How pharmas performed against high headwinds

Pharmaceutical companies have posted their earnings for the July to December period of 2022, and here's how some of the top drugmakers performed during the half year.

Among eight of the leading pharma companies, five – Beacon Pharma, Square Pharma, Ibn Sina Pharma, Navana Pharma, and Acme Laboratories –  posted profit growths, while the other three – Beximco Pharma, Renata, and ACI – faced declines. 

And, the ones that did post profit growth, saw their profit margins decline because of a significant increase in their production costs, said sources. 

Industry people blamed the skyrocketing prices of the dollar and raw materials, and high production costs for the decline in their profit. 

The price of $1 has now increased to Tk106.1 – about a 26% jump from around Tk84 a year ago.

Besides all these already prevailing challenges, the recent hikes in gas and energy prices have emerged as a new thing to worry about for pharmaceutical companies. 

According to industry people, the cost of producing drugs is expected to go up because of the gas and energy shock. 

According to the firms' unaudited half-yearly financial statements, all but Beacon Pharma and ACI posted year-on-year revenue growth.

In the first half of the current fiscal, Square Pharma's revenue went up 10.9% to Tk3,225 crore and profit by 10.2% to Tk1,062 crore. 

The company's Chief Financial Officer Md Zahangir Alam told The Business Standard, "Although the profit increased, it was not up to the mark because of a strong dollar, and hike in raw material prices. The profit should have grown at least by 18%."

He said, "The company's expenses have gone up by 5% to 6%, and now, energy prices have increased."

"But we couldn't raise the prices of our products. This somewhat affected the profit growth, and apparently will do so more in the future."

Beximco Pharmaceuticals, one of the top drugmakers, has seen a 15.97% growth in revenue to Tk1967 crore, but its profit declined by 15.13% mainly for the end of a tripartite contract to supply Covid-19 vaccines. 

During July-December 2021, it earned Tk61.90 crore supplying vaccines to the government from the Serum Institute of India, but no income was generated from jabs in the July to December period of 2022.

Also, as per its stock exchange disclosure, its profit declined due to increased cost of production and a consequent decrease in gross margin.

ACI witnessed a 1.19% drop in revenue but its profit declined by 20.78% to Tk110.12 crore.

The company's stock exchange filing said its consolidated profit decreased due to an increase in costs because of currency devaluation, a hike in energy price, high import costs, and increased financing costs, which adversely affected the overall profitability of the ACI Group.

Despite a 6% growth in revenue, Renata has seen a 22.37% fall in profit to Tk209.88 crore. 

Renata's Company Secretary Jubayer Alam told TBS that the rise in power and fuel prices raised manufacturing costs by Tk21 crore, travel, and freight costs by more than Tk10 crore, and international freight costs by Tk4 crore.

"We increased raw materials inventory by Tk247 crore to protect against dollar shortages in the near future. Stock build-up and increased expenditures adversely affected cash flow." 

"Despite these disappointing results, the company remains financially strong and therefore we intend to stay focused on our long-term strategic goals," he added.