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
-
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
1.8
1.5
2010
2011
2012
2013
2014
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
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)
11
Mkt Share(MNCs)
70%
Mkt Share(Local)
9
60%
7
5
50%
3
40%
30%
2011
2012
2013
2014
2015
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
15,000
45,000
10,000
35,000
25,000
5,000
15,000
5,000
2011
2012
2013
2014
2015
2010
2011
2012
2013
2014
2015
6
Industry Review
Gross margin comparison of listed pharma players
50%
16%
40%
12%
30%
8%
4%
20%
2010
2011
2012
2013
2014
2011
2012
2013
2014
2015
2010
2015
ROE (Local)
ROE (MNCs)
ROA(Local)
ROA(MNCs)
30%
15%
25%
20%
10%
15%
10%
5%
5%
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
7
69.6
PKRmn
8.0
USDm
665.0
Free Float
21.3
Total shares
97.9
Market cap
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.
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
Surbex Z
Duphalac
Stock Details
Stock price
PKR
523.4
Market cap
PKR bn
64.2
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).
Jun-15
Portfolio Mix: Searles product portfolio is divided across three major division; 1) Pharmaceutical, 2) Consumer
Health and 3) Nutrition.
10
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
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
PKRmn
35.4
USDm
601.0
Free Float
16.0
Total shares
318.5
Market cap
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
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
Augmentin
Panadol
Velosef
Amoxil
Calpol
Betnovate
Zantac
Others
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
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.
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
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
Top Products
Sovaldi
Peg-Inf
Omega
Xolox
Bronochol
Carveda
Xavor
Others
15
Stock Details
Stock price
PKR
581.5
Market cap
PKR bn
13.3
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.
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
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
Stock Details
PKRmn
7.8
USDm
63.5
Free Float
15.0
Total shares
42.8
Market cap
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
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
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
PKRmn
0.2
USDm
48.9
Free Float
15.0
Total shares
9.6
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
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
Flagyl
Amaryl
Claforan
Haemaccel
Clexane
Tarivid
Phenergan
Daonil
Amaryl M SR
Others
21
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
PKRmn
1.2
USDm
26.4
Free Float
26.7
Total shares
1.4
Market cap
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
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
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
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.
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
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
Ringolact
Aminoleban
Pladex
Ringolact D
Pan Amin G
Pletaal
25
Comparative Analysis
ABOT SEARLE
GSK
FEROZ HINOON
OTSU
Closing Price
PKR
710.8
523.4
197.5
1,006.1
581.5
155.5
531.0
1,943.8
77.5
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
%age
14.0%
15.6%
4.7%
28.3%
10.8%
14.3%
11.9%
3.0%
0.1%
%age
25.0%
31.5%
18.9%
18.7%
44.6%
78.7%
-21.6%
3.9%
-217.3%
%age
37.8%
43.6%
26.0%
50.6%
41.2%
31.6%
27.8%
19.1%
17.7%
%age
14.5%
11.5%
6.5%
19.7%
6.0%
12.7%
3.0%
1.7%
-4.0%
%age
32.6%
26.5%
13.0%
22.5%
26.5%
26.5%
13.9%
4.3%
-17.7%
Contact Details
Atif Mohammed Khan
atif.khan@alfalahsec.com
Research Team
Taha Khan Javed, CFA
Hassan Raza
Fahad Irfan
Ali I. Khan
taha@alfalahsec.com
Head of Sales-Local
imran.aziz@alfalahsec.com
fahad.ali@alfalahsec.com
Faisal Khan
faisalkhan@alfalahsec.com
Raheel Rafiq
raheel.rafiq@alfalahsec.com
Muhammad Noman
noman@alfalahsec.com
rehan@alfalahsec.com
27
Disclaimer
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subject companies/securities and (2) no part of his/her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this
report. Furthermore, it is stated that the research analyst or any of its close relatives do not have a financial interest in the securities of the subject company
aggregating more than 1% of the value of the company. Additionally, the research analyst or its close relative have neither served as a director/officer in the past
3years nor received any compensation from the subject company in the past 12 months.
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28