US showing good growth; EMs steady: Unichem Labs

Rakesh Parikh, CFO, Unichem Laboratories says the new drug pricing policy affected the company’s domestic growth. The drug firm reported a 3.22 percent increase in net profit to Rs. 36.2 crore for the quarter ended September 30 as sales rose.

The company had posted a profit of Rs. 35.07 crore in the corresponding quarter of the previous fiscal, Unichem said in a filing to the BSE.

The US market has shown good growth this quarter, Parikh says adding, emerging market growth has been steady this quarter. Unichem has got US FDA approvals for four plants, but Parikh says, the timeline of approvals from the health watchdog has been extended.

Unichem Laboratories is present in therapeutic areas such as gastroenterology, cardiology, diabetology, psychiatry, neurology, anti-bacterials, anti-infectives and pain management, among others.

Below is an edited transcript of the interview on CNBC-TV18

Q: Your revenue growth has been quite muted, just about 2 percent. Is that going to be the trajectory or was that a bit of a one-off?

A: We have seen that happen in the first quarter and that time also we had indicated it. One of the major reasons is the new pharma policy that got implemented at the end of the first quarter so the prices started effective on the second quarter. So, looking at that if you see the entire industry per se had a beating and that had two impacts.

One is on the prices, which were down almost by 20-30 percent and in some cases even more of the products which were notified by the drugs price control order (DPCO)-13. Second is since the margins were brought down, the trade in some of the states raised lot of issues by which there was a significant destocking and not resorting to purchases because their margins got significantly reduced when these products came under National List of Essential Medicines (NLEM).

It was an industry phenomenon, which has affected our India business. It accounts for more than 60-65 percent of our total turnover.

However, our international business as far as US is concerned, the emerging markets are concerned, they have been able to show a good growth and that has offset whatever impact because of the NLEM has come in the domestic market, in fact if you remove the NLEM impact then the growth would have been even higher and we accept this slowly to get resolve and things to improve from here for India business.

Q: With regards to the domestic business, earlier estimates had indicated around 7 percent growth for FY14. What would you target as for the second half of this fiscal and totally now?

A: It all depends on the market growth hours and looking at our current performance vis-à-vis the market it should be possible what you have said and I wouldn’t be surprise if it starts picking up from the Q4 onwards and it may even end up on a higher note because the inventories in stocking system has come down, the NLEM pricing impact which is a one time hit which is a structural adjustment downside has already happened and whatever action we have taken in terms of production improvement, launching new products and further penetration in terms of getting more out of our people and marketing spend and all, should start showing better results and it should improve further from here. So, what you said is quite possible, even right now in spite of NLEM we have had small growth in India business also.