Sat | Nov 27, 2021

Finance cost for ‘growth capital’ eats into Indies Pharma profit

Published:Friday | September 24, 2021 | 12:11 AM
Indies Pharm President and CEO Dr Guna Muppuri.
Indies Pharm President and CEO Dr Guna Muppuri.

Head of Montego Bay-based listed pharmaceutical company Indies Pharma, Dr Guna Muppuri, says he and the company are already looking past a 35 per cent drop in nine-month profits to July 31. It’s the long term on which their gaze it fixed, as the company expects huge returns from significant investments it has made into developing new drug formulations for the local and overseas markets, as well as invested in high-value real estate that continues to appreciate.

Nine-month profit fell to $103.6 million from $206.6 million in the corresponding period last year, while net profit for the third quarter dipped 14 per cent to $42.6 million, from $49.4 million in the same period last year.

“The lower net profit is primarily attributed to the finance cost associated with the loan acquired for growth capital, our strategic investment for long-term value,” the company’s financials stated.

“All the money that we’re spending is going to be capitalised going forward by 2023. That will mean a windfall of profits and great profitability,” Muppuri told the Financial Gleaner, as he reacted to the results and referenced the investments towards breaking into the United States market with two new drugs, for which Indies Pharma is seeking US Food and Drug Administration approval.

He noted, too, that half of the $805 million bond funds secured last year went into real estate which has already doubled in value. In September 2020, the company secured the private placement bond with a five-year repayment period. The loan was also used to repay parent Bioporist Holding Inc the amount of J$398.750 million, which was used to purchase three acres of land in Montego Bay, St James, for the development of Indies Pharma’s business park.

Even ascits finance costs eat into profits, the company is growing revenues. For the nine-month period ended July 2021, Indies Pharma Jamaica Limited earned gross revenues of $633 million, 12 per cent higher than the $566 million recorded in the corresponding nine-month period of 2020.

Costs are also inching up for the pharmaceutical company.

“Cost of sales easily varies from quarter to quarter. At that time, we had some huge shipments,” Muppuri said, adding that the company also had large shipments of certain non-prescription drugs which attract a higher level of duty and GCT.

Muppuri noted that the business has mitigated increased shipping costs and delays, particularly through bulk buying.

“We try to stay ahead of the likely shipping delays by making sure that our orders and subsequent deliveries will not put us in trouble with supplying the market. We want to have more stocks at hand to take care of demand,” according to Muppuri.