Revised growth projections for this year, more conservative budgets for 2009, possible layoffs and cuts in operating margins are having an impact on domestic drug makers, in the wake of the international financial crisis.
The deepening financial crisis comes amid an extremely tense period in the domestic pharmaceutical industry, after drug distributors were seriously hurt by the decline in RON and the Health Ministry's decision to maintain drug prices. Distributors have the biggest turnovers of all players in the domestic pharmaceutical industry and any break in their activity is felt at the level of both producers and drugstores. However, producers' representatives believe the direct impact of the crisis may be from loans, with part of them maintaining investments and current activities through funds raised from banks.
"The main implication is the access to loans and working capital. This is much more difficult and severely affects local producers (...)," says Stephen Stead, CEO of LaborMed. The representatives of Ozone Laboratories share his opinion and agree that the crisis would also erode turnover growth.
On the other hand, Mahendra Bharadwaj, CEO of Terapia Ranbaxy, says the crisis is being particularly felt in fields such as real estate, durables industry and consumer electronics. He believes that, because of the nature of this field, the pharmaceutical market will not be harmed at the level of demand. With regard to financial projections for this year, some players have reviewed their budgets, whilst others believe Romania will experience "delayed impact".
"For 2008 we haven't thought of revising our turnover targets (...)," said Dragos Damian, general manager of Zentiva SA. The list of companies that refused to change their annual budget also includes Ozone. On the other hand, LaborMed, part of International investment fund Advent, is revising this year's budget.
Mahendra Bharadwaj believes that the depreciating currency, as an indirect effect of international crisis, is of more concern for the pharmaceutical industry in Romania. "Companies have substantial imports of finished products and/or active pharmaceutical ingredients and other inputs. Increasing the cost of inputs may significantly erode operating margins (...)."
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