| GSK Pharmaceuticals Heads into a Period of Consolidation|
| GlaxoSmithKline Pharmaceuticals Ltd (GSK Pharma) is entering into a phase of consolidation, where it will use its expanded sales force and new product launches to drive growth. In the December quarter, it benefited from higher market growth.|
Sales of pharmaceutical products rose by 18% year-on-year during the quarter compared with a 12.5% rise during the full year 2011. The market growth during the year was in the range of 14-15%, which the company expects to sustain in 2012, too. Growth would have been higher, but for slower demand for anti-infective products during the year.
The vaccines business did well, with sales rising 58% in 2011. Specialty business reported 25% growth, dermatology rose by 14% and mass products by 7-8% (pulling down overall growth).
Most of its sales growth is led by volume and product mix, with prices contributing 1.5% to the 12.5% growth in 2011. High sales growth during the December quarter was accompanied by higher growth in material costs. Overall sales rose 15.4% y-o-y in the quarter, but material costs rose by 27% due to the rupee depreciation and price increases.
A decline in other expenditure and relatively lower increase in employee costs led to its operating profit margin increasing by 11 basis points to 31.5%. One basis point is one-hundredth of a percentage point.
Net profit (before exceptional items) rose by 20% to Rs. 147.4 crore, higher than the 15.7% growth in its operating profit, chiefly due to higher other income.
GSK Pharma’s key growth drivers are new product launches and expanding sales reach. It has launched new products from its parent’s portfolio; two drugs and one vaccine were launched in 2011, and also branded generics to fill gaps in its product portfolio. In 2012, it will follow the same strategy, with a few branded generics being launched in the anti-infective, cardiovascular and metabolic categories.
An important change is that it does not expect any significant additions to its sales force this year; in 2011, it added about 700 people. Its focus will, thus, be on using its expanded manpower base to drive further sales growth, which should see salaries increase largely in line with wage inflation.
If the company can grow sales at or above market rates and keep material costs in check (an appreciating rupee should help), then 2012 should see its profit grow much better than it did in 2011. The parent’s focus is to exceed market growth in emerging markets in Asia-Pacific. India’s position in this market should see it get continued attention, which is good for GSK Pharma.
| Wipro Aims to Boost Global Healthcare Share|
| Opportunities in healthcare may make up for likely decline in spending in BFSI space, says a JPMorgan report|
Wipro Ltd’s information technology services business hopes to ride what it sees as a wave of vendor consolidation and anti-incumbency in the healthcare segment in Western markets, as it seeks to push up revenues in the key growth segment.
Healthcare may well be the “next holy grail in Indian IT,” JPMorgan Chase & Co. said in a recent report.
Wipro’s healthcare, life sciences and services business grew at 4.2% in the December quarter over the preceding three months (6.9% on a constant currency basis)—faster than any other segments and comprising about 10% of the company’s overall quarterly revenue of $1.5 billion.
Infosys Ltd, too, is keen on expanding its healthcare business, both with a direct eye on the top line as well as to derisk its high exposure to the BFSI segment.
Infosys does not provide growth metrics for healthcare and life sciences.
The “explosion of opportunity in healthcare will significantly compensate for the likely long-term decline in spending rates in the BFSI segment,” JPMorgan said in its report, quoting research firm IDC.
It cautioned, however, that “winning in healthcare is not straightforward,” as it entails more domain intensity and longer timeframes to results, besides fragmented client budgets.
JPMorgan said Infosys and Wipro have “more work ahead” to make the most of the opportunities. “We are optimistic that this will happen, as these two firms, after their initial hiccups, are concentrating investments in this area.”
Wipro categorizes its healthcare practice into three sub-segments-pharma companies (drug makers and biotechnology firms), which contribute about half of the vertical’s revenue; medical devices; and the so-called “payer and provider” business.
Payers are insurance companies while providers are hospitals. Medical devices may range from implants to chips on pills to wearable monitoring devices that send vital healthcare information to care providers and family members.
The healthcare segment “can be a $1 billion revenue segment annually for select Indian IT players in three to five years time through penetration in the payer-and-provider space,” JPMorgan said in its report, while adding, “provider margins will be lower as this could be on-site centric. Current margins are sustained only with platform-based turnkey solutions.”
| Merck forms JV with Supera Farma to market pharma products & branded generics in Brazil|
| Merck, a global healthcare leader working to help the world be well, has formed a new joint venture (JV) with Supera Farma Laboratorios S.A., a Brazilian pharmaceutical company co-owned by Cristália and Eurofarma. The new JV will market, distribute and sell a portfolio of innovative pharmaceutical and branded generic products from Merck, Cristália and Eurofarma solely in the Brazilian retail sector.|
Under the terms of the JV, Merck, through a subsidiary, will own 51 per cent, and Cristália and Eurofarma will collectively own 49 per cent. The venture will be managed by a joint board and leadership team consisting of members of senior management from the three companies. Establishment of the JV is subject to satisfying certain agreed upon closing conditions but is scheduled to be completed later in 2012.
"Merck is pleased to partner with two of Brazil's leading pharmaceutical companies-organizations that share our commitment to enhancing health care for the people of Brazil," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "This venture is an important step forward in our strategy to grow our business in key markets and improve global access to our medicines and vaccines."
By establishing the JV with Supera, Merck will gain additional local expertise, an expanded portfolio of products and a strong distribution network to facilitate wider access to medicines for the people of Brazil. The initial portfolio of the JV will include approximately 30 products across a range of therapeutic areas. The JV will have its own dedicated sales force separate from Merck, Cristália and Europharma, but will leverage the parent companies' infrastructures for activities such as sales force training. The parent companies will continue to maintain separate businesses in Brazil.
Ogari Pacheco, president of Cristália, commented, "This joint venture is a combination of Cristaliá's creativity, Eurofarma's commercial efficiency and Merck's innovation."
Maurizio Billi, president of Eurofarma added, "We are sharing learnings and combining the very best of each company, making this joint venture more competitive in the Brazilian market. Partnering with Merck is a strategic move to advance access to innovative pharmaceutical products."
Cristália Labs (Cristália Produtos Quimicos Farmaceuticos Ltda.), a privately held Brazilian company founded in 1972, produces high quality medicines to address medical needs. Primarily focused on specialty areas such as psychiatry, anesthesia and pain relief, the company has become a healthcare leader across Latin America.
Established in 1972, Eurofarma ranks among the leading pharmaceutical companies in Brazil. The company operates in virtually all pharmaceutical segments through its Business Units - Prescription Drugs, Generics, Hospital & Procurement, Oncology, Third-Party Services and Pearson (Veterinary).