Wyeth

Continues to expand in line with the steady growth in the domestic pharmaceutical industry

Wyeth is a 51.12% subsidiary of the US$ 22.4-billion Wyeth, US, a leading player in the pharmaceutical, consumer healthcare and animal health products. Three companies — Wyeth Laboratories, John Wyeth (India) and Wyeth (India) Pvt Ltd — were amalgamated with Cyanamid India and the combined entity was named Wyeth Lederle on 1 January 1998. Effective 1 April 2003, Geoffrey Manners & Company was merged with Wyeth Lederle and the name of the company was changed to Wyeth.

In India, Wyeth is a market leader in oral contraceptives, folic acid and depilatory cream. The company has many established brand names in the formulations segments of anti-infectives, gynaecologicals, corticosteroids and tranquilisers. Some of the prominent brand names include Wymox (antibiotic), Wysolone (corticosteroid), Ultragin (analgesic) and Ovaral (contraceptive).

Pioneering several new therapies in India, Wyeth was the first to launch hormone therapy and vaccines against HIB and invasive pneumococcal disease. Enbrel, a breakthrough treatment for rheumatoid arthritis; Rapamune, an immuno suppressant for prevention of rejection after renal transplant; Prevenar, a pneumococcal conjugate vaccine; and Tygacil, the world’s first glycilcycline antibiotic, are among the internationally known products launched by Wyeth in India.

One new product has been unveiled every year since FY 2007 and plans are on to launch one new product in the financial year ended March 2009 (FY 2009), too. Tygacil, a hospital injectable antibiotic for life threatening infections such as complicated intra-abdominal infections and complicated skin and skin structure infections, was launched in 2008. The products launched in the last couple of years have achieved good growth. Enbrel, a breakthrough treatment for rheumatoid arthritis and psoriasis, grew 65% FY 2008. Revenue from Prevenar, a vaccine for invasive pneumococcal disease, rose 222% in FY 2008.

Wyeth’s consumer healthcare division recently introduced an extension of its product Anne French in the form of 25-gm tube pack. This initiative has been well received by consumers and the trade. To enhance the brand image of Anne French, leading film star Kareena Kapoor has been signed on as brand ambassador.

As with demands made on many other pharmaceutical companies, the government of India asked from Wyeth Rs 59.08 crore (inclusive of total interest of Rs 42.06 crore) up to 31 March, 2008 under the Drugs Prices Control Order (DPCO), 1979. The company feels the ultimate liability would not exceed the amount already provided in the accounts.

Wyeth’s sales grew 15% to Rs 331.32 crore in FY 2008 in line with market growth of 14.84%. The Indian retail pharmaceutical market, valued at Rs 32095.75 crore, expanded 14.84% in FY 2008 (source: IMS MAT, March, 2008), and is expected to advance 12%-14% in the coming years on growth in rural areas and health insurance.

Sales grew 21% to Rs 105.83 crore in the quarter ended September 2008. Operating profit margin (OPM) was steady at 41.1% as against 41.6% in the quarter ended September 2007, taking the operating profit (OP) up 20% to Rs 43.46 crore. Profit before tax (PBT) spurted 20% to Rs 46.69 crore, and net profit 25% to Rs 33.83 crore.

Sales were up 15% to Rs 200.843 crore in the six months ended September 2008 over the same period of the previous year. OPM jumped 39.4% (39%), pushing up OP 17% to Rs 79.12 crore. PBT increased 14% to Rs 85.29 crore, and net profit 17% to Rs 60.38 crore.

Wyeth continues to invest in all the key brands to increase sales and also takes initiatives to reduce cost to improve profitability. Currently, its top 10 products contribute 50%-55% of the total revenue. Around 8% of the products come under the DPCO.

In the last few years, Wyeth’s growth was hurt as it rationalised major products and discontinued some that did not have a future. The company has no major pending discontinuation now.

We expect Wyeth to register sales and net profit of Rs 386.48 crore and Rs 94.99 crore, respectively, in FY 2009. EPS works out to Rs 41.8. The company has paid dividend of Rs 30 per share since the last two years. The share price trades at Rs 370. P/E works out to just 8.8 and dividend yield an attractive 8.2%