Abbott India benefits on power of brands

Overtakes GlaxoSmithKline to become first in sales among multi-national drug corporations

Abbott India, listed subsidiary of the US-based pharmaceutical giant, outpaced multinational peers to register 14.6 per cent sales growth to ~25.2 billion in the first nine months of the current financial year.

This is larger than the nearly ~21.5 billion reported by GlaxoSmithKline Pharma (GSK), a 2 per cent annual decline in this period. In 2016-17, GSK had ~30 billion in sales and Abbott India was next with ~29 billion. Earlier, the gap was much wider.

The US-based giant also has an unlisted company, Abbott Healthcare, which has a coronary stent business, beside the 350 branded drugs acquired from Piramal Healthcare in a $3.7-billion deal in 2010. Together, Abbott is No.2 in India, behind Sun Pharmaceutical Industries.

Abbott India’s growth comes when goods and services tax (GST) implementation affected most Indian pharma companies, including the multinational ones. Some of their products have also been impacted by the growing list of NLEM (National List of Essential Medicines) products (on which there is price control).

“Growth of the Indian pharma market over the last eight quarters has been continuously slowing. While GST and demonetisation disrupted sales for one to two months, we believe the real reason for weak growth of 5.5 per cent (as of) December 2017 was absence of price-related growth over the 12 months ended December,” said

Kartik Mehta, analyst with Deutsche Bank Market Research.

The MAT (moving annual total) growth of the Indian pharma market was 5.5 per cent in December, from 10.4 per cent a year before. Price-related growth in this period was a negative 4.2 per cent for NLEM, against 1 per cent earlier. For non-NLEM, 7 per cent, against the earlier 12 per cent.

Trade data says 17 of Abbott India’s brands are listed among the top 500 domestic pharma products. “These brands contributed about 24 per cent to the company’s revenues. Ten of these grew faster than the market rate of 7.8 per cent. We expect these 10 brands to drive future growth,” said Ranjit Kapadia, analyst with domestic brokerage Centrum. Its Thyronorm brand reported 43 per cent growth despite being under price control.

The company also distributes Novo Nordisk’s anti-diabetic range of products in India. These contributed about 16 per cent to revenues. Three of the six Novo Nordisk ones grew faster than the market growth rate of 7.8 per cent, indicating strong brand image. Human Mixtard is the largest selling insulin brand in the India market and grew 8.6 per cent.

As the insulin brands are under price control and the company distributes these in the domestic market, sales growth is recorded on higher volume. The company receives a distribution margin from Novo Nordisk.

Abbott India also started a vaccine division and launched four new vaccines during 2015-16. It has entered into strategic ties with Bharat Biotech for supplying these. It is also looking for partnerships on other vaccines, aiming to be the third biggest in this segment. “We expect the vaccines to drive future growth, due to limited competition and wider usage,” said Kapadia.