ago quarter. This was aided by a healthy growth in the companies’ export revenues, especially from the US market. Lupin, Torrent Pharmaceuticals, Piramal Enterprises (PEL) and Glenmark Pharmaceuticals (GPL) led the pack by reporting impressive sales performance during the quarter.

The profit after Tax (PAT) net of prior period and extraordinary items, declined by (-) 27.35% (y-o-y)in the March 2015 quarter, by (-) 36.44% (y-o-y ) in the June 2015 quarter but increased thereafter to 61.55% (y-o-y) in the quarter ended September 2015, as compared to the corresponding period last year. At the operating level, margins of the industry scaled up by 1698 basis points to 22.1% on account of a sharp drop in operating expenses, against a healthy growth in net sales.

In the December 2014 quarter, Oxygen, Piramal Pharmaceutical Development Services, and PHL Capital got amalgamated into PEL. As a consequence of this, PEL had recognized a permanent diminution (of Rs. 24.2 billion) in the value of its investments in the intervening holding company of the companies that got amalgamated. This caused the industry’s operating expenses to mount during the said quarter. of such an expense in the December 2015 quarter, therefore, led the industry’s operating expenses to fall by 3.7 per cent. Resultantly, the operating profits of the industry grew by a staggering 243.4 % and operating margins expanded during the quarter. Operating were at 19.69% (y-o-y) for the March 2015 quarter, at 13.2% in 5.63% in the September and (-) 3.44% (y-o-y) in the December quarters respectively of the year 2015. PBDIT net of P&E&OI (Operating profit) registered a decline (-) 6.5% (y-o-y) in the March 2015 quarter. It was 4.17% in June 2015 quarter, 67.4% in September and 243.39% (y-o-y) in the December 2015 quarters as compared to corresponding periods of the previous year.

Drugs and Pharmaceuticals: Growth and Profitability in the Year 2015-16

(% change over year ago)

Source: Centre for Monitoring Indian Economy (CMIE) Pvt Ltd data as on 19.03.2016.

As per CMIE estimates, investments in the drugs and pharmaceuticals industry is expected to remain buoyant during 2015-18 with companies in the industry altogether investing a little over Rs. 82 billion by March 2018.

Investments

(Rs. million)

Source: CMIE

The demand for Indian generics is expected to remain healthy. The drug manufacturers are also likely to tap new markets to give a thrust to export revenues. Therefore, drugs companies are likely to step up capacity to meet the rise in demand.

Warning letters and import alerts from US Food and Drugs Administration (FDA), the US drugs regulator, for India-based manufacturing units, have escalated considerably over the last couple of years following
the regulator’s increasing focus on compliance. Nevertheless, Indian companies are expected to upgrade their facilities to match up to the required standards.

Other than formulations and API, drug manufacturers are likely to make big investments in putting up facilities to manufacture vaccines and injections. Besides private players, State Government bodies eg. Kerala State Industrial Development Corporation (KSIDC) and Kerala Industrial Infrastructure Development Corporation (KIIDC) too are expected to invest in drugs & pharmaceuticals industry during the period under consideration.

Imports

• The country is almost self-sufficient in case of formulations. The imports are being made on quality and economic considerations and not necessarily due to non-availability from domestic sources. Manufacturers of Drugs and Pharmaceuticals are free to produce any drug approved by the Drug Control authorities.
• Imports of Drugs & Pharmaceuticals is done as per Foreign Trade Policy and the provisions of the Drugs & Cosmetics Act.There are certain incentives available to the exporters of Drugs & Pharmaceuticals which enables them Customs duty-free import of all inputs, required to manufacture the export products in line with Advance Authorizations granted by the DGFT. The quantities of inputs are as per published Standard Input-Output Norms (). In of the export product do not have published or the inputs are different from the published, ad-hoc norms are considered. Being the Administrative Department, the Department of Pharmaceuticals is actively engaged in processing Pharma Industry’s applications for fixation of ad-hoc norms. More than 650 such applications, both for Pharma formulations and Bulk drugs & drug intermediates, were processed by the Department during 2015.
• In addition to conveying ad-hoc norms, the Department has also recommended publication of additional SIONs for a number of pharmaceuticals formulations and as many as 33 new SIONs are understood to have already been finalized for notification by the DGFT.
• Import of some the drugs & drug intermediates is still restricted under current Foreign Trade Policy. Imports are restricted basically due to common HS codes for some narcotic substances or similarity to some Ozone Depleting Substances (ODS). Applications received from the Pharma industry, through the DGFT, for import of either the Bulk Drugs or intermediates whose import is restricted, are processed in the Department and suitable inputs are provided based upon the Actual User Status and essentially of usage of the chemicals to be imported.
• Quite a few applications from the Pharma industry for import of certain dual-purpose chemicals, particularly Sodium cyanide included in the Schedule to the Insecticides Act, are also processed and suitable recommendations are conveyed to the Central Insecticides Board under the Ministry of Agriculture, in the capacity of Administrative Department, for grant of import permits to the Actual Users in Pharma Industry.

Import of medicinal and pharmaceuticals products for the last three years was as under:

Source: – Directorate General of Commercial Intelligence & Statistics, Kolkata.

Exports

Exports of medicinal and pharmaceuticals products for the last three years were as under: –

International Cooperation /Export Promotion Of Pharmaceuticals

Department of Pharmaceuticals has the following MoUs with foreign governments:-

• MoU between Department of Pharmaceuticals Government of India and Department of Pharmaceutical Industry, Ministry of Health of the Republic of Belarus to strengthen cooperation in the spheres of manufacturing and trade of pharmaceutical products between the two countries and desirous of simplifying the process of registration of pharmaceutical products
• MoU between Department of Pharmaceuticals Government of India and The State Administration of Ukraine on Medicinal Products on Mutual cooperation in Trade, Industry, Joint Venture (JV), Research & Development (R&D) in BioPharmaceuticals and Biopharmaceuticals sectors

Joint working Groups (JWG)/High Technology Cooperation Group (HTCG)

The Department of Pharmaceuticals provided financial assistance for the following activities/events for promotion and development of Pharma sector from Pharmaceuticals Promotion Development Scheme (PPDS) during Financial Year – 2015-16:-