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India's Sun Pharmaceutical Industries is facing trouble on two fronts: price erosion and regulatory scrutiny.   © Reuters
Cover Story

China's appetite for infrastructure investment creates big winners

Indian drugmakers are among the biggest losers in this year's list

TOKYO -- China's hunger for infrastructure investment helped create some of the biggest gainers in the A300 rankings, while Indian pharmaceutical companies dropped significantly as they wrestled with regulatory scrutiny and price competition in the U.S.

Bumi Serpong Damai, Indonesia's largest property developer by market capitalization, reported a net profit of 4.92 trillion rupiah ($342.7 million) last year, a 173% increase from a year earlier. That catapulted the company -- which is tied to Indonesia’s powerful Widjaja family -- from 35th in the 2016 rankings to third place.

Analysts at IndoPremier, a local brokerage, attributed the jump to one-off land plot sales -- including a 1.4 trillion rupiah sale to Chinese real estate developer China Fortune Land Development, a deal that contributed to a nearly threefold rise in BSD's commercial land sales. The company's core residential business, however, was lackluster.

Chinese cement maker Anhui Conch Cementrose from 129th to 17th. The company's net profit for 2017 increased by more than 80% on the year. Analysts attribute the jump to rising cement prices sparked by Beijing's effort to curb excess supply. The company announced on July 9 that it expects a net profit rise of 80-100% for the first half of 2018.

Another standout was Celltrion, a South Korean producer of biosimilars -- a near-identical copy of an original drug manufactured by a different company once the patent for the original has expired. The company jumped to seventh place in 2017 from 56th a year ago.

The Incheon-based company posted 399.3 billion won ($356 million) in net profit last year, more than double from a year ago, while sales rose 41.5% to 949 billion won. The company attributed this to the success of Remsima, its trademark treatment for rheumatoid arthritis and other autoimmune diseases. In Europe, the market share of Remsima grew to 52% in the fourth quarter of 2017, surpassing that of Remicade, an original drug produced by Janssen of the U.S.

"Celltrion's brand value has increased significantly in Europe thanks to Remsima, which hit the market three years ago,” said Celltrion Healthcare, a marketing affiliate of the company.

On the flip side, the top drugmakers in India were among the biggest losers in the Asia300 ranking.

Net profit for market leader Sun Pharmaceutical Industriesand rival Lupin, another leading player, fell by almost half from the previous fiscal year. Their performance on other fronts, including sales, return on equity and annual growth, was also poor, dragging their overall rankings down significantly -- Sun Pharma fell from 11th the previous year to 154th, while Lupin dropped from 18th to 248th.

Amey Chalke, a research analyst at HDFC Securities, attributes the slide in performance to continuing price erosion in the U.S., where the companies generate 40-50% of their total revenue, as well as to a regulatory clampdown on manufacturing facilities, which has left them unable to obtain new product approvals. 

One of Sun Pharma's largest plants, located in western India, came under scrutiny from regulators in December 2015 for failing to meet manufacturing standards.

To stay competitive in the generic market, Sun Pharma is starting to focus more on specialty areas. In March it received U.S. regulatory approval for its first biologic drug Ilumya, used to treat psoriasis. Still, Mumbai-based Edelweiss Securities says the drugmaker will likely face significant challenges in the build-up stage, including a cash drain over the next three to four years, and potential overestimation by investors.

Nikkei staff writers Erwida Maulia in Jakarta, Rosemary Marandi in Mumbai and Kim Jaewon in Seoul contributed to this story.

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