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Pharmaceuticals 101

29 June 2016

Hassan Raza
T: +92-21-35645090-95- Ext: 336
hassan.raza@alfalahsec.com

Research Entity
Notification Number:
REP-088

http://www.JamaPunji.pk

Table of Contents
Industry Review _______________________________________________________ _______________________________3
ABOT _ ___________________________________________________________________________________

SEARL ___________________________________________________________________________________________10
GLAXO __________________________________________________________________________________________12
FEROZ ___________________________________________________________________________________________14
HINOON _________________________________________________________________________________________16
IBLHL ___________________________________________________________________________________________18
SAPL ____________________________________________________________________________________________20
WYETH __________________________________________________________________________________________22
OTSU ____________________________________________________________________________________________24
Comparative Analysis _______________________________________________________________________________26

Research Entity
Notification Number:
REP-088

2
http://www.JamaPunji.pk

Industry Review
The pharmaceutical industry is considered the backbone of public health service in any country. This is strategically important both for the well being of the population in
general and for the provision of good yet affordable healthcare in particular. Pakistan has a dynamic pharmaceutical industry with more than 700 manufacturing units. The
industry comprises of around 400 local and several (around 21) multinational pharma companies. Pakistan Pharmaceutical Manufacturing Association (PPMA) is the
representative body of local pharmaceutical companies, while Pharma Bureau represents multinational pharmaceuticals in the country.
The total sales of pharmaceutical industry of Pakistan is estimated between USD2.5bn to USD2.7bn. The industry is fulfilling approx. 70-80% of the countrys demand of
finished medicine. According to the latest data, the market share of the local pharmaceutical companies is 63% as compared to 37% of multinational companies. Medicine
of worth around USD180mn is being exported to more than 50 countries of the world with average growth in export of around 5-6% p.a. Getz Pharma, Sami
Pharmaceutical, Novartis Pakistan, OBS, Hilton Pharma Ltd, Bosch Pharmaceuticals, and Merck are some of the largest unlisted players in the industry commanding a
cumulative 25% of industry share. Listed pharma companies account for around 28% of mkt share in terms of revenues, having total mkt capitalization of USD2.4bn
(around 3.3% of total mkt cap of KSE-All index).
Though the country meets around 70-80% of its medicine needs locally, only a few companies are manufacturing active pharmaceutical ingredients (APIs) in Pakistan (due
to substantial cost of setting up R&D facility, continuous cost of test runs to achieve 1) required yields, 2) required stability, 3) required purities, 4) required characteristics).
Thus, majority of pharmaceutical companies are dependent on European, Japanese, Korean, South American & Southeast Asian manufacturers for requirements of APIs for
their products hence have little control over the cost of APIs. The pharmaceutical industry imports approximately 80-90% of all raw material. In terms of quality and
efficacy, locally manufactured drugs are well regarded as most manufacturers are following Good Manufacturing Processes (GMPs) and mainly because the APIs of most
local products manufactured in Pakistan are imported from quality manufacturers from abroad. Owing to fairly good reputation of locally produced pharmaceuticals, the
national pharma products are registered and exported Far East, South East Asia, and African and Middle Eastern countries.
Drug Pricing: Previously, the Ministry of Health (MoH) controlled, assigned and decided the drug prices in Pakistan. Retail price determinations were made by the Price
Recommendatory Committee (PRC), which regularly monitored the drug prices in the country and decided the ceiling price of a product referred to them by the MoHs
Registration Board during monthly meetings. There was a pricing policy (adopted in 1992) based on leader prices or the CPI but as PRC did not allowed any across-theboard price increases since 2001, the classification of controlled and uncontrolled drugs remained invalid. After the passage of 18th Amendment, MoH remained dissolved
and health services were transferred to provinces, which prompted the creation of Drug Regulatory Authority of Pakistan (DRAP) under the DRAP Act 2012 to provide
effective coordination and enforcement of the Drugs Act, 1976 (XXXI of 1976) and to bring harmony in inter-provincial trade and commerce of therapeutic goods.
During the last few years, dissidence between PPMA and DRAP have grown regarding price mechanism and new medicine registration. The main issue is Section 12 of
Drugs Act 1976 which empowers government to fix and control the maximum price of the drugs, while pharma industry wants government to cede control over drugs
prices. In 2013 DRAP allowed pharma industry to increase drug prices by 15%, later the ordered was reversed by the government which prompted pharma companies to
resort to judiciary seeking stay against the government's decision. In May 2016 DRAP allowed manufacturers to increase prices by 8% for hardship medicine (those
medicines that are being sold at a loss). In the mean time a new SOP was released by DRAP on 6th June 2016 which allows pharmaceutical companies to increase drug
prices based on annual CPI of immediately preceding financial year as published by PBS. Scheduled drug prices are allowed price increase of up to 50% of CPI (subject to
cap of 4%), while prices of non-scheduled drugs can be raised up to 70% of CPI (with annual ceiling of 6%). Lower priced drugs have been allowed maximum increase
equal to CPI once in any financial year till they reach a specified MRP (PKR3/tablet, capsule, PKR3/5ml of syrup/suspension, PKR6/sachet, PKR15/injection, PKR3/gm of non
sterile cream/ointment, PKR4/gm of sterile cream/ointment/gel, PKR4/ml of eye/ear/nasal drops/sprays/inhalation solutions). This will to some extent alleviate severe
hardships faced by pharma companies in the country and provide them some breathing space.

Industry Review
Pharmaceutical exp. per Capita 2010, USD PPP
700
600
500
400
300
200
100
-

Total Health exp. as %age of GDP in Pak


3.0
2.7
2.4

Japan
Australia
Singapore
Korea, Republic
New Zealand
Brunei (2009)
Thailand (2009)
China
Asia-19
Viet Nam
Malaysia
Mongolia
India
Philippines
Indonesia
Sri Lanka
Cambodia
Fiji
Bangladesh
Nepal
PNG
Lao PDR
Pakistan
Solomon Islands
Myanmar

2.1

Source: WHO, Alfalah Research

Pharma expense as % of total health expenditure in Pak

1.8
1.5
2010

2011

2012

2013

2014

Source: WHO, Alfalah Research

Public/Private health expenditure profile


Private health exp as % of total health expenditure
Govt health exp as % of Total Health Expenditure

60
50
40
30
20
10
-

100
80

Thailand (2009)
India
China
Bangladesh
Viet Nam
Myanmar
Indonesia
Lao PDR
Philippines
Nepal
Cambodia
Pakistan
Korea, Republic
Singapore
Mongolia
Brunei (2009)
Sri Lanka
PNG
Japan
Australia
Fiji
Malaysia
New Zealand
Solomon Islands

60

Source: WHO, Alfalah Research

40
20
0
2010
Source: WHO, Alfalah Research

2011

2012

2013

2014
4

Industry Review
In 2005 there were 36 MNCs working in Pakistan which have now been reduced to merely 21. In the last ten years, around 15 companies have shifted their
businesses/wind down from Pakistan just because they were not comfortable with price mechanism adopted by the government that was resulting in serious erosion of
profitability. Other MNCs are shifting their dependency from pharmaceutical segment to consumer health care to retain their market share and revenues as heath care
segment price does not come under strict Government control. Furthermore, the MNCs were irked by the unbecoming practices adopted by local companies under the
guise of selling and promotion costs for their drug promotion in collusion with health professional that tilted the playing field in favor of local pharmaceutical companies.
Second major issue faced by the industry pertains to the registration of new medicines as according to PPMA there are around 18,000 applications pending for registration
of new medicine with the Government.
Local pharmas have outperformed the MNC pharmas: We also present a comparison of operating performance of both multi-national pharmaceuticals and local
pharmaceuticals. It is evident that local pharma companies have fared well against their foreign counterparts in the past few years. Though in terms of listed pharma
companies, MNCs still command the lions share, but on a overall industry scale, local pharmas rule the roost in terms of sales. Overall market share in sales of foreign
pharma has slipped from 43% in 2011 to 37% to 2015 with simultaneous increased share of local pharmas. Looking at the revenue growth rate (of listed pharma
companies), whereby rate of increase in revenues of local pharmas (5-year CAGR of 13.8% during 2010-15) has outpaced the growth rate of MNCs (5-year CAGR of 8.5%
during the same period) by a wide margin (5.27%) remains a key reason for outperformance of local pharms. Also, in terms of profitability, local listed pharma companies
have outdone their foreign counterparts. After tax earnings of local pharma companies have increased at an impressive 5-year CAGR of 29.7%, while multinational
pharmas managed to grow their bottom line at relatively lower 5-year CAGR of 18.9% during the same period. Local pharmas, which already had better gross margins
compared to their foreign competitors, further beefed up their gross and as well as their net margins, which led to multifold increase (3.7x) in their after tax profitability
vis--vis merely 2.4x jump in earnings improvement of MNCs. Gross margins of listed local pharmas in 2010 stood at 36% which the companies further improved by
8.65% to 45% in 2015, while the foreign companies with relatively lower gross margins of 28% in 2010 managed to improve it by merely 1.9% to 30% in 2015. The
similar outperformance is also visible in ROE, ROA and growth in assets and equity.
Outlook: In terms of return, the sector has outperformed the broader market by a wide margin rising by 7.5x versus 2.3x. It is owed to impressive revenue growth
leading to superior profitability compared to broader market in the past 5 years. We expect revenue/profitability momentum to continue in future as product prices will rise
annually by at least 50% of annual CPI (post DRAP SOP) and also due to increased focus of government spending on health related services and rising per capita income
going forward. Thus, valuations of the sector which apparently seem stretched in terms of PE, PB, EV/EBITDA multiple are not that expensive considering the impressive
growth record (revenue and PAT) in the past, which is likely to reecho going forward. Additionally pharma companies are also gearing up for
accreditation/recognition/membership by various int. bodies, such as WHO, FDA and PIC/S, which will open up the export avenue towards EU, USA and other developed
world where there are stringent quality control requirement/standards. There are about 15 new production facilities currently under construction that aspire to obtain FDA
credentials.
5

Industry Review
Market share of key pharma players (%age)

Comparison of mkt share of local pharmas vs MNCs

11

Mkt Share(MNCs)

70%

Mkt Share(Local)

9
60%

7
5

50%

3
40%
30%
2011

Source: IMS, Alfalah Research

2012

2013

2014

2015

Source: Company Accounts, Alfalah Research

Revenue comparison of listed pharma companies (PKR bn)


Local pharmas

65,000

MERCK

BOSCH

HILTON

OBS

PFIZER

SANOFI

SEARLE

FEROZ

NOVARTIS

SAMI

GETZ

ABOT

GSK

Gross profit comparison of listed local and MNC pharmas (PKR bn)
20,000

MNC pharmas

55,000

Gross profit MNCs

Gross profit Locals

15,000

45,000
10,000

35,000
25,000

5,000

15,000
5,000
2011

2012

Source: Company Accounts, Alfalah Research

2013

2014

2015

2010

2011

Source: Company Accounts, Alfalah Research

2012

2013

2014

2015
6

Industry Review
Gross margin comparison of listed pharma players
50%

Gross margin (local)

Net margin comparison of listed pharma players

Gross margin (MNC)

Net margin (local)

Net margin (MNC)

16%
40%

12%

30%

8%

4%

20%
2010

2011

2012

2013

2014

Source: Company Accounts, Alfalah Research

2011

2012

2013

2014

2015

Source: Company Accounts, Alfalah Research

ROE profile of listed pharma companies


35%

2010

2015

ROE (Local)

ROA profile of listed pharma companies


20%

ROE (MNCs)

ROA(Local)

ROA(MNCs)

30%
15%

25%
20%

10%

15%
10%

5%

5%
2011

2012

Source: Company Accounts, Alfalah Research

2013

2014

2015

2011

2012

Source: Company Accounts, Alfalah Research

2013

2014

2015
7

Abbott Laboratories (Pakistan) Limited


PKR bn

69.6

3-month avg turnover

PKRmn

8.0

USDm

665.0

Free Float

21.3

Total shares

97.9

Market cap

ABOT vs KSE100 performance


(%)

ABOT

KSE-100 INDEX

125
105
85
65
Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

45
May-16

Diagnostics: Diagnostics account for a modest 5% of total product mix. The company has solid footprint in in vitro
diagnostics offering broad portfolio spanning immunoassay, clinical chemistry, hematology, blood screening,
molecular and informatics. Main products of the company include Machines for testing-ARCHITECT (immunoassy &
clinical chemistry test), Aceelerator A3600 (advanced lab automation), CELL-DYN (hematology analyzer), M2000
(testing of infectious diseases). It is worthwhile to note that sales in this segment grew by 14% over the past year.
It is also noteworthy that Abbot is a key partner of Shifa International and its laboratory for over last 15 years.

Market cap

Oct-15

Nutrition: Nutrition accounts for around 15% of overall product portfolio of the company which has the highest
market share of around 31% during 2015 in this particular segment up by 2% over a year ago. With its wide range
of products, the company meets the nutritional needs of various age groups ranging from infants to children to
adults. Its main products in this segment include Pedisure, Ensure & Glucerna. Not only that company enjoys
more than 90% share in adult nutrition segment, sales of Pediasure and Ensure both topped PKR1bn mark last year.

710.8

Sep-15

Established Pharmaceutical: With more than 150 products in established pharmaceuticals, including general
health care, it is the largest division of the company accounting for around 76% of total portfolio mix. Leading
brands in established pharmaceuticals include Klaricid (antibiotic), Brufen (pain killer), Surbex Z (multivitamin +
essential minerals), Arinac (cough and cold), Duphaston (HRT for progesterone deficiency), Serc (treatment of
vertigo), Duphalac (laxative), Epival (treatment for epilepsy), Entamizole (antibiotic and antiprotozoal). Together
these drugs account for around 45-50% of overall revenues of the company. Sale of each of the 4 products (Brufen,
Klaricid, Surbex and Arinac) tops PKR1bn benchmark.

PKR

Aug-15

Portfolio Mix: The company has presence in a broad range of products (more than 180) in established
pharmaceuticals used in various therapeutic areas including Gastroenterology, Pain, CNS, Respiratory, Cardio
Vascular and Metabolic comprising around three-fourth of its product portfolio. The company also enjoys firm
standing in Nutrition, Diagnostic and Diabetes-care.

Stock price

Jul-15

Market share: Abbott is the 2nd largest MNC in Pakistan with the market share of 6.4 % in 2015.

Stock Details

Jun-15

Outline: Abbott is global broad-based health care company with over 70,000 employees world wide and global
presence in more than 130 countries. Abbott started operations in Pakistan in 1948. Currently the company has two
manufacturing facilities located at Landhi and Korangi in Karachi with a total work force of over 1,500 employees.

Abbott Laboratories (Pakistan) Limited


Diabetes: Diabetes care is the smallest segment constituting merely 2% of the overall product portfolio of the company. Glucometers and Glucose testing strips remain the
key product in this division.
Operating/Financial performance: Operating performance of the company has improved significantly over the past few years, with its revenues almost doubling since
2010 (5-year revenue CAGR of 14%). Net profit on the other hand has remained even more impressive, which almost trebled during the said period (5-year PAT CAGR of
25%). Improvement in gross margins led to swift growth in bottom line. Gross margins improved steadily during the 5-year period from 33.5% in 2010 to 38.9% in 2015. A
similar trend is visible in net margins which have grown by around 624bps during the same period from 10.7% to almost 17% in 2015. Abbott Pakistan posted impressive
CY15 results with its revenues clocking in at PKR21bn, highest in the history (7.51% YoY growth). Gross margins and net margins improved from 38.3%/14.3% to
38.9%/16.9%, respectively during the year which resulted in 27% YoY growth in bottom line during CY15 as the company reported EPS of PKR36.6 in CY15 versus PKR28.8
in SPLY. It is also worthwhile to mention that the company is sitting on ample cash (around PKR88/share as per the latest qrtrly accounts of the company, around 13% of
market cap of the company) with debt free balance sheet. The company is the cheapest when compared on PE basis, as it is the only pharma company trading PE of sub
20x.

Top Products
2011

2012

2013

2014

2015

Brufen

EPS

16.8

21.3

25.8

28.8

36.6

Klaricid

DPS

6.0

7.0

7.0

7.8

30.0

Ensure

0.8%

1.0%

1.0%

1.1%

4.2%

GP margin

36.0%

37.5%

38.5%

38.3%

38.9%

Arinac

NP margin

12.7%

13.7%

14.7%

14.3%

16.9%

Pediasure

Revenue growth

17.7%

17.5%

13.2%

14.4%

7.5%

Duphaston

PAT growth

39.7%

27.1%

21.0%

11.4%

27.4%

Epival

ROE

36.1%

35.1%

32.7%

28.7%

30.1%

Entamizole

53.0

68.5

89.3

111.0

132.3

P/S

5.4

4.6

4.0

3.5

3.3

Mospel

P/B

13.4

10.4

8.0

6.4

5.4

Glucerna

P/E

42.3

33.3

27.5

24.7

19.4

Folic 500

EV/EBITDA

23.6

18.3

14.8

12.4

11.2

Others

Div Yield

BVPS

Source: Company Accounts, Alfalah Research

Surbex Z

Duphalac

The Searle Company Limited


Outline: Searle Pakistan Limited (SPL) was incorporated in Pakistan as a Private Limited Company on October 5,
1965 as a subsidiary of G.D. Searle & Co., U.S.A. In 1966, Searle Pakistan (Private) Limited acquired a small
manufacturing facility in S.I.T.E. in April 1993, G.D. Searle & Co. as part of its global policy divested its shares in
Pakistan and was acquired by IBL Group. On November 14, 1993, the company was converted into a Public Limited
Company as The Searle Company Limited (TSCL). Presently Searle is one of the leading pharmaceutical companies
in Pakistan, having six state-of-the art manufacturing facilities in Lahore, and Karachi with over 3,000 employees
including sales and marketing force to run the businesses of the company.

Stock Details
Stock price

PKR

523.4

Market cap

PKR bn

64.2

3-month avg turnover

PKRmn

280.1

USDm

614.0

Free Float

35.0

Total shares

122.8

Market cap

Market Share: Despite being the 4th largest pharmaceutical company in terms of volume and 6th largest company
in terms of value, the enjoys a relatively modest market share of around 3.5% as there are large number of
companies operating in pharmaceutical industry of Pakistan.

Nutritional care: The company also has a is well established segment of nutritional care and over the years has
.
created
brands like VITRUM (multi-vitamins and multi-minerals), Peditral (highest selling ORS in Pakistan), Canderel
(Sugar for the diabetics), Infant milk NI-1, NI-2 and NI-Mom.

(%)

SEARL

KSE-100 INDEX

295
245
195
145
95
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

45
Jul-15

Pharmaceutical Segment and consumer healthcare: The company has wide pharmaceutical range across
therapeutic areas such as Allergy/Cough/Cold, Analgesics, Anti-Malarial, Cardiovascular, Respiratory Care,
Gastroenterology, Pain Management, CNS, Orthopedics/Rheumatology, Neuropsychiatry, Probiotics, and Antibiotics.
Key products across the 2 divisions include Hydryllin (for cough associated With Asthma and Cough due to
Bronchitis and other respiratory diseases) with revenues nearing PKR1bn mark and constituting around 8-9% of
total sales of the company, Nuberol (muscle relaxant with analgesic) with revenues of PKR700-800mn and 7-8% of
overall sales, Extor (for treatment of hypertension) with revenues of PKR500-600mn and 5-6% of total sales,
Macsolate (used in alkalosis, vomiting, urinary obstruction, hepatic disease, and prevents Hypoglycemia
consequences in trauma and shock patients) with contribution of around 4% in top line, Tramal (opioid analgesic
agent for the treatment of moderate to severe acute and chronic pain) with revenue contribution of around 4%.
Other notable drugs include Byscard (Beta Blocker), Zenbar (for neuropathic pain in diabetes), Spiromide (Cardio
protective anti diuretic), Morcet (anti-depression), Rotec (arthritis), Gravinate (for motion sickness, vertigo, nausea
or vomiting).

SEARL vs KSE100 performance

Jun-15

Portfolio Mix: Searles product portfolio is divided across three major division; 1) Pharmaceutical, 2) Consumer
Health and 3) Nutrition.

10

The Searle Company Limited


Operating/financial performance: Though cursory look at 5-year operating performance is not exceptional by any means, as the company marginally outperformed the
revenue and PAT growth of the local industry (5-year revenue CAGR of 15.6% vs CAGR of 13.8% of local pharmas and 5-yr PAT CAGR of 31.5% versus CAGR of 29.7% of
local pharms), the companys performance in the past 2 years has been astounding. During 2011 and 2012, the performance remained relatively muted, as earnings of the
company remained virtually flat. Even in the past 3 years, though top line grew by 15%, PAT has grown at an impressive 54% CAGR during 2012-15 period. Several of its
high impact products including Nuberol, Extor, Mascolate, Tramal, Spiromide, Peditral have witnessed impressive growth. Gross margins have remained flattish ranging
between 40.8% to 45.5% in these years. As a result, gross profit has also grown at a CAGR similar to revenue growth (15.1%). Impressive improvement in profitability is
mainly attributed to other income (dividend income from its wholly owned subsidiary, Searle Pharmaceuticals (Pvt.) Limited formed in 2012). The company received sizeable
dividends of PKR475mn/705mn in 2014/2015 resulting in massive surge in other income. It is worthwhile to note that other income which was a fraction (3%) of gross
profit of company during 2010-13, is now a little less than 25% of GP of the company, thus contributing generously to improved profitability of the company. The scrip is
trading at annualized 2016 PE multiple of 28.2x.
FDA Compliant unit: The company is going to build a state of the art FDA compliant manufacturing facility with intention to produce biological product for Oncology,
Rheumatology, Nephrology and Virology for local and international market that will give company an excess to EU and USA market as well.

Top Products
2011

2012

2013

2014

2015

EPS

3.0

3.1

4.3

6.1

11.4

DPS

0.4

0.4

1.0

2.8

1.4

0.1%

0.1%

0.2%

0.5%

0.3%

GP margin

44.5%

43.2%

45.5%

40.8%

43.9%

NP margin

8.7%

7.7%

10.2%

12.4%

18.5%

15.2%

16.5%

4.3%

17.9%

24.9%

3.0%

2.8%

38.4%

43.8%

86.6%

24.8%

20.8%

23.4%

26.8%

36.5%

BVPS

13.3

16.3

20.1

25.6

37.0

P/S

15.2

13.0

12.5

10.6

8.5

P/B

39.2

32.1

26.0

20.4

14.1

P/E

174.6

169.8

122.7

85.3

45.7

64.6

44.6

47.9

29.9

Div Yield

Revenue growth
PAT growth
ROE

EV/EBITDA

66.5
Source: Company Accounts, Alfalah Research

Hydryllin
Nuberol
Extor
Macsolate
Tramal
Spiromide
Peditral
Rotec
Gravinate
Sustac
Metrozine
Canderel
Enfamil A+
Complan
Enfagrow A+
Metodine
Others

11

GlaxoSmithKline Pakistan Limited


Outline: GSK Pakistan is a subsidiary of GSK, which is one of the biggest pharmaceutical companies in the world.
GSP Pakistan was created in Jan 2001 through the merger of SmithKline and French of Pakistan Limited, Beecham
Pakistan Limited and Glaxo Wellcome Pakistan Limited. Its legacy company, Glaxo Laboratories Pakistan Ltd. was the
first pharmaceutical company to be listed on KSE in 1951. GSK Pakistan presently employs about 2,300 persons
across Pakistan with its production facilities at West Wharf, Site and Korangi in Karachi.

Stock Details

Market share: GSK Pakistan is the largest pharmaceutical company with 10.3% value base and 17% volume base
market share in Pakistan pharmaceutical industry. In Pakistan the company has introduced 150 valuable brands.

Consumer Healthcare: Renowned consumer health care products include Panadol, Horlicks, Sensodyne, and ENO.
Amongst the consumer healthcare products, Panadol remains the main bread and butter of the company. It
achieved net sales of more than PKR3bn with over 60 million annual prescriptions. Sensodyne is another major
product of the company and its sales clocked at PKR1bn in 2015.

197.5

Market cap

PKR bn

62.9

3-month avg turnover

PKRmn

35.4

USDm

601.0

Free Float

16.0

Total shares

318.5

Market cap

GLAXO vs KSE100 performance


(%)
145

GLAXO

KSE-100 INDEX

125
105
85
65
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

45
Jul-15

Pharmaceutical brands: Some of the leading pharmaceutical brands of the company are Augmentin (antibiotic),
Seretide (for treatment of asthma), Amoxil (antibiotic), Velosef (antibiotic), Zantac (GERD and heartburn),
Calpol (Pain & Fever, Congestions), Actifed (antihistamine and nasal decongestant for cold and allergy symptoms).
Augmentin remains the highest selling antibiotic in Pakistan with PKR4.4bn sales, that registered 7% YoY growth
in the highly competitive anti infective market during 2015. Velosef is the 2nd largest GSK Pakistan antibiotic that
achieved PKR2bn landmark again in 2015 despite having some supply constraints. Amoxil is the 3rd largest selling
antibiotic of the company with PKR1.9bn sales and YoY growth of 10%. Zantac is another high volume PPI drug of
GSK Pakistan, that crossed sales of PKR950mn and aims to join PKR1bn club in 2016. Ampiclox is another high
selling antibiotic with revenues of around PKR800mn and forming around 3% of total sales of the company. Though
FixVal is a relatively new medicine, introduced some 5 years back, it has made a firm footing in antibiotics.
Revenues crossed PKR150mn in 2015, but grew by an impressive 27% on a YoY basis. Fefolvit is another high
growth multivitamin drug, that achieved sales of PKR676mn in 2015 with YoY growth of 18%.

PKR

Jun-15

Portfolio Mix: The company operates mainly in 2 industry segments in the country: Pharmaceuticals (prescription
drugs and vaccines) and Consumer Healthcare (OTC medicines, oral care and nutritional care). The company deals
in anti-infective, respiratory, vaccines, dermatological, gastrointestinal, analgesics, urology, CNS, allergy,
cardiovascular and vitamins therapy areas. Augmentin, Panadol, Velosef, Amoxil, Calpol, Betnovate, Zantac,
Ampiclox form majority of the revenues of the company (around 50%).

Stock price

12

GlaxoSmithKline Pakistan Limited


Darmatology: GSK Pakistan is undisputed leader of the dermatology market in terms of value, volume and prescription generated. Betnovate remains its key selling
product in derma segment, that generated sales of more than PKR1bn last year. Other notable drugs are Hydrozole (PKR200mn sales) and Zolanix and Bactroban with
PKR100mn sales each. Vaccines: It is the smallest segment on GSK Pakistan. Notable products include Synflorix, Engerix-B and Cervarix.
Operating/financial performance: The operating performance of GSK has remained lackluster over the years. Though revenues of the listed pharma companies have
grown at a 5-year CAGR of 10% during 2010-15, revenue growth of GSK grew at a meager pace of 5.8% during the said period, despite being the market leader in the
industry. Growth in gross profit has been 5.8% during the past 5-years, emulating the revenue growth. Gross profit margin of the company during 2010-2015 remained in a
narrow band of 24.7%-27%, averaging around 26%, considerably below the average gross profit margin of the listed pharma companies during the period, that clocked in
at 31.6%. Furthermore, a steady upward trend is visible in the gross profit margins of listed pharma companies (both locals and MNCs) whereby margins have fattened by
around 3.8%, while margins of GSK have improved merely by 1.3% during the same period. On the contrary, net profit has risen at a 5-year CAGR of 18.9%, inflated due
to one-off gains on sale of land and related operating assets). Overall net margins have remained unimpressive averaging 6.34% (average being inflated due to one-off
gains in 2015) versus listed industry average of 8.3%. Recently, the company has initiated its demerger of consumer healthcare business (already approved by the SHC),
after GSK plc announced a deal with Novartis AG, whereas GSK plc and Novartis will work to create a new world leading Consumer Healthcare Business. Post demerger, GSK
Consumer Healthcare Pak Ltd. Will be listed as a separate entity on PSX. Consumer Healthcare, in 2015, with revenues of PKR5.5bn was around 19% of total sales of the
company, with GP margins of 30% (versus 26.7% GP margin on pharma business). The scrip is trading at annualized 2016 PE multiple of 22.5x.

Top Products

2011

2012

2013

2014

2015

EPS

3.6

4.2

3.3

4.8

7.9

DPS

3.3

3.6

3.5

5.0

4.0

1.7%

1.8%

1.8%

2.5%

2.0%

GP margin

26.7%

26.1%

24.7%

25.6%

27.0%

NP margin

5.2%

5.7%

4.2%

6.7%

10.5%

15.0%

6.4%

9.0%

-9.5%

4.3%

7.8%

16.3%

-20.0%

44.5%

63.6%

10.4%

11.8%

9.3%

13.2%

20.1%

34.9

35.8

35.6

37.5

41.0

Ampiclox

P/S

2.9

2.7

2.5

2.8

2.6

Ventolin

P/B

5.7

5.5

5.5

5.3

4.8

Spetran

P/E

55.1

47.4

59.2

41.0

25.0

Panadol Ex

EV/EBITDA

25.6

20.5

23.1

18.4

13.7

Fefol Vit

Div Yield

Revenue growth
PAT growth
ROE
BVPS

Source: Company Accounts, Alfalah Research

Augmentin
Panadol
Velosef
Amoxil
Calpol
Betnovate
Zantac

Others

Ferozsons Laboratories Limited


Outline: Ferozsons Laboratories Limited was created in 1954 as one of the first pharmaceutical manufacturing
facilities of Pakistan. The company initiated operations in 1956, and in 1960 became the first local pharmaceutical
company to be listed on KSE. Ferozsons Laboratories include subsidiaries BF Biosciences Limited (in collaboration
with Bag Group of Argentina in which Ferozsons holds 80%) that manufactures biological medicines to treat
Cancer and Hepatitis C for the local and export markets and Farmacia. The companys manufacturing facility is
situated at Nowshera.

Stock Details

Foreign collaborations: Ferozsons maintains exclusive agreements with a number of international partners for
distribution, selling and co-manufacturing of products including the Bag Group in Argentina, BioGaia of Sweden,
Biofreeze of Hygenic Corp., PanTheryx, Boston Scientific and Gilead Sciences, Inc. in the USA.

Stock price

PKR

1,006.1

Market cap

PKR bn

30.4

3-month avg turnover

PKRmn

48.7

USDm

290.2

Free Float

35

Total shares

30.2

Market cap

Mkt share: Ferozsons holds around 3.5% market share with more than 40 brands.

(%)

FEROZ

KSE-100 INDEX

245
195
145
95
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

45
Jul-15

Sovaldi (Sofosbuvir): In 2014, Gilead Sciences (an American biopharmaceutical company that discovers, develops
and commercializes therapeutics mainly in antivirals) joined hands with Ferozsons to bring its US FDA approved
breakthrough treatment for Hepatitis C with reduced price under Developing World Access Program. PMRC (Pakistan
Medical and Research Council) data suggest highest prevalence of Hep C in Punjab (6.7%) followed by Sindh
(5.0%), Baluchistan (1.5%) and KPK (1.1%) translating into an estimated 10 million infected people in the country.
Therefore, as soon as product was launched in February 2015, after receiving full regulatory approval for
distribution in Pakistan the response from patients was overwhelming. Revenues have almost trebled in the recent
9M results to PKR9.5bn from PKR2.8bn in SPLY which is only attributed to sky rocketed sales of newly introduced
Hep C drug. The company has now obtained license and required production process technology from Gilead
Science to manufacture an authorized generic version of Sovaldi, under the brand name of Savera, availability of
which is pending registration by DRAP. It will further help to reduce the cost of treatment and hence make the
treatment affordable to the masses, thereby keeping top line momentum in tact.

FEROZ vs KSE100 performance

Jun-15

Portfolio Mix: The company, through a range of branded generics and in-licensed products offers therapeutic
solutions in cardiology, gastroenterology, hepatology, oncology, dermatology and anti-infective treatments. Major
products in its portfolio are Sovaldi (Hepatitis C drug), Peg-INF (the old IV treatment of Hepatitis C, made in
collaboration with Bago Group, by its subsidiary BF Biosciences), Omega (anti ulcer), Xolox (anti viral agent),
Bronochol (cough syrup), Clarion (antibacterial drug), Combitrrol (Anti-Hypertensive), Oxaltie (colorectal
cancer), Carvida (Cardiovascular drug), Nicoril (Angina Pectoris).

14

Ferozsons Laboratories Limited


Harvoni (Sofosbuvir/Ledipasvir): Harvoni is a follow up drug of Sovaldi, and an all-oral treatment for patients of Genotype 1 Hepatitis C (Genotype 1 is estimated to
prevail in over 1 Million HCV patients in Pakistan). Ferozsons on the behalf of Gilead Science Inc filed an application for the registration of Harvoni which has shorter
duration of treatment and more effective for Hepatitis C Gynotype 1.
Operating/financial performance: Operating performance of the company has improved considerably during the past 5 years attributed to introduction of a
revolutionary drug for treatment of Hep C last year. Companys revenues merely doubled from 2010 to 2014, from PKR1.27bn to PKR2.54bn, growing at a 4-year CAGR of
19%. However, in the last year alone, revenue showed massive jump of around 75% on a YoY basis (the complete impact of introduction of Solvaldi was not even visible as
the drug was launched in Feb 2015). Revenues of recent 3 quarters capture the phenomenal sales related to Sovaldi in which top line almost tripled in the past 9M over the
SPLY. Bottom line which had also stagnated between 2012-14, was also reinvigorated surging impressively by 79% YoY in 2015. It is also worthwhile to note that gross
margins of the company have remained impressive during 2010-2014 at around 50-54%, before slipping to 45.5% in 2015 (Sovaldi was a trading business that offered
relatively little margins). Revenue growth and hence earnings profile in future however remains questionable, in our opinion, as 1) Feroz remained the only player that
marketed Sofosbuvir previously, and now other pharma companies have also been allowed to market the drug which will intensify the competition in this segment, 2) new
entrants are offering the product at steeply lower prices (~PKR6k/pack), thus forcing the company to match their price level (the drug was initially introduced at
PKR55k/pack, price of which was then lowered to PKR38k/pack by Feroz). Ferzsons also remains cash rich with net debt per share of -PKR56/share as per the latest qrtrly
accounts. On 2016 annualized earnings, it is trading at PE multiple of 12x.
2011

2012

2013

2014

2015

EPS

10.0

13.5

13.5

13.8

24.8

DPS

2.1

4.3

7.0

12.0

19.0

0.2%

0.4%

0.7%

1.2%

1.9%

GP margin

50.8%

51.3%

53.9%

51.4%

45.5%

NP margin

20.9%

23.1%

21.0%

16.5%

16.9%

Revenue growth

12.9%

23.2%

10.1%

30.0%

74.9%

PAT growth

-5.2%

35.7%

0.0%

2.3%

79.1%

ROE

21.3%

23.4%

19.7%

18.3%

29.7%

BVPS

51.4

64.1

73.6

77.6

89.6

P/S

21.1

17.2

15.6

12.0

6.8

P/B

19.6

15.7

13.7

13.0

11.2

P/E

100.9

74.3

74.3

72.7

40.6

77.7

59.0

52.4

40.1

22.6

Div Yield

EV/EBITDA

Source: Company Accounts, Alfalah Research

Top Products

Sovaldi
Peg-Inf
Omega
Xolox
Bronochol
Carveda
Xavor
Others

15

Highnoon Laboratories Limited


Outline: Highnoon Laboratories Limited was incorporated in March 1984 as a Private Limited Company in Lahore,
Pakistan. It became public limited company in 1995 when it was listed on all 3 stock exchanges of Pakistan.
Highnoon has strategic alliances with some of the leading pharmaceutical companies of the world. There are
licensing agreement with Laboratorios Almirall, S.A., Spain, Chugai Pharmaceutical Co., Ltd. and Mitsubishi Tanabe
Pharma of Japan, JW Holdings, Korea, TRB Chemedica International and Acino Pharma AG of Switzerland which
allow Highnoon Pakistan to manufacture, market and export their products in Pakistan and other countries. A
number of companies turn to Highnoon for contract manufacturing, including Abbott Laboratories Limited, Biogenics
Pakistan Limited, Chiese Pharmaceuticals Limited and OBS Pakistan Limited.

Stock Details
Stock price

PKR

581.5

Market cap

PKR bn

13.3

3-month avg turnover

PKRmn

26.6

USDm

126.7

Free Float

31.3

Total shares

22.8

Market cap

Market share: Highnoon is one of the fastest growing local pharmaceutical company in Pakistan with the market
share of 1.5% of the total industry. Company has established more than 50 brands in Pakistan.

HINOON

KSE-100 INDEX

295
245
195
145
95
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

45
Aug-15

Investment in subsidiary: The company has made a long term equity investment of PKR156.60mn in Biocef
(Pvt.) Ltd (80% stake), which was incorporated in June 2015 set up with the principal objective of production of
Cephalosporin drugs (broad spectrum, semi-synthetic beta-lactam antibiotics, used for treatment of ear infection,
Pneumonia, skin/kidney/bone/throat infections, and Meningitis). Share of Cephalosporin drugs in the country is
around 8% (PKR20bn out of total industry size of PKR250bn) and this facility will start commercial production in
2017. Recently, Highnoon resolved to further invest PKR43.5mn in Biocef (Pvt) Limited, by way of subscription of
shares directly from Biocef (in addition to LT equity investment of PKR156.5mn).

(%)

Jul-15

Pharmaceutical Products: Some of the leading brands of the company include Combivair (treatment of asthma
and in sever chronic obstructive pulmonary disease), Cyrocin (broad spectrum antimicrobial agent for oral and IV
administration particularly in UTIs, respiratory tract infections, sinusitis, intra abdominal infections), Tres-orix (for
anorexia in children, adolescents and adults), Ulsanic (for treatment of acid peptic disorders), Kestine (for the
symptomatic treatment of allergic rhinitis), Tagipmet (used in the management of type 2 diabetes), Skilax
(laxative), and Loprin (enteric-coated aspirin). Together these drugs constitute around 50-55% of total revenues of
the company.

HINOON vs KSE100 performance

Jun-15

Portfolio Mix: Companys portfolio contains products for all major therapeutic areas, with focus on Alimentary
Tract & Metabolism, Antihistamines, Anti-Infectives, Cardiovascular, Endocrine, Hematology, Musculoskeletal,
Nervous System, Parasitology, Respiratory, and Urinary.

16

Highnoon Laboratories Limited


Operating/financial performance: Operating performance of Highnoon has remained impressive in the past 5 years or so. Though revenues have grown at a modest
pace of 10.8% (5-year CAGR during 2010-15), after tax earnings of the company have more than hextupled during the same period from a mere PKR70mn (EPS: 3.87) to
PKR444mn (EPS: 21.81). This phenomenal growth in profitability is mainly attributed to impressive accretion in gross margins, which improved from 34.3% in 2010 to
47.5% in 2015. As a result, growth in gross profit (CAGR: 18.3%) has outpaced revenue growth during the last 5 years. A similar trend is also visible in rising trend in
operating profit which has grown at 5-year CAGR of 29%. Performance in 2015 also stood out with YoY revenue growth of 19% and gross profit rising by 26% YoY.
Operating costs were kept under tight control, thus operating profit surged by 54.6% on a yearly basis. We also find it pertinent to mention that local sales (PKR4.1bn;
around 93% of total revenues) increased by 19% while exports though a small chunk of top line(PKR280mn; 7% of top line) was up by 25% over last year led by
impressive 61% YoY growth in sales to Afghanistan. Amongst the various therapeutic areas, alimentary tract and metabolism segments contributed PKR1.4bn in 2015
posting YoY growth of 12%. Tagipmet (recently launched product) has shown promising growth already posting yearly growth of 40%. Respiratory segment and
cardiovascular segment also continue to perform well, each as sales in each area surged by 29% and 21% respective growth. On 2016 annualized earnings, the company is
trading at PE multiple of 20.5x.

Top Products
2011

2012

2013

2014

2015

EPS

4.5

5.1

7.6

13.4

21.8

DPS

2.4

2.8

3.6

5.8

6.7

0.4%

0.5%

0.6%

1.0%

1.2%

GP margin

31.0%

41.6%

40.9%

44.8%

47.5%

NP margin

3.1%

4.2%

5.2%

7.4%

10.1%

Kestine

Revenue growth

11.7%

-16.3%

22.0%

22.9%

19.2%

Tagipmet

PAT growth

31.3%

12.6%

49.5%

74.8%

63.3%

ROE

Skilax

16.9%

17.5%

23.3%

33.4%

41.6%

24.9

27.2

31.4

40.0

53.6

P/S

4.5

5.4

4.4

3.6

3.0

P/B

23.4

21.4

18.5

14.5

10.8

Herbesser

P/E

143.5

127.5

85.3

48.8

29.9

Blokium

44.7

36.5

23.3

15.5

Others

Div Yield

BVPS

EV/EBITDA

43.7
Source: Company Accounts, Alfalah Research

Combivair
Cyrocin
Tres Orix
Ulsanic

Loprin
lipirex

17

IBL HealthCare Limited


Outline: IBL HealthCare (Pvt) Ltd is owned by Searle Company Limited (51.4%) and International Brands Limited
(22.5%). The company started its operation in 1997 and works as a marketing affiliate and has shown consistent
growth by marketing products under licensing agreements with reputable International companies like Mead
Johnson Nutrition, Nestle Health Science, Terumo, Meditech and Mepaco (Egypt). IBL healthcare is listed on
Pakistan stock exchange since 2009.

Stock Details

Market share: Market share of IBL Healthcare is negligible, under 1%.

3-month avg turnover

PKRmn

7.8

USDm

63.5

Free Float

15.0

Total shares

42.8

Market cap

IBLHL vs KSE100 performance


(%)

IBLHL

KSE-100 INDEX

245
195
145
95
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

45
Nov-15

Operating/financial performance: Though revenue growth in the last year, 2015, has remained static, rising
merely by 2.4%, 5-year revenue CAGR of IBL Healthcare, at around 14.3%, has remained comparable with revenue
growth experienced by local pharma players. Owing to considerable improvement in gross margins (from 23.7% in
2011 to 38.3% in 2015) has led to impressive surge in gross profit from PKR113mn to PKR357mn. The company
maintained tight control over opex, which resulted into impressive growth in operating profit which nearly rose by
ten-folds during the same period. The company is working to enhance its current business by tapping new
opportunities and are finalizing agreements with new USA and UK based principals for their range of products,
which is likely to keep growth momentum intact. The stock is trading at annualized 2016 PE of 37x.

6.6

Oct-15

Medical Disposable Division: Terumo (Terufusion Blood transfusion set), Nrodatalia (Automatic blood pressure
monitor arm type), Meditech (Oxygen Therapy) Meditech (Filtrations), Meditech (Anesthesia care products).

PKR bn

Sep-15

Brand Plus: Prep-up Rice, Prep up fruits & rice, Prep up fruits and wheat.

Market cap

Aug-15

Nestle healthcare Science: Enfamil O-LAC, Resource Optimum, Resource Junior, Beneprotein, Novasource Renal,
Peptamen.

155.5

Jul-15

Product line: Mead Johnson Nutrition: Enfamama A+, Enfamil A + Stage 1, Enfamil A+ Stage 2, SUSTAGEN
SCHOOL 6+, Enfamil O-LAC.

PKR

Jun-15

Product Mix: IBL HealthCare holds a portfolio consisting of three main categories, namely Nutritional Products,
Plasma Protein Components and Hospital Disposables. The company is the major partner of globally recognized
multinational organizations like Nestle and Mead Johnson Nutrition having vast experience in nutrition business.
There are four different divisions 1) Mead Johnson Nutrition, 2) Nestle healthcare Science, 3) Brand Plus, and 4)
Medical disposable division.

Stock price

18

IBL HealthCare Limited


2011

2012

2013

2014

2015

EPS

1.1

1.8

2.4

3.5

3.9

DPS

1.2

1.2

0.7

0.7

1.4

0.8%

0.8%

0.5%

0.4%

0.9%

GP margin

26.9%

30.0%

27.1%

35.7%

38.3%

NP margin

7.1%

10.8%

11.6%

16.4%

17.8%

33.9%

13.4%

19.1%

5.3%

2.4%

400.6%

72.2%

28.4%

47.9%

11.3%

16.8%

25.5%

29.0%

33.3%

27.9%

6.9

7.5

8.7

12.2

15.5

P/S

10.4

9.2

7.7

7.3

7.1

P/B

22.6

20.7

17.8

12.7

10.0

P/E

146.1

84.9

66.1

44.7

40.1

58.5

47.9

33.2

30.8

Div Yield

Revenue growth
PAT growth
ROE
BVPS

EV/EBITDA

94.3
Source: Company Accounts, Alfalah Research

19

Sanofi-Aventis Pakistan Limited


Outline: Sanofi Pakistan is the subsidiary of Sanofi (one of the largest global pharmaceutical company based in
France, formed as Sanofi Aventis by the merger of Aventis and Sanofi which were each product of several previous
mergers) with over 1,000 employees. The main production unit of the company is situated at Korangi industrial area
Karachi.

Stock Details

Market share: Sanofi is one of the leading pharmaceutical company in Pakistan with market share and growth rate
of 3.5% and 6.5% respectively.

Market cap

531.0

Market cap

PKR bn

5.1

3-month avg turnover

PKRmn

0.2

USDm

48.9

Free Float

15.0

Total shares

9.6

SAPL vs KSE100 performance


(%)

SAPL

KSE-100 INDEX

145
125
105
85
65
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

45
Jul-15

Pharmaceutical Brands: Flagyl (used for treatment of bacterial infections of the stomach, skin, joints, and
respiratory tract) remains a key product of the company with revenue contribution nearing PKR2bn and forming
around 15-18% of total sales of the company. Other leading brands in the pharmaceutical segment of the company
include Amaryl (oral type-2 diabetes medicine that helps control blood sugar levels), Claforan (third generation
anti biotic used against numerous gram-positive and gram-negative bacteria for a variety of infections including
respiratory tract / Genitourinary system / Gynecologic / Intra-abdominal / Bone & Joint / CNS infections),
Haemaccel (used in the prevention or treatment of shock associated with reduction in effective circulating blood
volume due to hemorrhage, loss of plasma, or loss of water and electrolytes from persistent vomiting and diarrhea),
Lantus (long-acting insulin used to treat adults with type 2 diabetes and adults and pediatric patients (children 6
years and older) with type 1 diabetes for the control of high blood sugar), No Spa (to smooth muscle spasms
connected With diseases of biliary origin), and Clexane (used to stop blood clots forming within the blood vessels
and treatment of pulmonary embolsim, myocardial infarction), that make up around 35-40% of total revenues of
the company.

PKR

Jun-15

Portfolio mix: The company has presence in pharmaceuticals including consumer healthcare products offering a
diverse range of drugs/products.

Stock price

Vaccine: Though vaccines constitute merely 6% of the total sales of the company, it is one of the fastest growing
businesses of the company. Vaccines sales amounted to PKR604mn depicting YoY increase of 51.4%. Growth in
private vaccines stood at 34.7% despite acute stock shortage. Growth driven products are Verorab, Vaxigrip,
Trimovax, Menectra. Public vaccine business mounted massively by 109% YoY led by impressive sales of Polio
vaccine.
Consumer Healthcare: The company also offers several products in its healthcare division and key brands include
Selsun Blue, Seacod, CollaFlex, E-Cod, Plus etc.

20

Sanofi-Aventis Pakistan Limited


Operating/financial performance: Operating performance of the company has remained a mixed bag over the past several years. Though top line of the company has
risen at a 5-year CAGR of 11.9%, reduction in gross margins (rising input costs attributable to higher cost of utilities, higher fuel and power costs, higher depreciation
charge, higher personnel costs, and as well as increase in travelling and conveyance expenses) that averaged 27.9% in the past 5 years to 26% in 2015 led to relatively
lower growth in gross profit over the years (9.9% CAGR during 2010-15). Moreover, operating costs have risen at a relatively higher CAGR during the years, at 13.6%
during the same period, which has led to erosion in operating margins as well. Additionally, relatively lower other income in 2015, on account of lower forex gains pulled
down profitability in 2015. Similar decline in other income coupled with higher tax incidence squeezed earnings in 1QCY16 in which after tax earnings clocked in
PKR2.5/share. The scrip is trading at an annualized 2016 PE of 53.1x.

Top Products
2011

2012

2013

2014

2015

EPS

23.8

50.5

32.1

24.7

6.9

DPS

10.0

12.5

10.0

7.0

3.0

1.9%

2.4%

1.9%

1.3%

0.6%

GP margin

26.7%

30.5%

30.5%

25.5%

26.0%

NP margin

3.0%

5.6%

3.5%

2.4%

0.6%

Lantus

23.7%

13.2%

1.9%

13.2%

8.4%

So Spa

2.5%

112.2%

-36.4%

-23.0%

-72.1%

ROE

15.0%

26.9%

14.6%

10.3%

2.8%

BVPS

166.0

209.0

230.9

248.0

249.9

P/S

0.7

0.6

0.6

0.5

0.5

P/B

3.2

2.5

2.3

2.1

2.1

P/E

22.3

10.5

16.5

21.5

77.0

6.3

3.8

4.7

6.7

6.2

Div Yield

Revenue growth
PAT growth

EV/EBITDA

Source: Company Accounts, Alfalah Research

Flagyl
Amaryl
Claforan
Haemaccel

Clexane
Tarivid
Phenergan
Daonil
Amaryl M SR
Others

21

Wyeth Pakistan Limited


Outline: Wyeth Pakistan Limited is a public limited company integrated its business in 1949 in Pakistan. The
company is listed on Pakistan stock exchange since 1982. The Company is engaged in manufacturing and marketing
of research based ethical specialties and other pharmaceutical products. Pfizer Inc. has acquired WYETH LLC, USA
on 15 October 2009. Accordingly Pfizer Inc (USA) has become the ultimate parent (USA) of the company however,
Wyeth LLC, USA continues to be the dominant shareholder of the company. The companys manufacturing plant is
located at Site area Karachi.

Stock Details

Mkt share: Market share of the Wyeth Pakistan in overall industry is less than 1%.

PKR

1,943.8

Market cap

PKR bn

2.8

3-month avg turnover

PKRmn

1.2

USDm

26.4

Free Float

26.7

Total shares

1.4

Market cap

WYETH vs KSE100 performance


(%)

WYETH

KSE-100 INDEX

125
105
85
65
May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

45
Jul-15

Operating/financial performance: Operating performance of Wyeth has declined considerably over the past 5
years. Revenues have stagnated, growing at a 5-year CAGR of merely 3%,. Though the company has its share of
noteworthy products under its belt, growth in all products except Ponstan has been anemic (all in single digit). The
company attributes depressed revenue growth to supply chain issues and difference in opinion with reference to
drug pricing policy between the company and the government. Gross profit has been hit hard during these year,
declining at a 5-year CAGR of 6.6% during 2010-15. Gross margins which were already one of the lowest in the
listed pharma industry were further squeezed (declining from the peak of 25.6% in 2011 to merely 12.8% in 2015).
Net profit of the company has followed the suit, growing at a subdued 5-year CAGR of 3.9% during the same
period.

Stock price

Jun-15

Pharmaceutical Segment: Noteworthy brands in the pharmaceutical segment include Ponstan (non-steroidal
anti-inflammatory drug used to treat painful conditions such as arthritis and pain after surgical operations),
Norvasc (for treatment of hypertension, chest pain (angina) and other conditions caused by coronary artery
disease), Ansaid (non-steroidal anti-inflammatory drug used in rheumatoid arthritis, osteoarthritis, and ankylosing
spondylitis, tendinitis, bursitis), Lysovit (Vitamin B-Complex syrup), Lincocin (used to treat severe bacterial
infections in people who cannot use penicillin), Xanax (for anxiety disorders, panic disorders, and anxiety caused
by depression), Mucaine (for relief from the symptoms of indigestion, heartburn or stomach discomfort which can
be caused by peptic ulcer, gastritis, esophagitis, hiatus hernia), Deltacortril (steroid medicine, prescribed for many
different conditions, including Allergy and anaphylaxis, Blood / cardiovascular / endocrine / muscular /
gastrointestinal / neurological / ocular / renal / respiratory / Rheumatic / skin disorders), Vibramycin (for
treatment of certain infections caused by bacteria and protozoa) that form around 50-60% of total revenues of the
company.

Geographical sales

22

Wyeth Pakistan Limited


2011

2012

2013

2014

2015

EPS

105.8

93.1

11.8

(59.5)

22.5

DPS

40.0

80.0

20.0

20.0

2.1%

4.1%

1.0%

0.0%

1.0%

GP margin

25.6%

23.2%

18.8%

15.0%

12.8%

NP margin

5.2%

4.2%

0.5%

-2.8%

1.2%

25.5%

8.5%

-1.0%

-2.0%

-12.4%

Div Yield

Revenue growth
PAT growth

468.4%

-12.0%

-87.3%

-603.3%

-137.9%

ROE

13.8%

10.7%

1.3%

-7.4%

2.9%

BVPS

823.3

918.3

849.2

769.1

802.4

P/S

1.0

0.9

0.9

0.9

1.0

P/B

2.4

2.1

2.3

2.5

2.4

P/E

18.4

20.9

164.5

(32.7)

86.3

8.2

24.0

131.1

19.8

EV/EBITDA

8.0
Source: Company Accounts, Alfalah Research

Top Products
Ponstan
Norvasc
Ansaid
Lysovit
Lincocin
Xanax
Mucaine
Deltacortril
Vibramycin
Myrin P
Prevenar 13
Feldene
Lederplex
Citralka
Nilstat
Others

23

Otsuka Pakistan Limited


Outline: Otsuka Pakistan Limited was incorporated in February 1988 and commenced commercial production in
September 1989 at its factory in Hub, Balochistan. The company is an indirect subsidiary of Otsuka Pharmaceutical
Company Limited, Japan. The principal activity of the company is manufacturing, marketing and distribution of
intravenous infusions and trading in pharmaceutical products, nutritional foods and medical equipment. The
Company's therapeutic drugs consist of Pletaal and Meptin. Its products include such as Ringolact, Pladex, Dextrose
Injection and Sodium Chloride.

Stock Details

Industry Portion: While over all market share of MNCs in Pakistan pharmaceutical industry is 37%, Otsuka
Pakistan is a very small operator with overall market share of merely 0.25% of total industry.

Stock price

PKR

77.5

Market cap

PKR bn

0.9

3-month avg turnover

PKRmn

2.2

USDm

8.1

Free Float

13.4

Total shares

11.0

Market cap

Portfolio Mix: The company has presence in 4 distinct business segments namely 1) Intravenous (I.V) solutions,
2) Cardiac stunts, 3) Clinical nutrition, and 4) Therapeutic drugs.

Clinical Nutrition: The company offers several products in this category. Aminoleban (oral nutritional formula
with multivitamins formulated for patients with chronic liver impairment) and Aminovel (for provision of amino
acids and energy in patients who require intravenous nutrition) remain 2 key products in this division with
contribution of around 15%/10%, respectively in the top line of the company.

OTSU

KSE-100 INDEX

125
105
85
65
Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

45
May-16

Cardiac Stents: The company has 4 different products in this category. Mustang and Tango are bare metal stents,
while Firebird is a drug eluting stent.

(%)

Jul-15

Therapeutic drug: In this category, the company has merely a single product Pletaal (used for peripheral
vascular disease) which is around 5-7% of the total sales of the company.

OTSU vs KSE100 performance

Jun-15

I.V Solution: The company has various type of solutions including electrolyte solutions, standard solutions,
ampoules and other solutions. The company offers several products in this segment including Ringolact solution
(often used for fluid resuscitation after a blood loss due to trauma, surgery, or a burn injury.) which is around 2530% of overall sales of the company, Pladex (Dextrose Intravenous Infusion) which is around 10-15% of total
revenues of the company, Plasaline (normal saline for fluid and electrolyte replenishment that also contains
antimicrobial agents) comprising around 10% of total sales of the company. Other notable I.V solutions of the
company are Plabolyte (maintenance solution), Destrose inj (carbohydrates sol), NACL inj (diluting agent), KCL Inj
(Hypokalemia), Meylon84 (alkalinizing agent).

24

Otsuka Pakistan Limited


Plant capacity & Production: I.V solution and plastic ampoules are the two main segments which largely represent the production data of the company. Total I.V
solution production in 2015 was 25.9mn tons up 292% against 6.6mn tons in 2014 while total capacity of the unit is 31.9mn tons. On the other hand plastic ampoules
production remained flat from 8mn tons in 2014 to 8.4mn tons in 2015 as the company is producing at full capacity in this segment.
Operating/financial performance: Operating performance of Otsuka has remained dismal over the past few years. Net revenues of the company have remained static
in the past 5 years. Though sales exhibited rising trend during 2009-12 as revenues surged from PKR1.2bn to PKR1.6bn with befitting improvement in after tax earnings
from PKR24mn (EPS: 2.41) in 2009 to PKR94mn (EPS: 9.38) in 2012, performance deteriorated in the subsequent years. The factory remained close for almost 2 months in
2013 to undertake major renovation work and the closure continued well into 2014 hurting the production of plabottle 500ml which contributes more than 70% of total
sales of the company. Though the company had built stock ahead of this closure, it turned out to be inadequate as the shut down period protracted. Though production
resumed from March 2014, the company was beset with early teething issues and later on was besieged with severe water shortage. Though water shortage was overcome
in 2015, the company grappled other issues such as frequent electric breakdowns, and more importantly its inability to increase its product prices kept on prices by the
government amid overall hike in cost of business on account of higher power costs, PKR deval, and security related expenses amid rising terrorism, as evident from
depressed gross margins which have fallen from average 26% between 2009-13, to merely 11% in 2015 and 11.2% in 9MFY16, significantly hampered its profitability. It is
the only listed pharmaceutical company to be in a loss on an annual basis.

Top Products

2011

2012

2013

2014

2015

EPS

4.0

8.5

(0.3)

(18.2)

(13.3)

DPS

1.4

1.1

0.9

1.8%

1.5%

1.2%

0.0%

0.0%

GP margin

23.7%

29.2%

24.2%

0.1%

11.1%

NP margin

2.9%

5.9%

-0.2%

-18.5%

-10.1%

Aminovel

Revenue growth

3.4%

6.7%

-18.9%

-16.7%

34.8%

Plasaline

-33.2%

113.1%

-103.2%

6632.2%

-26.8%

10.8%

20.2%

-0.6%

-51.3%

-67.7%

38.5

45.9

44.4

26.4

12.9

P/S

0.6

0.5

0.7

0.8

0.6

P/B

2.0

1.7

1.7

2.9

6.0

P/E

19.4

9.1

(287.3)

(4.3)

(5.8)

Plabolyte M

7.0

4.5

6.8

(13.2)

18.7

Others

Div Yield

PAT growth
ROE
BVPS

EV/EBITDA

Source: Company Accounts, Alfalah Research

Ringolact
Aminoleban
Pladex

Ringolact D
Pan Amin G
Pletaal

25

Comparative Analysis
ABOT SEARLE

GSK

FEROZ HINOON

IBL SANOFI WYETH

OTSU

Closing Price

PKR

710.8

523.4

197.5

1,006.1

581.5

155.5

531.0

1,943.8

77.5

No. of shares O/S

mn

97.9

122.8

318.5

30.2

22.8

42.8

9.6

1.4

11.0

Mkt Capitalization

PKR mn

69,586

64,245

62,891

30,369

13,260

6,650

5,121

2,763

853

PKR

132.3

37.0

41.0

89.6

53.6

15.5

249.9

802.4

12.9

PKR mn

216.2

61.8

74.8

146.9

193.1

21.8

1,118.4

1,881.5

132.0

EPS

PKR

36.6

11.4

7.9

24.8

21.8

3.9

6.9

22.5

(13.3)

EV

PKR mn

61,265

65,447

59,249

29,074

12,883

6,506

5,095

2,533

1,290

P/B

5.4

14.1

4.8

11.2

10.8

10.0

2.1

2.4

6.0

P/S

3.3

8.5

2.6

6.8

3.0

7.1

0.5

1.0

0.6

P/E

19.4

45.7

25.0

40.6

26.7

40.1

77.0

86.3

n.a.

EV/EBITDA

11.2

29.9

13.7

22.6

15.5

30.8

6.2

19.8

18.7

BVPS
Sales/share

Revenue Growth (5-yr CAGR)

%age

14.0%

15.6%

4.7%

28.3%

10.8%

14.3%

11.9%

3.0%

0.1%

NPAT Growth (5-yr CAGR)

%age

25.0%

31.5%

18.9%

18.7%

44.6%

78.7%

-21.6%

3.9%

-217.3%

5-yr Avg. Gross Margins

%age

37.8%

43.6%

26.0%

50.6%

41.2%

31.6%

27.8%

19.1%

17.7%

5-yr Avg. Net Margins

%age

14.5%

11.5%

6.5%

19.7%

6.0%

12.7%

3.0%

1.7%

-4.0%

5-yr Avg. ROE

%age

32.6%

26.5%

13.0%

22.5%

26.5%

26.5%

13.9%

4.3%

-17.7%

Source: Company Accounts, Alfalah Research

Contact Details
Atif Mohammed Khan

Chief Executive Officer

Tel: +(92-21) 35645060 Ext: 301

atif.khan@alfalahsec.com

Research Team
Taha Khan Javed, CFA

Strategy & Economy

Tel: (+92-21) 35645067

Hassan Raza

E&P, OMCs & Refineries

Tel: (+92-21) 35645090-95 Ext: 336 hassan.raza@alfalahsec.com

Fahad Irfan

Banks & Insurance

Tel: (+92-21) 35645090-95 Ext: 337 fahad.irfan@alfalahsec.com

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FMCG, Fertilizer & Textile

Tel: (+92-21) 35645090-95 Ext: 338 danish.kazmi@alfalahsec.com

Ali I. Khan

Power & Autos

Tel: (+92-21) 35645090-95 Ext: 339 ali@lfalahsec.com

Abdul Rehman Siddiqui

Cements & Steel

Tel: (+92-21) 35645090-95 Ext: 340 abdulrehman.siddiqui@alfalahsec.com

taha@alfalahsec.com

Equity Sales & Trading


Syed Rehan Ali

Director Tech. Research & Online Trading

Imran Abdul Aziz, CGMA, CPA (Aust.)

Head of Sales-Local

Tel: (+92-21) 35645073/74

imran.aziz@alfalahsec.com

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Head of Sales - Foreign

Tel: (+92-21) 35645071/72

fahad.ali@alfalahsec.com

Faisal Khan

Local Institution & HNWI

Tel: (+92-21) 35645070/81

faisalkhan@alfalahsec.com

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Local Institution & HNWI

Tel: (+92-21) 35645081

raheel.rafiq@alfalahsec.com

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Head of Online Trading

Tel: +(92-21) 35645083

noman@alfalahsec.com

Tel: +(92-21) 35645069 Ext: 321

rehan@alfalahsec.com

Alfalah Securities (Pvt.) Ltd | A subsidiary of Bank Alfalah Ltd


Corporate Member: Pakistan Stock Exchange Limited
8th Floor, Bahria Complex III,
M.T. Khan Road, Karachi, 74000, Pakistan.
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Web: www.alfalahsec.com

27

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28

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