Vadodara-based drug maker Alembic Pharmaceuticals Ltd, has decided to shift focus from the domestic active pharmaceutical ingredients (API) business, as it is a low margin business. Plus, cheaper imports from China also further affect profitability.
The company is now planning to tap regulated markets like the US and the EU countries, to improve profitability, a senior company official said. R K Baheti, director, finance, Alembic Pharmaceuticals said, "We are now focussing more on the regulated markets for our API business. We have decided to shift focus from the domestic API business as it is a low margin segment."
He also added that many companies are importing APIs from China, which are cheaper compared to their Indian counterparts. "The Chinese APIs are at least 10-15 per cent cheaper compared to APIs made in India," Baheti said. This further erodes the profitability of the domestic API business. Net import of APIs and intermediates from various countries till February 2012 (2011-12) stood at $3.07 billion, of which imports from China stood at $1.65 billion.
In comparison, Alembic feels its domestic branded drugs business is much more profitable. The company has at least four brands in the list of Top 300 brands in the industry including Althrocin, Roxid, and Wikoryl. Azithral, an anti-biotic, ranks 25 in the list.
The chronic and acute segments grew by 23 per cent and 4 per cent respectively in current year. The company also launched a dermatology division this year.
Alembic posted a 9 per cent rise in net profit for the third quarter of the fiscal, despite a fall in revenue. As Baheti explained, the drop in revenue is mainly because the company's API business did not do well during the quarter, however, whatever business the company lost was not high-margin business, and therefore, the profitability was not impacted. Its domestic formulations business, in contrast, grew by 15 per cent during the quarter, which explains the rise in net profit.