Pharmaceutical Industry

In Pakistan

May 2018
 Industry Structure 1

Local Players 598

Top 50: 89.29%
MNC’s 27
market share
Total Players 625

Listed companies Listed

on PSX: companies:
25.14% market
11 share

Market Share
Active Products:
Local : MNCs
Approx. 8,776
68 : 32

Revenue CY17: Exports CY17:

USD 3,266mln USD 200mln

Industry Risk Profile

Industry Growth Pharma Industry Profitability
Production Concentratio and Future
Structure Dynamics Prices Mix n Analysis
Outlook
 Revenue Growth Dynamics 1

 Consistent double digit

Growth, except 2015,
despite pricing issues taken
up with the regulator; CAGR
12%

 2018 Growth in existing

products clocks in at 18%,
whereas new products
contributed 0.59% in the
overall growth

 Pakistan Pharmaceutical
industry contributes 0.30%
of the world’s market, which
is very small and 1% of
Pakistan’s GDP annually

*Moving Average Total (MAT) sales at end-Mar

Risk Profile
Industry Growth Pharma Industry Industry Profitability
Production Concentration and Future
Structure Dynamics Prices Mix Analysis
Outlook
 Production Growth Trend 2

 Growth in tablets is due

to high demand of Production Growth Pattern
generic medicines 80%

 Capsules and injections 60%

have been taking double 40%
digit growth due to 20%
changing medical 0%
practices and disease -20%
FY14 FY15 FY16 FY17 9MFY18
patterns – mostly related
-40%
to new breed of
-60%
injections curing
Tablets Liquids/ Syrups Capsules Injections Ointments
Hepatitis in Pakistan

Pharmaceutical Production FY14 FY15 FY16 FY17 9MFY17 9MFY18

Tablets (`000' Nos.) 25,363,352 26,535,885 23,238,358 29,014,742 21,560,134 28,493,042
Liquids/ Syrups (`000' Litres) 91,139 98,996 108,342 117,084 87,744 50,465
Capsules (`000' Nos.) 2,644,465 3,098,139 3,398,609 3,497,716 2,551,965 4,138,213
Injections (`000' Nos.) 783,611 885,732 999,207 1,212,658 893,879 1,288,604
Ointments (`000' Kgs.) 2,575 2,788 3,106 3,970 3,012 1,498
Galenicals (tincture) - `000' Litres 64 75 46 343 219 263

Industry Risk Profile

Industry Growth Pharma Industry Profitability
Production Concentrati and Future
Structure Dynamics Prices Mix Analysis
on Outlook
 Pharma Prices – Regulated

Pharma prices are regulated by DRAP and cannot be change unilaterally by

pharmaceutical companies 3

Drug Pricing Policy – 2015

• MRP to be frozen at approved level of Oct’13 until Jun’16
• Reduction of originator/ brands prices to the extent of 10% every year
Industry players obtained stay order from Sindh High Court and raised prices
DRAP has allowed following formulae, w.e.f Jul-16, to raise pharma prices
a. Scheduled drugs up to 50% of CPI (with a cap of 4%),
b. Non-scheduled drugs up to 70% of CPI (with a cap of 6%); and
c. Lower priced drugs shall be allowed maximum increase equal to CPI once in any financial
year till MRP / cap of threshold as specified in para 11 of the Drug Pricing Policy-2015 is
achieved.
d. Latest price increase was allowed on 19 Jan 2018 with CPI 4.16

Risk Profile
Industry Growth Pharma Industry Industry Profitability
Production Concentration and Future
Structure Dynamics Prices Mix Analysis
Outlook
 Industry Players’ Mix 1

 Multinationals’ exiting
Pakistan market, because of
pricing issues

 Local brands are gradually

capturing market, which has
grown by CAGR of 14% since
2014

 Indication of more acquisition

and mergers, going forward

Risk Profile
Industry Growth Pharma Industry Industry Profitability
Production Concentration and Future
Structure Dynamics Prices Mix Analysis
Outlook
 Industry Concentration

Top 10 Pharmaceutical Companies in Pakistan

 Growth in sales are
Name Positioning National/MNC Listing
dominated by national
GlaxoSmithKline Pakistan Limited 1 MNC Listed
companies – low cost
Getz Pharma (Private) Limited 2 National Unlisted
generic market
Sami Pharmaceutical (Private) Limited 3 National Unlisted
Abbott Laboratories Pakistan Limited 4 MNC Listed
 Top ten companies
Martin Dow Pharmaceuticals (Pakistan) Limited 5 National Unlisted
constitute approximately
Sanofi Aventis Pakistan Limited 6 National Listed
46% of the market Sanofi Aventis Pakistan Limited 7 MNC Listed
OBS Pakistan (Private) Limited 8 National Unlisted
 Whereas top 50 share GSK Consumer Healthcare Pakistan Limited 9 MNC Unlisted
approximately 90% of the Hilton Pharma (Private) Limited 10 National Unlisted
market. Source: IMS MAT June 2017

 Public Private Partnership

in health sector has also
increased

Risk Profile
Industry Growth Pharma Industry Industry Profitability
Production and Future
Structure Dynamics Prices Mix Concentration Analysis
Outlook
 Profitability Analysis*
Gross Profit margins stagnant and have
stayed above 30%; after witnessing a drop 4
Profitability
of 1% in CY14, margins regained 4% due
40% 37% 37% 3.2
to rise in prices 34% 35%
35% 33% 3.0
30% 2.8
Operating Leverage (OL)
25% 2.6
Pharma industry’s OL, though dropped in 19%
20% 17% 2.4
CY16 to 1.9times from 2.3times in CY15 13%
15%
15% 13% 2.2
on the back of sale price increase.
However, it regained to 2.2times in CY17, 10% 2.0
owing to sales on high margins, the ratio 5% 1.8
still remains greater than 2times. A 10% 0% 1.6
rise in revenue has the potential to CY13 CY14 CY15 CY16 CY17
translate into 22% rise in operating profit. Gross Profits (%) Net Profits (%)
This is because higher sales shall absorb
Opearting Leverage (Times)
fixed cost; mainly marketing cost which is
traditionally high for the pharmaceutical
industry; a strategy used to induce *Analysis is based on a sample representing 33% of the market share
prescription based medicines.

Risk Profile
Industry Growth Pharma Industry Industry Profitability
Production Concentration and Future
Structure Dynamics Prices Mix Analysis
Outlook
 Risk Profile and Future Outlook
┼ DRAP new CPI linked criteria to raise prices is expected to bode well for
industry’s growth, going forward
┼ One-third of revenue translates into gross profits
┼ High operating leverage ratio of the industry reflects potential profitability
given the prices are raised in the light of above mentioned decision by DRAP
┼ Expansion opportunities for local players through mergers and acquisition, in
the wake of multinationals gradually taking exit from Pakistan Market
─ Cost of API exposed to foreign currency fluctuation
─ Multinationals are housed with continuous research and development
activities as compared to locals; as they are gradually taking exit from
Pakistan the quality of locally produced medicines may be impacted
─ Slow registration of new products; as reflected by recent approval of 24
products out of 500 pending applicants by Drug Pricing Commission (DPC)
under DRAP
┼ : Strengths
─ : Risks

Risk Profile
Industry Growth
Production
Pharma Industry Industry Profitability
and Future
Structure Dynamics Prices Mix Concentration Analysis
Outlook
 Bibliography
1. Pakistan Pharmaceutical Industry | MAT Q1’18 Report | IMSHealth
2. Pakistan Bureau of Statistics, Government of Pakistan | Industry | Quantum Index of Large Scale Manufacturing
Industries (QIM)
3. Drug Pricing Policy-2015 issued by the Drug Authority of Pakistan with the approval of its Policy Board and the
Federal Government | http://www.pcdapakistan.com/wp-content/uploads/2015/03/Pricing-Policy-2015-Final.pdf
4. PACRA’s in-house research and database – A sample of players representing approx. 33% of the market share

Faizan Sufi
Analyst [email protected]

Contact Number: +92 42 3586 9504