An improved first-half performance by certain leading pharmaceutical companies has seen their stocks take centre stage once again. In fact, over the last few sessions, these stocks have perhaps been the only ones which have managed to keep pace with the rising indices.

A number of these companies have also performed well in terms of returns on their stock values. The shares of German Remedies, Pfizer, SmithKline Beecham and Glaxo have appreciated between 15-20 per cent. And amongst the non-MNC pharma companies, the shares of Cipla have also resumed their rise.But some pharma experts have pointed out that on valuation terms alone, Glaxo appeared to be expensive in comparison to other growth stocks within the sector like SmithKline Beecham which trades at a more reasonable p/e ratio of 25 times expected earnings.

Glaxo is trading at a p/e multiple of 40 times its expected earnings of Rs 10 per share in 1997. A sample of what is to come was seen in Glaxo's first-half performance where the topline growth was just 16 per cent. Based on this performance, analysts tracking the stock closely feel that Glaxo can better that only marginally and report a cumulative growth of just 18 per cent year-on-year (YoY). The Glaxo stock has effectively doubled in the last year to Rs 404.

On the other hand, a company like SmithKline Beecham Pharma reported a topline growth of 28 per cent for the first half (year ending December) and is expected to report a much healthier growth in profits after tax of 45 per cent for the full year amounting to Rs 30.20 crore, while more or less maintaining its topline growth. Yet, of late, the growth in the stock price has not been as pronounced as it has been in the case of Glaxo or for that matter even that of German Remedies.

And German Remedies seems to be in a category of its own. Industry watchers reckon that the company, (year ending March 1998), will come close to increasing its earnings after tax when compared to last year by at least 75 per cent. For the first half of the current year, German Remedies outdid the best market expectations and doubled its profit after tax. Though some industry watchers say that next year, ie 1998-99, will not be as good for the company as the current year is turning out to be and the growth rate may may actually taper to about 25 per cent to 30 per cent.

The positive reaction of the markets to Pfizer which was at the receiving end from sellers not too long ago seems to have stemmed from the company's recent attempts at increasing its market presence by launching new products from its parent company's (Pfizer Inc) product portfolio. The subsequent reaction to the stock has been good. To top it off the company reported good first-half results. The company has decided to close its year in November every year beginning this year, and for its results due to be announced in February 1998, Pfizer is expected to grow it profits after tax by 25 per cent to 30 per cent.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.