Glaxosmithkline Pharma likely to restore dealer margins to boost sales

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On December 16, GlaxoSmithKline Plc had announced it wanted to raise its equity stake, in the Indian arm, to 75% from 50.7%. On December 16, GlaxoSmithKline Plc had announced it wanted to raise its equity stake, in the Indian arm, to 75% from 50.7%.
SummaryGSK has seen sales flag after reducing margins for wholesalers and retailers.

Glaxosmithkline Pharma (GSK) which has seen sales flag after reducing margins for wholesalers and retailers, is expected to increase them from July, 2014, sources in All India Organisation of Chemists & Druggists (AIOCD) said.

A couple of other drug firms, including Torrent Pharma and * Cipla have restored margins payable to wholesalers and retailers after the trade protested that margins were not attractive.

GSK was earlier offering wholesalers and retailers 10% and 20% respectively, but these were lowered to 8% and 16% respectively after the Drug Prices Control Order (DPCO) was amended in May, 2013, capping the prices of 348 drugs. The rules came into effect in end-July.

The company could not be reached for comment and an email sent to it remained unanswered.

On December 16, GlaxoSmithKline Plc announced it wanted to raise its equity stake, in the Indian arm, to 75% from 50.7% through an open offer for shares at R3,100 apiece.

Sales of Glaxo’s products, which came under price control thanks to the new DPCO, fell 27.5% y-o-y in December 2013 while November sales fell 31.8% y-o-y, according to AIOCD-AWACS data.

Sales from products adversely impacted by the DPCO constitute more than 30% of the company’s total revenues according to analysts. In CY12, Glaxo reported revenues of R2,669.97 crore.

Following trade protests across India, GSK Pharma had put out a sales warning in October, saying major pockets of the country were not buying its products. The company later withdrew the warning on December 11 saying, “trade has resumed the purchase of the company's products across the country since the last week of November, 2013.”

GSK Pharma's sales of DPCO drugs in Q1CY2013 grew 3.1% y-o-y but fell 7.3% y-o-y in the following quarter while Q3CY13 witnessed the sharpest fall of 24% y-o-y, according to analysts quoting AIOCD-AWACS data.

Total sales of Glaxo in Q3CY13 fell 7% y-o-y to R620.54 crore. Its net profit fell 33.7% year-on-year to R100.95 crore. The company had said it expects the weakness to continue for the next few quarters.

Analysts said they expect the impact to continue for the next two to three quarters.

Sales of GSK Pharma's top-selling drug, the antibiotic Augmentin fell 22.6% in August 2013 with sales of about R19.8 crore, compared with the same period in 2012, according to IMS Health data. The worst year-on-year fall was seen in October Augmentin sales, which plunged nearly 41.5%, recording sales of Rs 17.3 crore. Mumbai-based GSK Pharma's share price fell about 1.5% from early June to December 15. After the announcement of the open offer, the share price has jumped nearly 21%. On Tuesday, the stock closed at R2,978.20 on the Bombay Stock Exchange.

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