COMPANIES
GLAXO INDIA
New Directions
PHARMACEUTICAL major Glaxo
witnessed a mixed performance during the
year ended December 31, 1997. While the
company's net sales and value of production
improved by 7.1 per cent and 10 per cent,
respectively, its bottomline fell by 14 per
cent over the previous year. Though the
company managed to post a 3.6 per cent rise
in its operating profit during 1997, a steep
rise in interest charges (up 17 per cent) and
depreciation (up 11 per cent) led to a steep
fall in its net profit.
Despite the fall in earnings per share from
Rs 8 to Rs 6.9, the company maintained the
dividend at last year's level of 40 per centBook value, meanwhile, moved up from Rs
42.9 per share to Rs 45.1 per share. The
company's share price presently rules at
around Rs 402 on the bourses, discounting
its 1997 earnings per share by 58.3 times.
Glaxo has one of the widest therapeutic
presences in the industry with around 71
brands in over 14 segments. Its merger with
Burroughs Wellcome (BW1L), another
pharmaceutical major, will further widen its
therapeutic base as BWIL has a strong
presence in analgesics/antipyretics (with
Calpol) cough and cold (with Actified) and
dermatology (with Neosporin).This presence
will be further widened as there are several
proposed cross licensing arrangements.
The pharmaceutical industry witnessed a
slow down in growth at around 10 per cent
during 1997 as compared to the average of
16-17 per cent witnessed over the past few
years. Though this affected the company's
performance, it continued to enjoy a strong
position in the industry. It introduced several
new products during the year, some line
extensions and some older molecules for
which patents have now expired. A novel
calcium channel blocker discovered by Glaxo
Wellcome, Italy, was launched during the
year in the anti-hypertensive segment.
In order to meet additional demand for
local and export markets, the company's
chemical factories at Thane and Ankleshwar
are being expanded. While two new bulk
drugs, namely, clobetasone and clobetasol,
were successfully manufactured at Thane,
trial quantities of ranitidine base
manufactured at Ankleshwar were exported
for use in the Glaxo Wellcome group. The
company's ranitidine manufacturing facility
at Ankleshwar planned to apply for US FDA
certification in 1998. The company has also
entered into a three-way tie-up with
Chemferm Industrial Pharmaceuticals of
Netherlands and Max GB for cephalexin
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EPW Research Foundation
manufacture which will give it access to
superior technical know how and assured
supplies of 7ADCA. This is expected to
substantially improve the company's yields
and reduce costs,
Meanwhile, the parent company, Glaxo
Wellcome Pic, is reportedly looking for a
low cost manufacturing base so as to effectively compete in the generic market. Consequently, Glaxo might be used as a sourcing
base for generic products like ranitidine.
Though Glaxo India plans to enter the
over-the-counter (OTC) market in the near
future, this market is still at a nascent stage
in the country and previous experience has
been a mix of failure and success, Glaxo,
however, is relatively better placed due to
its strong brand image and familiarity with
consumer marketing. In fact the parent
company has already launched zantac as an
OTC product to counter the effect of patent
expiry.
POND'S (INDIA)
New Products
Pond's (India), a company specialising in
cosmetics and toilet preparations, fared well
during the year ended December 31, 1997.
While its net sales and value of production
increased by 18.9 per cent and 16.1 per cent,
respectively, the company's operating profit
improved by 23,1 per cent over the previous
year. Though depreciation and tax provision
were higher by 18.9 per cent and 12.8 per
cent, respectively, a sharp fall in interest
charges (down 77.1 per cent) saw the
company's net profit soar by 32.9 per cent
over the same period.
Encouraged by its performance, the
company has made a bonus issue in the ratio
of one equity share for every equity share
held.
Meanwhile the Unilever group has
increased its stake in Pond's India from 46
per cent to 51 per cent by subscribing to a
preferential issue of 9.31 lakh equity shares
of Rs 10 each at a price of Rs 620 per share.
While the personal care products of the
company witnessed good growth during
1997, talcs registered double digit volume
growth in a highly competitive market.
Pond's continues to be the market leader in
the talc category.
In the skin care segment, the company
launched several brands and extensions in
the Vaseline Petroleum Jelly and Body Lotion
ranges. Pond's Age Defying Complex, an
internationally successful product, was also
launchedduringthe year under review. While
test marketing of its Dream Fairness Cream
was undertaken. Vaseline Intensive Care
Lotion was also test marketed. The
company's overall market shares in the skin
care segment improved in 1997.
The company has successfully entered the
new category of deodorants registering threefold volume growth with the success of
Rexona Deo and the launch ofDreamflower
All Day Deo.
With the deregulation of imports, the
company is likely to face increased
competition from international brands and
for this reason the company increased its
advertising and sales promotion expenditure
by 45 per cent compared to the previous
year. The company claims that its brands are
one of its critical sources of long-term
competitive advantage and reasons that in
a market where the consumer is flooded with
ever increasing choice, brand loyalty would
become important.
Pond's India continued its personal
products exports to west Asia and Russia
largely on the strength of Unilever's presence
in these countries.
The company's mushroom exports,
however, were marginally lower than in the
previous year as the world market for
mushrooms went through a difficult phase
due to severe competition from China. The
company managed to maintain prices by
focusing on the premium segment and by
keeping a sharp focus on costs, It also
launched fresh mushrooms in the domestic
market under the brand name Kissan. In
addition, processed mushrooms were also
launched in select markets.
Meanwhile, the proposed amalgamation
of Pond's (India) with Hindustan Lever has
been approved by boards of both the
companies. Both companies are 51 per cent
subsidiaries of Unilever Pic and have
significant overlaps in personal care,
speciality chemicals and exports business.
Since 1993 the two companies have had a
common sales and distribution system for
personal products.
KNOLL PHARMACEUTICALS
Restructuring Scheme
The Indian subsidiary of Knoll AG of
Germany, Knoll Pharmaceuticals (formerly
known an Boots Pharma), is planning to exit
from the OTC segment and focus on its
formulations business instead. The company
owns several well known OTC brands like
Strepsils, Burnol, Aciguard and Coldarin
The company also plans to hive off its
wholly-owned subsidiary, Beem Healthcare,
which was set up with a dedicated field
force to market OTC products. The company
claims that the move to sell off its OTC
Economic and Political Weekly
May 9, 1998