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Offline MZ

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Pharmaceutical Sector
« Reply #-1 on: December 04, 2013, 05:18:56 PM »
All related to Pharmaceutical Sector !
« Last Edit: January 02, 2014, 03:05:34 PM by M&M »

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Pharmaceutical Sector
« Reply #-1 on: December 04, 2013, 05:18:56 PM »

Offline MZ

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Re: Pharmaceutical Sector
« on: December 04, 2013, 05:19:35 PM »
No lifeline for pharma sector

Imagine a world with no political expediency. While it may be hard to do, it is also a nightmare that sooner or later must be dealt with. The Federal Governments recent decision to reverse the hike in drug prices has been much appreciated by populist quarters. However, this decision poses real dangers to the survival of local healthcare industry, ones that could result in acute shortage of life saving drugs in the coming months.

Talking to BR Research, Khawaja Javed Akbar, Secretary-General of Pakistan Pharmaceutical Manufacturers Association (PPMA) said the industry is shocked by the lack of will shown by the current government to take politically difficult decisions. Behind closed doors, government representatives acknowledge that input costs have been increased by more than 94 percent since 2001, but are afraid of a public backlash given the soaring inflation in prices of goods and services elsewhere.

Clearly, the government is in no mood to add another fight to its list of political battles, but the mood in the pharma industry suggests the politicos may be playing with fire. Other sources in the industry argue that "the rupee has seen more than 100 percent depreciation against the dollar since prices were frozen back in 2001; for an industry which imports more than 90 percent of its inputs, the price control regime has become completely unsustainable, with many manufacturers at the risk of being driven out of business".

In a meeting with the industry representatives on November 18, the Ministry of NHS agreed to a 15 percent price hike for 45 percent of products, which excluded life saving medicines. However, afraid of media reports carrying "pharma bomb" as their 9 oclock headlines, the Federal Government reversed the decision promptly, baffling the industry and consumers alike.

While the lack of will shown by the government in dealing with Pakistans "pharma problem" may be symptomatic of a larger problem with our political system, the fact remains that price controls cannot be kept in place indefinitely. Using price controls suffocates an industry responsible for development of life-saving drugs, while discouraging investment in R&D that could potentially bring down total Medicare and treatment costs in the long term.

According to a study by Battelle Memorial Institute, "the prices American public pays for prescription drugs have been significantly higher than those paid by citizens of any other developed country--and have been so for years". But these higher prices allow the industry to invest in the development of new drugs.

"US pharmaceutical industry also accounts for 36 percent of worldwide research and development of medicinal drugs." Such research is expected to "save" more than $750 billion in treatment cost for the patients over the next 25 years, by rendering hospitalization for diseases such as Alzheimers and arthritis unnecessary.

And herein lies our problem: by taking the populist route to deal with price controls, the Federal Government has proven when it comes to dealing with the issues concerning long-term well-being of this nation; political expediency tends to take precedence over sound policymaking.

Offline Taimu123

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Re: Pharmaceutical Sector
« Reply #1 on: December 04, 2013, 07:17:36 PM »
shame on our government and they should learn something from USA or other developed countries......... :thumbsdown_anim:

Offline SBM

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Re: Pharmaceutical Sector
« Reply #2 on: December 04, 2013, 08:27:01 PM »
15% hike is nothing and there wont be any backlash
kuch chahiyae hoga ministers ko jo milnahi raha
I hate waking up.

Offline MZ

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Re: Pharmaceutical Sector
« Reply #3 on: December 08, 2013, 06:40:13 PM »
Response: Pharma body fends off allegations against companies


Pharmaceutical companies in the country have not increased the prices of any of their drugs and are strictly following the old prices despite facing severe challenges, a Pharma Bureau statement said yesterday.
Pharma Bureau is a representative body of multinational companies operating in Pakistan. It stated that the allegation on pharmaceutical companies, concerning an arbitrary price hike of drugs, are baseless.
“Pharmaceutical companies are not involved in any illegal practices that include pasting of new price tags, repackaging or scratching old prices from the drugs,” said a Pharma Bureau spokesperson. “The Drug Regulatory Authority of Pakistan (DRAP) should investigate the matter and find the perpetrators taking advantage of this situation and blaming the pharmaceutical companies.
“The companies are selling their products at the rates allowed by the government and welcome any investigation in this regard.
“It’s true that we are in a state of emergency but it does not mean we will indulge in such illicit activities, otherwise it is pointless to repeatedly ask the government to raise the drug prices that have been on a freeze for more than 12 years now.”

The spokesperson also pointed out that the pharmaceutical industry has repetitively requested the government to devise a balanced pricing policy which allows a price increase linked to either the Consumer Price Index (CPI) or inflation adjustments.
There has been no price increase in the last 12 years and the situation has resulted in the closure of five major multinationals and many local companies, as their profit margins fell drastically.
The spokesperson said the industry was hopeful that the prime minister would review his decision of disallowing the 15% increase in prices.
Published in The Express Tribune, December 8th, 2013.

Offline MZ

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Offline MZ

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Re: Pharmaceutical Sector
« Reply #5 on: December 10, 2013, 10:08:36 PM »
Pharmaceutical  industry  -  in search of amicable solution

Pharmaceutical  industry is one of the key industries in the country
– we are laying focus on GLAXO, ABOT, SEARL, FEROZ & ICI.
The  industry is trying to dictate terms wherein it is locked horns
with the government to increase prices of medicines. The Prime
Minister has asked the authorities to withdraw the notification of
10%  -  12% price increase. We expect some  amicable solution
wherein MNCs dominated industry may play tactics of
withdrawing key medicines from the market  –  thriving case for
counterfeit  or  black  market.  We also expect government to
present a long term solution which is also being presented in other
sectors. (see our table of valuations on companies)

Caveats: 
?  Meeting between government and industry participants;
?  MNCs to outwit government,  since medicine quality is an
important issue and price increase has already been done;
?  Product withdrawal threat;
?  The MNCs  are claiming that drug  prices in Pakistan are
lower than the other counties. 

Multinational companies withdrew key drugs:
We have come to know that  local managements  of MNCs  have
been asked by the parent companies to withdraw key products if
required price increase is not allowed by the authorities and
government. The companies are vying for pre-2001 formula where
they are undertaking to expand.   
 
Vanishing key products in peak winter season
The demand of Anti-  infectives , Anti-Viral and analgestic drugs
usually increase  in  winter season, but our pharmaceutical market
is facing acute shortage of these drugs like Panadol CF, Panadol
Extra, Actifid P , Cofcol, Calpol , Panadol syrup,  Xanax, Laxotanil,
Sancos, Migril tablets, Ativan, Phenabarbiton, Arinac Forte,
Decadron Inj., Marax Dihydan and Neuberol  etc (as per our
market survey. This situation creates a wide gap for the local un-
registered products to fill this gap and making profit. Some of these
brands belong to listed companies such as GLAXO, ABOT, SEARL
etc.

Pharmaceutical industry increases drugs' prices
unilaterally:

Beside rejection of demand of price revision by federal government
the pharmaceutical industry players have increased the drug prices
by more than 20%.
The price  of Panadol syrup is increased to Rs 51 which was previously  selling at Rs 35.  Likewise  prices of
Calpol syrup is expected to increase because supplier and wholesaler had vanished the product from market
and expected to resume its supply with new price (Calpol & Pandol both are GLAXO products)

Putting consumer’s life on duplicate local drugs:
Our observation is that in order to put pressure on the government for  increase in drugs prices, MNCs and
national registered companies have stopped  supplying key drugs to market. This created a gap for un-
registered and duplicate drug manufacturer to enter in the market and supply their products. These
duplicate products have many side effects which may lead to death of the patients. 
 
We have already observed these type cases in Punjab due to use of these types of low quality drugs. The crisis
could balloon and snowball to other province. 

Valuations deciphers that ABOT, SEARL and FEROZ still attractive – don’t forget ICI
Table given below illustrates valuations of pharmaceutical industry; 
 
?  GLAXO yields highest PE of 27x with mere 3% dividend yield; 
 
?  SEARL & FEROZ yield lower PE of 8.6x and 8.3x  (as per industry benchmarks; please also refer to our
web portal www.scstrade.com pharma sector multiples in advance search).   
 
?  Wherein ABOT stands out as the strong company which is reporting highest cash per share of Rs 31.10
based on 9MCY13 results and yielding a PE of 16x which is attractive than GLAXO.   
 
?  ABOT is having a roaring success in nutritional segment which brackets it with companies such as
NESTLE (PE 70x) 
?  Another company which comes to light is ICI for life sciences (report already released deciphering PE of
16x). 

Script 9MCY13 Exp PE*
Dividend
Yield GP margin
EBIT
margin
NPAT
margin
Cash per
share (Rs)  Book Value
PBV
GLAXO 2.95 26.7           3.0% 26% 10% 6% 5.50           38.2           3.5         
ABOT 17.92 16.1           1.7% 37% 21% 14% 31.10         76.3           5.5         
SAPL 13.77 22.9           3.0% 30% 10% 6% 2.44           213.0         2.0         
SEARL 2.41(1Q) 8.6             1.9% 46% 20% 10% 0.21           43.3           2.4         
FEROZ 3.22(1Q) 8.3             3.3% 51% 19% 23% 0.92           78.1           1.7         
Pharmaceutical sector- snapshot
Based on latest result

Source: www.scstrade.com

Offline SBM

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Re: Pharmaceutical Sector
« Reply #6 on: December 10, 2013, 10:53:14 PM »
yeah abot is good
I hate waking up.

Offline MZ

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Re: Pharmaceutical Sector
« Reply #7 on: January 02, 2014, 12:31:12 AM »
No quick fix to Pak-Indian pharma trade

Benjamin Franklin once said: “No nation was ever ruined by trade, even seemingly the most disadvantageous.” As benefits of free trade have become more widely established over the years, practical impediments to unrestricted commerce have only become more complex.

Take the trade potential of health sector commodities between India and Pakistan, for example. Pakistani surgical goods manufacturing industry has enjoyed extensive growth during past several years. Despite its export-orientation, the sector trades only two percent of its annual export with the eastern neighbour. A similar story is found when one looks at the break up of medicinal exports of India; world’s largest producer of generic drugs exports a dismal $60 million worth pharmaceutical items to its western neighbour, that too through informal trade channels.

Contrary to conventional wisdom, it is the technical barriers to trade and not political considerations that hold the pharma sectors in two countries from realising the full potential of cross-border trade. On surface, Pakistani pharma industry remains opposed to lowering of tariff barriers and phasing out of negative list items, but there is more than that meets the eye.

Industry participants claim while prices of sixty percent of products are cheaper on the western side of the border, there are no gains to be made from bilateral trade anytime soon. For one, the cheaper product prices are not by free choice: Pakistani pharma remains heavily regulated which keeps prices artificially low.

One consequence of price regulation is low margins for the industry which in turn has held back investment-–to date, the country has no FDA approved local manufacturing plant, which means restrictions on export to India (or any other country) due to questionable product quality.

On the other hand, several local drug manufacturers of India not only have FDA approved manufacturing facilities but also enjoy strict policy check on standards maintenance and plant monitoring. In sharp contrast, the broken Drug Regulatory Authority of Pakistan has thus far failed to devise a pricing mechanism, much less bring in quality control procedures.

Thus, quality of generic drugs manufactured in India is demonstrably superior. This raises fears among Pakistani manufacturers if gates are thrown open to Indian exporters, the fractured regulatory environment on this side of the border may put them out of business.

But surely, not all cross-border exchange can be bad. According to UN Comtrade, Pakistan enjoys a strong comparative advantage in surgical goods manufacturing, and the market next door is waiting to be tapped. Similarly, there is thriving demand for unani and ayurvedic alternate medicines in both India and Pakistan, and yet trade is mainly conducted through informal channels. Furthermore, researchers have pointed out that the livestock and veterinary medicines’ demand in India, a segment in which Pakistani manufacturers specialise also remains largely unexplored.

And then there is the intra-industry trade. While Pakistani manufacturers remain largely fearful of finished goods trade with India, importing raw material and intermediate goods can only serve to their advantage. For so long as the price controls remain in place, local manufacturers are focused on minimizing their input costs in order to maximize profits.

And what better place to look for cheaper trade than the world’s third largest producer by volume, who incidentally also shares a 2,900-km long border with us. If only the regulator in two countries could sit together and harmonize their product formulations. Hey, there is no tax on dreaming!

Offline MZ

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Re: Pharmaceutical Sector
« Reply #8 on: January 07, 2014, 03:57:51 PM »
Pharma stocks-the unresolved mystery

With the stock market touching new highs, pharma sector seems to be leading the pack with skyrocketing share prices and abnormally high multiples.

Recently, boosted investor interest in this sector resulted in the P/E multiples touching skies. While the fundamentals do not appear to be that strong too back the rally, it is quite interesting to note that Wyeth, GlaxoSmithKline and Sanofi-Aventis are now hovering around P/E multiples of around 40 times.

The giant in the pharmaceutical sector is Glaxo having a market capitalization of nearly Rs44 billion, the performance of which is worth mentioning. After having a dull start of the year, GLAXO picked up considerable momentum as the scrip heaped a return of 68 percent during the first half of the year. Its market price which used to hover around Rs73 at the beginning of last year shot up to 136 by the end of CY13, giving investors a handsome gain of nearly 86 percent in a single year, thus bringing shame upon 50 percent increase in KSE 100 index.

As a result, the P/E multiple of Glaxo which used to hover around 15 times in CY11 and CY12 more than doubled to touch 39 times by the end of CY13. A deeper analysis into Glaxos revenue mix slightly explains the reason behind this upsurge in investor interests. Glaxo has increased its focus on Consumer Health Care business where there is a double digit growth in sales demand. Also, the gross margin on Consumer Health Care business has magnified to 28 percent in 9M CY13 from 24 percent in the corresponding period of last year.

Another pharma company lying on the same boat as Glaxo is Sanofi. Its P/E multiple which used to be at 7 times soared to 39 times lately. According to companys latest financials for the quarter ended September 2013, the company was granted price increase on some pharma products. While this may be the reason behind the rally, a return of 93 percent in a single year is nonetheless unwarrantable.

A general understanding amongst the analyst community behind this recent soar in P/E levels in pharma stocks remains: 1) increasing foreign investor interest in consumer and pharma stocks 2) diversion of focus to Consumer Health Care business 3) talks floating around regarding potential increase in prices of pharma products {which has not yet materialized}.

While the reasons highlighted could have acted as triggers in the short-run, the tale behind pharma rally still remains a mystery and no one has yet been able to spot out the grounds. Also, a few analysts consider this to be the time for profit making for this sector as it lacks any fundamental or technical support. Whether this is the case or not, time will disclose.

Offline GlobalInvestor

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Re: Pharmaceutical Sector
« Reply #9 on: January 08, 2014, 01:45:43 PM »
BRR is the Fund Holding Pharam Sector and is expecting see 10+ very soon as whole Pharma Sector had boomed like anything in 2013 & its rally is still on  :fingerscrossed1: :good
WE Dare to Share the Fundamentals Based, Technically Supported & Sentiments Driven Value Investment LEADS

Offline MZ

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Re: Pharmaceutical Sector
« Reply #10 on: January 17, 2014, 12:11:51 AM »
Expected increase in drug prices: A rough sketch

???? A long overdue price increase of pharmaceutical products is here after a
breakthrough on the drug pricing mechanism was reached. The sector is all set to
pass on the price increase
???? Due to a multitude of factors, the impact of this price increase on the top?line of the
companies is difficult to quantify. To begin with, the increase in prices will not be
made across the board but only on certain products
???? Looking at the current and historic P/E, we believe that the stock prices have already
taken in the impact of the expected price increase and therefore trading at premium
to their average historic multiples
???? Given 1% price increase, the full year impact on EPS of GSK, Searle and Abbott are
PKR0.52/share, PKR0.74/share and PKR0.73/share.

Recent developments on pricing
A long overdue price increase of pharmaceutical products is here after a breakthrough on
the drug pricing mechanism was reached. The sector is all set to pass on the price
increase. Initially, companies will be allowed to pass on a price increase of 15% and the
discussions are ongoing about the pricing policies and linking the prices to the inflation for
CY15 and beyond, according to our industry checks. The pharmaceutical industry stocks
have already enjoyed a rally in their prices in anticipation of this price increase and have
rallied by 21% in last three months.

Ambiguous impact on top?line
Due to a multitude of factors, the impact of this price increase on the top?line of the
companies is difficult to quantify. To begin with, the increase in prices will not be made
across the board but only on certain products. Moreover, the companies were allowed a
hardship allowance by the regulatory authority on certain products and their prices were
subsequently increased. Therefore, if a product was allowed an aggregated price increase
of 7% the over last few years, its price increase will be capped at 8%. So a company which
has not had a price increase over the years is to come out as the biggest beneficiary. Thus
we expect the actual growth in top line will not be by 15% as almost all companies have
enjoyed a distress allowance on some of their products.

Favorable earning impact
We expect the price increase to come in to effect by the end of Jan14 and companies will
therefore have a whole year of sales at higher prices in front of it. We had earlier argued
that the demand of pharmaceutical products is inelastic and the sales will not be impacted
by an increase in price and the prices were largely kept at CY01 prices. Therefore, we
assume that there will be no decline in volumetric sales as a result of increase in the prices
and the margins will significantly improve.
Our tentative EPS estimates given one time price increase of 1%, keeping all else constant are

Accumulated EPS Impact PKR/sh.
GSK (CY)                      0.52                                                                       
                                                         
Searle (FY)                   0.74                                                                 
                                                           
Abbott (CY)                   0.73                                                               
                                                         

Source: Bloomberg, BMA database


The above analysis stays relevant in both scenarios i.e. 1) one time price increase and 2)
the inflation linked price increment

Sensitivity analysis for 1% change in price
                                               P/Es                          Impact of 1% price increase on stock price
                                  Current      3 yr Average           Current                 3yr Average

GSK                          16.3                15.34                       16.3                      8.0         
                                                                 
Searle                       6.7                  8.0                            6.7                     3.5                                       
                                               
Abbott                      12.9                8.61                         12.9                    6.3           
                                           

Source: Bloomberg

Conclusion
We believe that the price increase bodes positively for the entire sector and will help
improve the margins. However the magnitude of the increase in margins will definitely be
different for different companies as many players have had distress allowance on many of
their products. The biggest winners will therefore be those who have not been allowed
any distress allowances over last few years and those players who have a greater
percentage of sales coming from pharmaceutical sectors.

BMA

Offline MZ

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Re: Pharmaceutical Sector
« Reply #11 on: January 25, 2014, 08:21:18 PM »

Offline MZ

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Re: Pharmaceutical Sector
« Reply #12 on: February 09, 2014, 10:33:25 PM »
Drug sector sees adverse impact on local production

KARACHI: Business community, represented by multiple trade bodies, supports closer trade ties with India, but the drug sector anticipates an adverse impact on local production.

The industry has projected its position in its interaction with the government and media on several occasions over the past few months as Pakistan is believed to be inching towards awarding non-discriminatory market access (NDMA) status to India this month.

According to a presentation made by the Pakistan Pharmaceutical Manufacturers Association (PPMA), vast difference exists in the dynamics of drug sector in India and Pakistan. Pakistan’s pharma industry is worth $2 versus $40bn Indian industry and exports fetch $200m here against $20bn in India.

“We have presented our case to the Federal Commerce Minister Khurram Dastagir in a meeting held in Islamabad,” former PPMA chairman Dr Kaiser Waheed, told Dawn, adding that the minister patiently listened to the PPMA representatives, assuring them to look into the matter.

Due to sheer size of Indian economy/generic industry, the neighbouring country has huge economies of scale while Pakistan would be unable to compete on equal basis in Indian market.

Dr Waheed said that MNCs would shut down their plants and serve market from their facilities across the border.

Currently a lot of toll-manufacturing for MNCs is done by local medicine makers and the business will too shift to India.

After the initial dumping period in which low-cost players are driven out, prices will go up again.

Former PPMA chief said country’s exports, which are growing by almost 50pc per annum, will suffer.

Out of 700 manufacturing units, 70pc will shut down, creating unemployment, besides causing government’s revenue losses.

Some of the major obstacles in free or bilateral trade with India are existence of non-tariff barriers, trust deficit, specific visa regimes, no direct banking channels etc.

Kaiser said PPMA has urged the commerce minister to place a 10-15 year moratorium on import of finished products from India by retaining medicines on the negative list (HS Code 3004.9099).

The association called for amending Drug Registration Policy of the DRAP to allow registration of only those imported brands that are manufactured in plants approved by the registered bodies and sold freely in US, UK, EU countries, Switzerland, Japan or Australia.

The government has issued a negative list of 1,209 items, including 49 pharmaceutical products that India cannot export to Pakistan.

Some of the items included in the negative list are Ibuprofen, Paracetamol, Penicillin, Ampicillin, Insulin, eye drops, ointments and vaccines for veterinary use, amongst others.

Sources also suggest that once the MFN status is granted to India, the negative list is expected to be phased out.

An official in Pharma Bureau, the representative body of 22 research-based MNCs, said the process of registration of finished pharmaceutical products from India should be subjected to the same requirements/pre-requisites as applicable to finished pharmaceutical products imported from other sources/countries ie the intended MFN status to India, should not supersede the existing policy of registration of ‘imported pharmaceutical products’.

Moreover, only those products be allowed for registration in Pakistan, which have evidence of registration in referenced countries (FDA, EMEA, Australia, Japan).

To ensure that the local pharmaceutical Industry remains competitive with imported finished pharmaceutical products, it is essential that a level-playing field be provided to the local Industry by way of a transparent and predictable regulatory structure, processes and policies.

He said the current status of the newly-set up Drugs Regulatory Authority of Pakistan (DRAP) is in a stage of evolution with a number of policies not fully in place, including pricing, narcotics, toll manufacturing, vitamins, etc.

Without such policies in place, the local industry will be unable to plan and be competitive by investments for capacity and quality enhancements.

The pharmaceutical industry in India is greatly supported by their government by way of subsidies and incentives, including SEZ status, which gives Indian industry preferential access to electricity and gas at tax-free rates.

India also employs several non-tariff barriers to imports into its market, which must be countered first and a level-playing field created before opening up the local Pakistan market to the Indian industry.

The government, he said, should take appropriate corrective measures; first prior to including pharmaceutical products in the MFN status being granted to India so as to ensure that only such products are allowed to be imported from India which meet the basic minimum quality requirements/guidelines of the DRAP and other regulatory bodies of regional countries such as Bangladesh.

Offline MZ

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Re: Pharmaceutical Sector
« Reply #13 on: March 20, 2014, 08:54:45 PM »
Making pharma MNCs stay

"In nearly twelve years, the number of multinational pharmaceutical companies in Pakistan has nose-dived to 22 from 36," said Ayesha Tammy Haq, Executive Director of Pharma Bureau in a recent conversation with BR Research. The bureau represents pharma MNCs in Pakistan.

Why have 14 pharma MNCs called it quits in this period? Is it because Pakistan lacks growth potential? Well, the answer is probably yes in the case of pharmaceutical companies, where lack of transparent regulatory mechanism has seemingly crippled the industry growth.

Hence, some multinational pharmaceutical companies have already closed down their operations in Pakistan. Reportedly, the remaining players are not upbeat about investing further; rather they are attaching weight to countries like India and Bangladesh, where the pharmaceutical industry has a clear roadmap and a healthy regulatory environment.

In these countries, there is a relatively lesser level of price control, while their pharma sectors have access to the FDA-approved plants. In comparison, Pakistan has the highest level of price control which has impeded the industry to invest in the FDA-approved plants.

The situation pleads a question: why does the regulator exist?

Well, its implied that a regulators elementary role is to regulate the industry in a

manner that promotes

the well-being of the

industry at large. But here, the pharma regulator, the Drug Regulatory Authority of Pakistan (DRAP) is holding back and ignoring the industrys concerns.

By continuing to do so, what impression does the regulator want to convey to foreigner investors that consider Pakistan as an emerging market with a great investment potential? That, the government is just watching the clock when it comes to pharmaceutical sector? Well, this shouldn    be the case with a sector that provides life-saving drugs to a whole slew of patients.

A report released by the Planning Commission back in May 2011 had warned that "Pharmaceutical prices fixed by the government act as an entry barrier and keep monopoly of existing firms.

Such actions by the government have also not led to reduced prices for the consumer".

The regulator and the government need to implement a fair, rational and transparent pricing mechanism before the situation gets worse and the remaining pharma MNCs also start contemplating an exit.

Offline MZ

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Re: Pharmaceutical Sector
« Reply #14 on: April 01, 2014, 05:32:19 AM »
Rundown of pharma sector

A quick look at the pharmaceutical sectors financial performance during 1H FY14 suggests a bumpy ride for the sector. And it is not surprising at all!

Whimsical pricing mechanism and stringent regulatory framework, coupled with tough economic scenario, left no stone unturned in dampening the pharmaceutical sectors profitability during the period. However, the only strategy that granted manufacturers some respite was to diversify the product mix, especially in consumer healthcare business where pricing mechanism is adjustable, allowing pharmaceutical manufacturers to pass on price hikes to their consumers.

Also, the price performance of these companies on local bourse (see graph) has moved in anticipation of rise in drug prices which has not yet materialized.

Companies that were able to strengthen their profitability amid unfavourable external environment were IBL HealthCare, Searle, Highnoon, Abbott Laboratories and Ferozsons Laboratories. On the other hand, Otsuka, Wyeth, Sanofi-Aventis and GlaxoSmithKline were on a downward spiral.

On the whole, top line of the sector increased by 11 percent to Rs34 billion. Sadly, increase in costs swallowed whatever gains the sector achieved from increase in sales revenue. In terms of top line, during this period, highest revenue growth was achieved by Highnoon Laboratories and Ferozsons Labs, 27 percent each. Searle followed with an impressive top line growth of 21 percent year on year.

In terms of gross margin, average gross margin of the sector slid to 31 percent vis-à-vis 35 percent in the corresponding period of last year. Shrinking sectoral gross margin is attributable to slender growth in top line (owing to fixed pricing mechanism on bulk of life-saving drugs), which compels pharmaceutical companies to bear any rise in cost of production.

But, even in such a tight condition, Abbott Pakistan, Sanofi Aventis and IBL HealthCare were the ones that managed to perk up their gross margins through implementing diversification strategies and limiting their operating costs.

By and large, selling and distribution costs remained another concern that marred the bottom line of the sector by framing nearly 16 percent of sectors sales revenue. In this regard, Searle and Highnoon Laboratories witnessed the highest rise in their selling and distribution costs of 42 percent and 37 percent, respectively.

Owing to aforementioned detrimental reasons sectoral profitability dwindled to Rs2.5billion vis-à-vis Rs2.7billion in 1H FY13 depicting a fall of 7 percent year on year. Abbott Laboratories contributed the highest to the sectors bottom line, followed by Searle and GlaxoSmithKline.

To conclude, 1H FY14 wasn    an easy year for pharmaceutical companies. And with government and the regulator brushing off the concerns of pharmaceutical manufacturers, especially with regards to the pricing of essential drugs, one can expect the sectors profitability to continue moving towards the downward trajectory.

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PHARMACEUTICAL SECTOR (CONSOLIDATED PNL)
===================================================================Half year ended
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Rs (mn)                              Dec-12      Dec-13         chg
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Sales - net                          30,906      34,237         11%
Cost of sales                       (20,950)    (23,605)        13%
Gross profit                          9,956      10,632          7%
Selling and distribution expenses    (4,797)     (5,520)        15%
Administrative expenses                (973)     (1,183)        22%
Other income                            679         668         -2%
Other operating expenses               (533)       (562)         5%
Finance cost                           (300)       (407)        36%
Profit before taxation                4,032       3,627        -10%
Taxation                             (1,316)     (1,090)       -17%
Profit for the year                   2,716       2,537         -7%
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Source: Company accounts.
===================================================================

Offline RSI Fan

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Re: Pharmaceutical Sector
« Reply #15 on: April 02, 2014, 10:10:21 AM »
Pharma companies to benefit from strengthened PKR & focus on Nutrition segment
Pharmaceutical industry has shown 11% growth in term of revenues and posted Rs 34bn as revenue during 1HFY14. But increasing cost is also 'shrinking' margin of the industry but IBL Health Care (IBLHL) & Abbott Pakistan (ABOT) have managed to boost its profitability via distribution denominated business model and cost leadership - market penetration strategy respectively.
 
Strengthen PKR to support import oriented companies' profitability
Small company IBLHL as well as local giant ABOT seems to have diversified product portfolio and both may benefit from strengthening PKR against green back due to decrease in cost of imported products. During 1HFY14 IBLHL posted 35% gross profit margin wherein ABOT managed its GP margin to 38% during CY13 post. A further swelling in GP margin is expected given lowering cost of imports, which is a good sign for most of the pharmaceutical players.
Diversification- the possible solution available to Pharma players
The price regulatory framework is under tremendous spotlight where government authorities have lose control over fixing the price and resultantly prices of drugs have increased a lot in recent times. Still Pharma sector executives complain about 'diminishing margin'. Now players looking to diversify into Nutrition and Diagnostics products segment & adding them into the product portfolio mix for better margins.
Valuation
Given table shows comparison between Pharma & bio tech players. Based on Dec' 13 results, FEROZ is leading the industry with 52.3% GP margin and 16.5% net profit margin. Alongside we expect IBLHL & ABOT to post healthy growth in earnings during this reporting year due to foreign exchange gain. Based on our assumption IBLHL yield lower expected PE of 11.2x and dividend yield of 2.82% for FY14. Wherein SEARL yields PE of 11.9x & ABOT 13.4x. Pharma sector seems to beat benchmark PE of KSE100 & addition of relative Nutrition segment seems to align them with food producers PE. We see this aspect in ABOT, SEARL & GLAXO.
Pharma and bio tech Industry
 
 
Source: www.scstrade.com

Offline m.omar

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Re: Pharmaceutical Sector
« Reply #16 on: April 02, 2014, 08:20:56 PM »
Aoa,
I spoke to a couple of good friends who are directors of different local pharma and they confirmed that rupee appreciation effect will have good effects on the bottom line of pharma companies, and in a nutshell I got to know the following thumb rule:
Raw material and packing cost is approx 50 percent of sales and it can safely be concluded that raw material which is imported is 25 percent of sales.This makes it easy to analyse the effect of usd on pharma bottom line .
For example abbot pharma has a sale of 17 billion then it means cost of imported raw materials and other finished goods should be around 4.25 billion atleast so an 8 percent appreciation of rupee would increase the bottom line by 0.34 billion.
Num of outstanding shares 97.9 million
Eps increase 340/97.9 =3.47 per share
If raw material price has fallen in international markets more benefit.
Anyways SBM and 007 and other senior members pls share ure thoughts



Offline MZ

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Re: Pharmaceutical Sector
« Reply #17 on: April 05, 2014, 10:26:52 AM »
Against all odds: ‘Ailing’ pharma industry looks for recovery

LAHORE:
The pharmaceutical industry of Pakistan has been facing a crisis for years and several multinationals that have invested millions of dollars in the country have been either forced to shut down or limit their operation due to the absence of a proper regulatory environment.
However, the Pharma Bureau Pakistan, a representative body of the research-based multinational companies (MNCs) operating in Pakistan, still has a positive outlook for the future — more so after the government’s commitment to address the socio-economic challenges. But, the body requires assurance and a framework from concerned authorities.

Several multinational companies have left the country after working here for decades, prompting serious concerns and particularly at a time when the government is eager to encourage foreign investment in the country, said Pharma Bureau Chairman Shahab Rizvi while addressing the Pakistan prime minister via a letter.
“We remain optimistic and we see this sector developing into a strong contributor to the economy of Pakistan, but for that it is important that the government must not fall prey to misleading reports and have a clear picture of the industry,” Rizvi said.
The total market of registered pharmaceutical products in Pakistan is estimated at $2.2 billion, out of which the share of MNCs is 42%, Rizvi said.
He further stated that the companies have large local manufacturing operations and continue to invest in capacity, quality enhancement projects as well as human resources in their local manufacturing operations.
In addition, the prices of most MNC drugs in Pakistan are lower than India and Bangladesh. The component of imported and finished pharmaceutical products in Pakistan is less than 15%, indicating that the majority of products sold in Pakistan are manufactured within the country. Local manufacturing operations of MNCs include their respective global brands, claimed Rizvi.
“The per unit average price of products sold by local companies is higher than that by MNCs,” he said
It is unfortunate that during the past few years a number of global pharmaceutical companies have shut down their operations in Pakistan due to the unpredictable regulatory environment faced by the industry.
A report published by McKinsey Consultants in 2010 identified Pakistan’s pharmaceutical industry as one of the three industrial sectors that could, with the right reforms and regulatory framework, help the country’s economy. It could help boost exports, increase domestic production, bring in much-needed Foreign Direct Investment (FDI) (together with transfer of new technology in manufacturing and supply chain) and expanding employment opportunities for the country’s youth, he said.
It needs to be understood that MNCs act as a tool that helps bring innovative, research solutions from developed countries to a developing country like Pakistan for the benefit of patients suffering from life threatening diseases, Rizvi said.
The government should ensure that this industry realises its potential by devising manufacturing-friendly policies and providing a conducive environment which would in turn help the government revive the national economy, he added.
Published in The Express Tribune, April 4th, 2014.

Offline SBM

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Re: Pharmaceutical Sector
« Reply #18 on: April 23, 2014, 01:45:06 AM »
http://www.reuters.com/article/2014/04/22/us-novartis-idUSBREA3L07T20140422

Novartis and GSK trade assets as pharma industry reshapes
I hate waking up.

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