Antibiotice's profits looking less than healthy

Antibiotice saw its profit shrink by 30% in the first half of 2004 to 2.1 million euros, following the drop in the price of drugs sold through electronic auctions over the Internet. The fierce competition among producers sent prices plummeting.

Antibiotice is one of the first companies in Romania to have announced a profit slump as a result of the introduction of auctions over the Internet. The companies that sell products through electronic auctions will therefore have to streamline operations and become more competitive if they want to maintain or boost profits.

The lower prices for the drugs sold to hospitals made up the most significant factor that influenced Antibiotice’s first half results. “Approximately 35% of Antibiotice’s drug production goes to hospitals and the sale prices with regard to medical care institutions were 30%-40% lower,” stated Constantin Nicuta, the company’s economic manager.

He explained the low prices for drugs were also due to the generous offers of other pharmaceutical companies participating in the electronic auctions held by the Health Ministry.

The centralised auctions conducted via the Internet, which the Health Ministry envisioned as a method to secure significant reductions to drug prices have made competition on this market fiercer.

The pharmaceutical companies are now being forced to make their operations efficient, cut costs and optimise material and human resource allocation, that is, manufacturing at lower costs so as to achieve price competitiveness. The company is currently undergoing a downsizing programme, the purpose of which is to boost productivity.

Antibiotice Iasi logged 15.4 million euros in turnover for the first six months, down 10% from the same time in 2003. The decline in the company’s turnover was, however, due to the depreciation of the national currency against the euro, as turnover in ROL stagnated at about 625bn ROL.

Despite the results in this period, the company maintains its full-year forecast, that is 12% turnover growth to 1,400bn ROL (34 million euros) and 122bn ROL (2.9 million euro) net profit.

Antibiotice is GMP (Good Manufacturing Practice) certified for all its five production lines.

Its majority shareholder is the Romanian State through the Health Ministry, which owns 53.02% in the company. A report by market researcher Cegedim Romania showed Antibiotice was seventh among drug manufacturers in Romania at the end of last year due to its 21.2 million euro sales and 3.5% market share.

The company is listed on the first tier of the Bucharest Stock Exchange and last traded for 3,490 ROL/share.