Image Despite forex losses and currency fluctuations impacting profitability, leading Indian drug companies such as Cipla, Sun Pharma, Dr Reddy’s Laboratories and Wockhardt are likely to exceed revenue growth targets set for financial year 2008-09.

Dr Reddy’s Laboratories, which is celebrating its 25th year of inception, had targeted 25 per cent growth in revenues for 2008-09. In the first three quarters, the Rs 5,000-crore company recorded revenue growth of 25 per cent, 30 per cent and 49 per cent respectively, despite heavy losses in the first quarter.

According to analysts, the company is likely to have a good showing in the last quarter with about 20 per cent growth, thanks to good revenues from sumatriptan succinate, an authorised generic version of GlaxoSmithKline (GSK)’s Imitrex. The company launched the product in November last year, with exclusive sales opportunity for six months.

“The Indian companies would continue to benefit on the top line front from the 25 per cent rupee depreciation as compared to the last quarter of the previous year. On the operating front, margins are expected to contract for most companies,” said a Angel Broking analysis, led by analyst Sarabjit Kaur Nagra.

Another company that has performed beyond expectations is Sun Pharmaceutical Industries, India’s largest drug company in terms of market capitalisation. Sun Pharma gave a guidance of 18-20 per cent growth in revenues for 2008-09, but it has already recorded 50 per cent growth in net sales to Rs 3,137.9 crore for the first nine months, from Rs 2099.4 crore in the same period in 2007-08. Net profit was also up at Rs 1422.9 crore, up by 86 per cent, compared to the same period last year.

Analysts feel Sun Pharma’s performance in the fourth quarter will be affected due to diminishing sales for pantoprazole and production issues with Caraco, its US subsidiary. “Sun Pharma numbers should see sequential moderation, as sales of pantaprazol have come down and Caraco base business continues to decline,” said a CLSA report.

“In the first nine months, we have exceeded our guidance with basic business, without considering one-time opportunity revenues and other additional income,” said a Sun Pharma spokesperson.

According to a Religare Hichens Harrison earning estimate, second largest domestic drug maker Cipla’s March quarter sales are expected to go up by over 23 per cent to Rs 1,383.1 crore on year on year basis and profit after tax to grow by 60.2 per cent to Rs 253.3 crore on year on year basis.

Total sales for Cipla grew 26.4 per cent to Rs 3,785 crore for the nine months, but PAT was down by 1.2 per cent to Rs 521 crore, impacted by currency fluctuation losses. Motilal Oswal estimates Cipla’s revenues to grow 22 per cent in the fourth quarter of 2008-09. Analyst firm Prabhudas Lilladher had estimated Cipla’s revenues to grow 24 per cent, with a 9.3 per cent growth in net profit for 2008-09. Angel Broking’s estimate was an overall 10.4 per cent growth in PAT for Cipla for 2008-09.

Lupin Ltd, another top five Indian drug company, also had better than industry average performance in the first nine months. The company, which was growing at over 30 per cent in the last four years, maintained 38 per cent growth in turnover and 49 per cent growth in profits in the first nine months of 2008-09. “We should continue that momentum in this quarter. We anticipate to grow by at least 25 per cent in the next year,” said Kamal K Sharma, managing director, Lupin.

Even the debt ridden Wockhardt Ltd is outperforming its past business growth. Revenues increased by 40 per cent to Rs 2644.2 crore for the nine months ended in calendar year 2008.

However, its net profit was down by 21 per cent due to financing cost and exchange fluctuation on foreign currency borrowings. “Our growth will continue to outperform industry average in the coming years and for the last two quarters. Currency fluctuation losses and debt is a temporary phenomenon which we will address through restructuring our debts,” Wockhardt chairman Habil Khorakiwala said in a recent interview.

Motilal Oswal estimates that excluding upsides from patent challenges, forex losses and acquisitions, sales of major drug companies will grow over 20 per cent and Profit After Tax (PAT) by 17.6 per cent for the fourth quarter. Top-line growth for mid-cap generic companies will be about 33 per cent and for contract manufacturing specialist companies, growth will be about 18 per cent. However, on a reported basis, PAT is likely to decline by 63.2 per cent without making these adjustments.