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Hit by export ban on its facilities, Wockhardt net profit crashes 94%

Wednesday, 13 August 2014 - 7:35am IST | Place: Mumbai | Agency: dna

The troubled generic drug manufacturer Wockhardt reported a 94% year-on-year drop in net profit at Rs 19.95 crore during the April-June quarter, hit by 60% decline in its US business due to the ongoing ban on its export facilities at Waluj and Chikalthana by the US FDA. As a result of the continuing ban, the US business contributed just 29% to the company's global revenues during the first quarter. Net sales also fell 27% to Rs 991 crore on the back of drop in sales in the US market.

The company, however, filed 13 new product applications with US FDA in the first quarter taking cumulative filings pending approval to 75.

The UK business remained flat during the first quarter while the Irish business recorded a growth of 13% during the quarter. The emerging markets business grew 10% during the period under review. On the other hand, the company recorded 18% growth in its India business during the quarter. Wockhardt launched 16 new products in domestic market in the first quarter.

The company also increased its research spend significantly and the same is now at 11.2% to sales at Rs 111 crore, it said in a release. It also incurred a capital expenditure of Rs 67 crore in the first quarter of the current fiscal.

Wockhardt also filed for 52 patents during the quarter taking the cumulative filings to 2053 and has been granted 25 patents during the quarter taking the cumulative patents granted to 284.

The US has been Wockhardt's biggest market and the FDA ban on import of generic drugs from two of its manufacturing facilities, Waluj and Chikalthana, on grounds of quality lapses in the manufacturing process has hit the company in a very hard way. FDA also expressed concerns over the production procedures at its Chicago-based Morton Grove Pharmaceuticals facility, thereby making 12 important observations. The facility accounts for 50% of its total sales in the US market.

According to a Mumbai-based pharma analyst, the current situation is likely to take some time to resolve and a turnaround cannot be seen anytime soon. "Even its Morton Grove facility, which is the only facility catering to the US market, has received a Form 483 which the company said it has responded. But nothing has been heard since then. While other companies have shown earlier instances of coming out after facing import alert, it is to see how fast Wockhardt can come out of it. Since US is its major market, the ban has affected the company too adversely," the analyst said.

Even IIFL pharma analyst Abhishek Sharma is of a similar opinion. "We were expecting the quarter to be really bad for the company since the company's import to the US is grossly affected. Wockhardt has submitted its response regarding its Morton Grove facility but FDA is yet to get back on that. Sometimes it can take a really long time, as much as close to 30 months, in some cases. Unless, the company can resume its exports to the US market, the situation is not likely to improve."

Meanwhile, the shares of the company closed at Rs 678.70 per scrip on BSE on Tuesday, down 3.81%. The shares slipped 5% in intra-day trade, touching a low of Rs 667.50 before recovering to end at Rs 678-level.

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