Pharmaceutical Industry

April 2019
 TABLE OF CONTENTS

❑ Global Pharma Market

• Medical Spending | Trend
• Global Predictions
• Drug Market | Top Drugs and Therapy Areas

❑ Local Pharma Market

• Industry Players’ Mix
• Production | Revenue | Profitability
• Regulatory and Pricing Environment

❑ Risk Profile and Future Outlook

❑ Bibliography
 Global Medicine Spending | Trend

During the past decade, worldwide pharmaceutical spending have witnessed growth to over US$ 1 trln. Growth in
spending is attributed to market expansion in emerging countries and favorable demographics including an ageing
population in developed nations. Such trends are likely to continue over the coming years with global pharmaceutical
market growing to US$ 1.5 trln by 2021.
 Pharmaceutical | Global Predictions

Growth from new products and pricing shifts will be Cost-containment measures and less growth
moderated by loss of exclusivity in the U.S. and by cost- from new products in Europe contribute to
containment measures worldwide. slower growth of 1-4%, compared to the 4.7%
compound annual growth seen over the past
five years that was significantly lifted by
spending from new products.
Global Drug Market
 Top 15 Therapy Areas

Oncology therapy area is by far the largest in the pharma world with $107 billion in sales in 2017. It’s also projected to
maintain its dominance going forward, growing at an impressive 12.2% CAGR to $233 billion by 2024. Next, while sales in
cancer-related drugs will be the most in absolute terms, the fastest growing treatment area is actually in
immunosuppressants – a segment of drugs that make a body less likely to reject a transplanted organ, such as a liver, heart,
or kidney.
 Pakistan | Industry Players’ Mix
There are approximately 650 companies operating in the Pakistani
pharmaceutical market, out of which less than 30 are multinational Market Composition | Sale Value
companies. The pharmaceutical industry contributes approximately ~1% to
the GDP of Pakistan annually. 33%

There are around 9,000 actively marketed drugs in Pakistan sold at licensed
pharmacies on prescription. In addition, there is a large segment of Over the
Counter (OTC) products e.g., multivitamins, pain, cold and flu relief.
67%
Name of Pharma Company Ranking National / MNC Listing Status
GlaxoSmithKline Pakistan Limited 1 MNC Listed MNC National
Getz Pharma (Private) Limited 2 National Unlisted
Sami Pharmaceutical (Private) Limited 3 National Unlisted Market Composition | No. of
Abbott Laboratories Pakistan Limited 4 MNC Listed
Companies
Martin Dow Pharmaceuticals (Pakistan) Limited 5 National Unlisted 3%

The Searle Company Limited 6 National Listed

Sano Aventis Pakistan Limited 7 MNC Listed
OBS Pakistan (Private) Limited 8 National Unlisted
GSK Consumer Healthcare Pakistan Limited 9 MNC Unlisted
Hilton Pharma (Private) Limited 10 National Unlisted

The industry is dominated by multinationals companies which account for

2/3rd of market share whereas local / national enjoy the remaining 1/3rd. 97%
Top ten companies constitute approximately 46% of the market whereas top MNC National
50 share approximately 90% of the market.
 Pakistan | Production
Pharmaceutical Production | Growth Trend
60%
Capsules and injections have been
50%
taking double digit growth due to
40%
changing medical practices and
30%
disease patterns – mostly related to
20%
new breed of injections curing
10%
Hepatitis in Pakistan. However,
0%
Devaluation of Rupee and Rising
-10%
Interest rates have adversely affected
-20%
the production trend.
-30%
-40%
Tablets Syrups Capsules Injections Ointments

FY15 FY16 FY17 FY18 FY19*

Product
Units FY14 FY15 FY16 FY17 FY18 FY19*
Category
Tablets 000 Nos 25,363,352 26,535,885 23,238,358 29,014,742 27,802,617 27,899,018
Syrups 000 Ltrs 91,139 98,996 108,342 117,084 112,637 104,916
Capsules 000 Nos 2,644,465 3,098,139 3,398,609 3,497,716 5,149,828 3,397,565
Injections 000 Nos 783,611 885,732 999,207 1,212,658 1,622,228 1,205,529
Ointments 000 Kgs 2,575 2,788 3,106 3,970 3,786 3,312
Galenicals 000 Ltrs 64 75 46 343 371 44
Source: Pakistan Bureau of Statistics
 Pakistan | Revenue
Pharma Revenue | Trend
Total Revenue of the industry is on the rise – with GSK
140 50%
and Abbott contributing 50% of the Total revenue of
120
listed companies. 100
40%

PKR Mln
80 30%
In Mar2017, GSK Health Care was formed as a result of 60 20%
the demerger of Consumer Healthcare business of 40
GlaxoSmithKline Pakistan Limited. In 2018 GSK Health 10%
20
Care witnessed an increase of ~80% in Revenue. - 0%
2014 2015 2016 2017 2018

Revenue Growth %

Revenue (PKR Mln)

Name of Pharma Company
% 2018 2017 2016 Trend
GlaxoSmithKline Pakistan Limited 26% 34.01 32.77 27.56
Abbott Laboratories (Pakistan) Limited 23% 29.72 26.09 23.39
GlaxoSmithKline Consumer Healthcare 11% 14.88 8.30 5.38
Sanofi-Aventis Pakistan Limited 10% 12.96 12.45 11.89
The Searle Company Limited 10% 12.91 10.75 9.52
Highnoon Laboratories Limited 6% 7.50 5.97 5.07
AGP Limited 4% 5.38 4.72 4.21
Ferozsons Laboratories Limited 3% 4.46 4.31 10.19
Macter International Limited 3% 4.05 3.63 3.06
Otsuka Pakistan Limited 1% 1.87 1.83 1.55
IBL HealthCare Limited 1% 1.36 1.19 1.16
Wyeth Pakistan Limited 1% 1.19 1.13 1.25
130.29 113.14 104.23
 Pakistan | Profitability
Gross Profit Margins of the industry have remained Pharma Profitability | Trend
stagnant, yet healthy at above ~35% 140 40%
120 35%
Net Profit Margins witnessed an increase in 2017 on 30%
100
account of increasing prices but devaluation of PKR has 25%
shrunk the margins for 2018. 80
20%
60
15%
AGP leads the listed companies with average GP 40 10%
margin of ~59%. Wyeth Pakistan Limited is ranked 20 5%
first on basis of highest average NP margin.
- 0%
2016 2017 2018
GSK and Abbott earned highest profits in absolute
Revenue GP Margin NP Margin
terms on account of its high business volumes.
Avg. GP Avg. NP
Name of Pharma Company Name of Pharma Company
Margin Margin
AGP Limited 59% Wyeth Pakistan Limited 32%
Highnoon Laboratories Limited 47% AGP Limited 25%
Macter International Limited 44% The Searle Company Limited 23%
Ferozsons Laboratories Limited 39% IBL HealthCare Limited 14%
The Searle Company Limited 37% Abbott Laboratories (Pakistan) Limited 14%
Abbott Laboratories (Pakistan) Limited 37% Ferozsons Laboratories Limited 11%
Sanofi-Aventis Pakistan Limited 33% Highnoon Laboratories Limited 10%
IBL HealthCare Limited 33% GlaxoSmithKline Pakistan Limited 10%
GlaxoSmithKline Consumer Healthcare 32% GlaxoSmithKline Consumer Healthcare 9%
GlaxoSmithKline Pakistan Limited 26% Sanofi-Aventis Pakistan Limited 7%
Otsuka Pakistan Limited 25% Macter International Limited 6%
Wyeth Pakistan Limited 16% Otsuka Pakistan Limited 1%
 Regulatory and Pricing Environment -Updates
▪ Pharma Industry operates in a heavily regulated environment,
stringent and closely monitored and administered by Drug
Regulatory Authority of Pakistan (DRAP).
▪ New molecules can take up to one year to register and generics
take up to 2-3 years.
▪ Although Pharma companies are contributing 1% of their PBT
to government for conducting R&D, much of this is going
towards meeting administrative expenses of DRAP rather than
R&D
▪ Resolve is needed on the part of the government to end the
counterfeit menace which is believed to be as high as 45%
▪ Pricing matters have been addressed to some extent through a
revised pricing policy.
▪ The basis for hardship price calculation is revised from a fixed
rate of 8% (once in 3 years) to factors of prime costs (2.4 to 3.55)
linked with various dosage for locally manufactured drugs.
▪ Further, all hardship cases are required to be resolved in 180
days of filing. In case the DRAP does not resolve in 180 days,
prices may be increased by a maximum of 10%. Moreover, the
price may be increased as per policy if matter is not disposed
within 270 days from date of filing.
▪ The allowable price increase percentages, linked with consumer
price index have been also improved in the new drug policy. In
Jan2019 a one off relief of 15% has been given to partially
mitigate the impact of massive PKR devaluation.
▪ Going further with the momentum to improve the conditions of
pharmaceutical industry, the DRAP has assured that in order to
facilitate exports, it will establish a separate desk where all
concerns of exporters regarding issuance of necessary
documentation will be addressed.
 Risk Profile and Future Outlook
┼ DRAP’s new CPI linked criteria to raise prices has boosted industry’s
profitability
┼ One-third of revenue translates into gross profits
┼ 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
─ Lack of public transparency in the mechanism of price raise has caused hue
and cry in the local market
─ It is not clear how eventually profitability of the sector will settle if prices are
reduced
─ Slow registration of new products

┼ : Strengths
─ : Risks
 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 & 18 issued by the Drug Authority of Pakistan with the approval of its Policy Board
and the Federal
4. PACRA’s in-house research and database – A sample of players representing approx. 33% of the market share

Jhangeer Hanif S. Muhammad Obaid Muhammad Abdullah

Unit Head [email protected] Supervisor Muhammad.obaid@pacra Analyst [email protected]
.com om

Contact Number: +92 42 3586 9504