For most companies, the boost in profits came as overseas sales, including US and Europe, improved. Also, total expenditure for most companies grew at a lesser rate than sales due to drive down of inventories. In the run-up to VAT, many wholesalers and dealers had reduced their inventory levels.
For instance, Dr Reddys - which posted a profit for the first time in 7 quarters - saw revenues from European markets improve 98% to Rs 57 crore and sale of branded drugs abroad rise 47% to Rs 116 crore. Cipla, too, saw a rise in overseas sales increase 40% to Rs 285 crore. On the other hand, Ranbaxy, which has seen US sales fall 11% this quarter, saw net profits down 48%.
Indian pharma companies are beginning to reap the rewards of the alliances they have been forming over the past two years. This spike in overseas sales has come because of their efforts at forward integration, said an industry analyst. Also, companies are working to enter into new geographies through alliances or acquisitions. Dr Reddys is shoring up front-end presence in Russia and CIS, while Wockhardt is investing up to $100 million to widen its European distribution network.
Also, there is a typical spike in sales during the monsoon months especially in the anti-infectives category, added an analyst with an equity brokerage.
However, all including the companies themselves, admit that outlook is not very rosy mainly due to fierce competition in overseas markets where generic drug prices are falling as much as 95% and innovators are employing tactics like authorized generics to discourage para-4 filings. Ranbaxy has lowered its earnings forecast for the year and Dr Reddys too reiterated its statement of this is a tough year.