Wockhardt net profit declines 69 per cent due to regulatory actions
Oct 25 2013 , Mumbai
The company, which is in news lately due to the regulatory hurdles with both United States Food and Drug Administration (FDA) and United Kingdom Medicines and Healthcare products Regulatory Agency (MHRA), saw a significant impact on its businesses in both in the US and the UK market as well as in the emerging markets.
During an analyst call, Wockhardt’s managing director Murtaza Khorakiwala said, “The current performance has been impacted due to the recent regulatory actions. The US business declined by 26 per cent in dollar terms to $87 million during the quarter ended September 30 against $118 million in the year-ago period. In rupee terms, the decline was by 19 per cent.” The contribution of the international business was about 78 per cent to the total revenues during the quarter.
The UK market, however, grew by five per cent in rupee terms at Rs 239 crore (Rs 228 crore in September quarter 2012) but declined marginally in British pounds. The Irish market which has become generic-generic from branded-generic witnesses a 37 per cent decline in business in Q2 at 4.2 million euros (3.4 million euros). In rupee terms, the drop is 15 per cent at Rs 34 crore vis-a-vis Rs 53 crore corresponding period last year.The emerging market business, including India, declined by seven per cent during the quarter to Rs 344 crore from Rs 371 crore. The emerging market, excluding India, declined by 21 per cent in Q2FY14 due to supply constraint in manufacturing, whereas the Indian business declined by only two per cent, due to new pricing policy and suspension of Spasmo Proxyvon. The Centre banned the drug, which had annualised sales of Rs 180 crore, impacted its India business by about Rs 30 crore in Q2. The matter is currently sub judice.
“Due to the recall of products in the UK market, the topline got impacted by $10 million. There is also contractual obligation with various distributors and customers for the US from the EOU (export-oriented unit) facility (at Waluj),” Khorakiwala said, adding that there is some additional impacts as well which attributed in the drop in profits.
The company made additional expenses of Rs 40 crore for remedial corrections in good manufacturing practices and also involved consultants for its Waluj and Chikalthana facilities. “There is a stock write-off inventory and some additional expenses are due to higher expenses in air trade and some other legal issues
The pharma major reported consolidated revenue of Rs 1,347 crore in Q2FY13 and a consolidated net profit of Rs 453 crore. The PAT margins stood at 11.5 per cent in the second quarter compared to 33.6 per cent in the corresponding period last year.
The company, on the other hand, has increased its research spend which is currently 8.9 per cent of its total sales at Rs 106 crore. Wockhardt capital expenditure during the first half of the current fiscal was Rs 208 crore and is more likely to opt for an additional capex of about Rs 150 crore in the second half, Khorakiwala said.
Wockhardt filed seven new product applications with USFDA during the 1st half year and launched 13 new products in India in Q2FY14. UK received three approvals and launched one product during the quarter.
The pharma major, in May, received a warning letter followed by an import alert from the FDA on the Waluj facility. The company at that time has identified the impact to be in tune of $100 million in sales a year. In July, the UK regulator had also imposed an import alert on Wockhardt's export-oriented plant at Waluj in Maharashtra.
Its Chikalthana facility was also jointly inspected by FDA and MHRA in July where FDA issued “483” observation for that unit. Wockhardt has already responded on the matter and is awaiting decision from the FDA.
In early October, MHRA has also withdrawn its GMP certification on the Chikalthana unit and has imposed restriction on import of medicines from that unit.
According to Khorakiwala, the unit contribution to the UK business is about 12 million pounds out of which nine million pounds will be impacted on an annualised basis. MHRA has also issued a restricted GMP on the company’s Kadaiya facility in Nani Daman, the impact of which is yet to learn.
The company, which is in the process of shifting its existing products from the Waluj facility to the Shendra facility, has had a total of 11 inspections in the second quarter, out of eight of which came out with satisfactory outcomes.
On Friday, the shares of the company on BSE closed at Rs 455.35 apiece, down by 0.98 per cent from the previous close.