Customs Duty on the import of Pre-fabricated Modular Clean Rooms (used in Pharma, bio tech. and life sciences) is proposed to be reduced from 20% to 3%.
Fabric, (non-woven) is used in the manufacturing of bandages, surgical gowns, wound dressings etc. To provide relief to the pharmaceutical sector and reduce cost for patients, customs duty to be reduced from 16% to 5%.
Machinery, equipment, apparatus, appliances, wheelchairs, medical, surgical, dental furniture and spares etc. import are allowed duty free by charitable non-profit institutions, now the scope of this exemption is being expanded by including Hospitals of Armed Forces, Fauji Foundation, and Pakistan Atomic Energy Commission.
Electric Cigarettes customs duty increased from 3% to 20% owing to its harmful effects.
1HCY17 Pharmaceutical Profitability up by 36% YoY, ex-FEROZ
Profitability surged by 11% YoY
In 1HCY17, domestic pharmaceutical sector accumulated recorded profit of PKR 4,922mn, up by 11% YoY (Ex-Feroz up by 36% YoY). Our sample includes five companies (ABOT, SEARL, GLAXO, SAPL and FEROZ) which have 90% weight in the sector’s market capitalization.
SAPL Recorded Highest Growth in Profitability
Highest growth in profitability was achieved by Sanofi-Aventis (+153%) on the back of robust growth in vaccine business. GLAXO’s earnings surged by 56% YoY as it benefited from its presence in consumer health care and participation in tenders of Punjab Government. The profitability of SEARL grew by 22% YoY on the back of higher sales and lower effective taxation (PBT was up by 2% YoY). Whereas ABOT’s bottom-line grew moderately by 13% YoY due to inability to pass on the full inflationary impact.
FEROZ decays the profitability
Meanwhile profitability of Pharma sector (ex-FEROZ) grew by 36% YoY to reach PKR 4,902mn. Ferozsons PAT declined by 98% YoY attributable to plunge in net revenues. The declining drug ‘SOVALDI’ (highest selling drug of FEROZ) was substituted by several cheaper generic brands of Sofsobuvir available in the market which eroded the company’s top-line by 52%, hence profitability tanked.
Margins Remained Flat
The pharmaceutical sector has managed to maintain its gross margins at 34% during 1HCY17. On a YoY basis, SEARL conserved its margins at 39% whereas SAPL and GLAXO’s margins surged by 3% and 1% to 37% and 27%, respectively. However, ABOT and FEROZ’s margins compressed to 38% YoY (down by 1%) and 32% YoY (down by 8%); particularly due to inflationary pressures and lackluster revenues, respectively. Pertinently, Drug Pricing Committee (DPC) announced expected increase in drug prices by 3%, which would bode well for the Pharma sector profitability.
The export of pharmaceutical products during the first quarter of the ongoing financial year (FY20) grew by 12.35pc when compared with the corresponding period of last year.
The pharmaceutical exports were recorded at $55.481 million during July-September FY20 as against the exports of $49.383 million during July-September FY19, according to the Pakistan Bureau of Statistics (PBS).
In terms of quantity, the export of pharmaceutical goods increased by 22.42pc, from 2,792 metric tonnes to 3,418 metric tonnes.
Meanwhile, on a year-on-year basis, pharmaceutical exports rose by 16.35pc during the month of September 2019 as compared to the same month of last year. Pharmaceutical exports in September 2019 were recorded at $18.210 million against the exports of $15.651 million in September 2018.
On a month-on-month basis, the exports of pharmaceutical products increased by 7.45pc in September 2019 when compared with the exports of $16.947 million in August 2019.
It is pertinent to mention that the country’s merchandise trade deficit plunged by 34.85pc during the first three months of FY20 as compared to the same period last year.