bd pharma_overview - 2010 brac

7/26/2019 BD Pharma_Overview - 2010 BRAC

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Parvez M ChowdhuryAnalyst: Pharmaceuticals and Consumer Goods

[email protected]

An overview of the pharmaceutical sector in Bangladesh

July !"!

#ntroduction

The pharmaceutical market in Bangladesh remainstiny compared to the population size because ofthe lack of spending power of the population.Pharmaceutical spending is also amongst thelowest in the world in per capita terms. Healthcareexpenditures consist of only 3.4 of !"P.Howe#er$ the increased awareness of healthcareand the go#ernment%s increased expenditure inthis sector is causing the demand to increase in

this sector. &n addition to the demand oftherapeutic drugs$ the demand for 'wellness(drugs such as #itamins and minerals areincreasing gradually and the future growth of thesector lies in it.

)urprisingly$ the pharmaceutical sector$ which iswidely regarded as a 'hi*tech( industry$ is themost de#eloped among the manufacturingindustries in Bangladesh. +oughly ,- companiesare operating in the market. /ccording to &0)$ a1)*based market research 2rm$ the retail marketsize is estimated to be around B"T -- billion$which grew by .5 in ,6. The market size in,5 was B"T 47 billion with a growth of .6.

The actual size of the market may #ary slightlysince &0) does not include the rural market in theirsur#ey. Howe#er$ the de#iation is estimated to benot more than -* in either direction.1nfortunately$ there is no solid information sourcein Bangladesh other than &0). The retail market isabout 6 of the total market. &n that respect$ thetotal market size is more than B"T billion.

$able "% &ealth e'penditure as a ( of)*P

$otal e'penditureon health as ( of)*P

!!! !!+

,- 7. 5.4

,A 3.4 -.7

Japan 7.7 5.

#ndia 4.4 4.

ri /an0a 3.7 4.,

Pa0istan 3. ,.7

Malaysia 3., 4.4

$hailand 3.4 3.7

#ndonesia ,. ,.,

Bangladesh ,.7 3.4

Source: World Health Statistics 2010, WHO

8ne of the fastest growingsectors with an annual a#erage

growth rate consistently in thedouble digits$ Bangladesh%spharmaceutical industrycontributes almost of !"P. &tis the third largest tax payingindustry in the country.Bangladeshi pharmaceutical 2rmsfocus primarily on brandedgeneric 2nal formulations usingimported /P&s 9/cti#e

Pharmaceutical&ngredients:. Brandedgenerics are a

category of drugsincluding prescriptionproducts that areeither no#el dosageforms of o;*patentproducts produced bya manufacturer that isnot the originator ofthe molecule$ or amolecule copy of an

o;*patentproductwith a

tradename.Thisde2nitionis usedby boththe


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c non*steroid drugs$ non *narcoticanalgesics$ antihistamines$ andoral anti*diabetic drugs. )omelarger 2rms are also starting toproduce anti*cancer and anti*retro#iral drugs.

$able % Pharmaceuticalsector growth rate

1ear )rowth 2ate

, ,,.4

,, .5

,3 -.6

,4

,-

,

,7

,5

,6

Source: Bangladesh Associationof PharmaceuticalIndustries (BAPI

3e initiate this sectorresearch in an

attempt topresent an

overview ofthe sector.

3ithin this

research we

will cover thestate of the

sector4 it5sstrengths and

wea0nesse

s4 and6nally

the overview of someleading

pharmaceuticalcompanies.


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Pharmaceutical ector%Bangladesh

/lthough the sector has a long way to go$ the reasons we are optimistic about the sectorcan be summarized in


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/#erage !"P !rowth +ate .

)rowth ,pside


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Pharmaceutical ector% Bangladesh

Mar0et players

"omestically$ Bangladeshi companies including the locally based 0?Cs 7igure % Mar0etshare concentrationproduce 6-*67 of the drugs and the rest are imported. /lthough

about ,- pharmaceutical companies are registered inBangladesh$ less than are acti#ely producing drugs.

The domestic market is highly concentrated and

competiti#e. Howe#er$ thelocal manufacturers dominatethe industry as they enDoy

>

!(

approximately 57 of marketshare$ while multinationals hold a

3 share./nother notable

M?Cs"8(

$o

the top ten !erman 2rmsgenerated approximately.

Source: BAPI andne%s&a&erre&orts


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)AuarePharmaceuticals isthe stand outmarket leader witha market share of6.3 whichposted domesticre#enue of B"T., billion in the

last four Auarters9/pr 6 * 0ar :.Their nearestcompetitors are&nceptaPharmaceuticalsand BeximcoPharmaceuticalswith market sharesof 5.- and 7.

7igure 8% *omesticmar0et share ofcompanies

$op $enCompany)rowthApr !9 Mar "!

AC# /imited

Acme /aboratories

Aristopharmauare

Pharmaceuticals

ectorBe'imco

Pharmaceuticalss0ayef

Pharmaceuticals

2enata /imited#ncepta

Pharmaceuticals>psonin

Pharmaceuticals

*rug #nternational

Source: 'e%s&a&er re&orts

$able :%*omestic mar0etshare ofcompanies

$op Companies

uarePharmaceuticals#nceptaPharmaceuticalsBe'imcoPharmaceuticals>psoninPharmaceuticalss0ayefPharmaceuticals

Acme /aboratories

2enata /imited

AC# /imited

Aristopharma

*rug #nternational

ano6Aventis

)la'omith-line

?ovo ?ordis0

andoz

?ovartis

>thers

$otal

Source:BAPI andne%s&a&erre&orts


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respecti#ely.&ncepta andBeximco hadB"T 4.6 billionand B"T 4.4billion indomestic salesfor the last fourAuarters./lthough anumber of 0?Cs areoperational inBangladeshmarket$ no0?Cs are in thetop ten in termsof domesticsales.

BecauseBangladesh /P&capacity is

insigni2cant$pharmaceuticalcompaniesimportapproximately5 of their/P&s.


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3


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$able ;% Pharmaceutical #mport to Bangladesh

,* MillionD!!!!" !!"! !!

!8 !!8!:!!:!; !!;

!=!!=!+ !!+!rganic Chemicals #mport toBangladesh

Pharmaceutical Products #mport toBangladesh

>thers>thers

#ndonesia &ungary

,..A #ndia

Japan #taly

$aiwan Belgium

)ermany!!+!rdinance "9


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1nder this 8rdinance$ 9i: no medicine of any kind can be manufactured for sale or be imported$distributed or sold unless it is registered with the licensing authorityM 9ii: no drug orpharmaceutical raw material can be

7


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imported into the country except with the prior appro#al of the licensing authorityM 9iii: thelicensing authority cannot register a medicine unless such registration is recommended bythe "rug Control CommitteeM 9i#: the licensing authority may cancel the registration of anymedicine if such cancellation is recommended by the "rug Control Committee on 2nding

that such a medicine is not safe$ eLcacious or usefulM 9#: the licensing authority is alsoempowered to temporarily suspend the registration of any medicine if it is satis2ed thatsuch a medicine is substandardM 9#i: the go#ernment may$ by noti2cation in the oLcialgazette$ 2x the maximum price at which any medicine may be sold and at which anypharmaceutical raw material may be imported or soldM 9#ii: no person is allowed tomanufacture any drug except under the personal super#ision of a pharmacist registered inthe Pharmacy Council of BangladeshM 9#iii: no person$ being a retailer$ is allowed to sell anydrug without the personal super#ision of a pharmacist registered in any +egister of thePharmacy Council of BangladeshM and 9ix: the go#ernment may$ by noti2cation in theoLcial !azette$ establish "rug Courts as and when it considers necessary. The ?ational"rug /d#isory Council ad#ises the go#ernment on the implementation of the national drugpolicyM on the promotion of local pharmaceutical industries and the production and supplyof essential drugs for meeting the needs of the country and on matters relating to theimport of drugs and pharmaceutical raw materials.

#ntellectual property legislation

Bangladesh is a signatory of the !/TT 1ruguay +ound and orld Trade 8rganization 9T8:agreements$ including the /greement on Trade*+elated /spects of &ntellectual Property+ights 9T+&P):. &t is also a least de#eloped country 9K"C: and thereby is exempted by the"oha declaration from implementing patent protection for pharmaceutical patents until,. This only holds for countries that ha#e not yet implemented a legislation thatpro#ides for such patent protection$ though. &t is therefore necessary to look at theBangladeshi law

The Bangladeshi patent law dates from 6 and was amended in 65-. The responsiblego#ernment institution is the 0inistry of &ndustries$ "epartment of Patents$ "esigns and

Trade 0arks. The patent law is thereby largely the same as in &ndia before adapting to thereAuirements of T+&P) in ,-. /lthough there ha#e been disputes about the patentabilityof pharmaceutical products according to this law$ it is reasonable to assume that theinterpretation that was chosen in &ndia$ namely the patentability of pharmaceuticalprocesses but not of pharmaceutical substances$ can also be adopted in Bangladesh.

Bangladesh is a member of the orld &ntellectual Property 8rganization 9&P8:$ andadhered to the Paris Con#ention on &ntellectual Property in 66. /lthough its intellectualproperty laws are often considered as outdated and enforcement as being weak$Bangladesh has ne#er been on the 1) trade representati#es N)pecial 3 atch Kist(. ThisKist identi2es countries that deny what the 1) trade representati#e considers adeAuate ande;ecti#e protection for intellectual property rights.

$he industry after "9


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2 Foreign Companies foreign brands are not allowed to be manufactured underlicense in Bangladesh if similar products are being manufactured in the country.0ultinational companies that do not ha#e an own production facility in Bangladesh are notallowed to market their products e#en if manufactured in the

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country by toll F contract manufacturing 9manufacturing by a Bangladeshi company onbehalf of the multinational:.

O Price Control - drugs were de2ned as essential drugs.


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0alaysia$ are moderately regulated. hile countries do not always reAuire stringentcerti2cation$ a certi2cation from a regulated market signi2es Auality and pro#ides a 2rmwith a competiti#e ad#antage.

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Unregulated 0ost Bangladeshi pharmaceuticals are exported to less than fully regulatedmarkets such as Bhutan$ ?epal$ Jietnam$ 0yanmar and /frican countries such as oryCoast$ 0ale$ etc.

MaEor e'porters

The maDority of Bangladesh%s pharmaceutical exports are from 0?Cs such as )andoz.)andoz$ an 0?C operating in Bangladesh$ has approximately ,- manufacturing sitesglobally. Bangladesh is one of its smaller sites. The Bangladeshi manufacturing site is an E1certi2ed plant which produces about - million tablets a year and generates about 1)"3-*4 million in sales. &t has been growing rapidlyQ-*5 per yearQand is responsible fora signi2cant portion of Bangladesh%s pharmaceutical export growth. &t imports /P&s$acAuires packaging domestically$ and manufactures 2nal formulations in Bangladesh forexport of 1)" , million or for sale to the domestic market ranging from 1)" ,3*,5 million.

Exporting pharmaceutical products is not accessible for all companies. Each country has itsown product regulations$ registration reAuirements$ language reAuirements$ cultural

preferences$ national packaging reAuirements$ and industry protection mechanisms. )aleson the global market are Auite competiti#e with 2rms from around the world #ying forbusiness.


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ten 2rms accounted for most of the in#estments.

0?Cs can operate in a country in multiple ways$ including foreign direct in#estment 9


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manufacturing$ Doint #entures and strategic partnerships or licensing. Each arrangement#aries in terms of which partner contributes more resources and technical knowledge$which partner assumes more risk$ and which partner accrues more bene2ts and pro2ts.

Contract manufacturing

Contract manufacturing is a good business opportunity for Bangladeshi 2rms$ and if welldone$ it can enable technology transfers to domestic 2rms. /s a result$ they can acAuireworld*class experience in 2nished dosage manufacturing$ /P&s or other aspects ofpharmaceutical manufacturing. )Auare Pharmaceuticals$ one of Bangladesh%s largestpharmaceutical 2rms$ attributes much of its success to what it learned by working with an0?C.

Bangladeshi pharmaceutical 2rms can make se#eral types of contract manufacturingarrangements with 0?Cs$ including

1 Contract manufacturing with the product intended for export to a regulated market.

The current ?ational "rug Policy 9?"P: permits this. Contract manufacturing for export is asigni2cant 2nancial opportunity$ but challenging. The domestic pharmaceutical 2rm mustha#e a facility accredited by the regulators of an ad#anced market. )Auare Pharmaceuticalsis one of the #ery few Bangladeshi 2rms with a Auali2ed facility. &t is currently initiating acontract manufacturing arrangement with a British 2rm.

2 Contract manufacturing with the product intended for the domestic market. The"rug Control 8rdinance 9"C8: prohibits foreign 2rms from selling products in Bangladeshunless they ha#e a manufacturing presence in the country. Thus$ Bangladeshi 2rms canonly contract manufacture for domestic distribution with 0?Cs that already ha#e apresence in Bangladesh. /n example of this arrangement is Beximco contract manufacturesJentolin$ which is an inhaler for !laxo)mith=line.

*emand for essential drugs

Bangladesh has a strong pharmaceutical industry represented by pri#ate enterprises andthe state*owned E"CK. Bangladesh is largely self* suLcient with regard to drugs and has nosigni2cant drug a#ailability problem. &n fact$ the a#ailability of drugs has a strongeroutreach than the a#ailability of health care professionals.

"ue to widespread #accination schemes$ successful eradication of leprosy and widespreaduse of oral rehydration for diarrhea$ many of the traditional health problems are minimizedand life expectancy has risen to around - years R comparable to &ndia and Pakistan ratherthan to /frican K"Cs who mostly ha#e life expectancies below -. The most importanthealth issues in Bangladesh today are related to maternal health and malnutrition$ #itaminand iron de2ciency. /&")$ 0alaria and TBC are potential health threats. 8ther important

causes of death are cardio#ascular diseases$ diabetes and cancer. 0ental disorders are animportant reason for disability. Thus$ in line with the statement that there is no signi2cantdrug a#ailability problem in Bangladesh$ the therapeutic groups do largely re@ect the maDorhealth issues in the country.

$he health care system

Bangladesh is a signatory to the /lma /ta "eclaration on Primary Health Care 9PHC: in675. &n 655$ the Bangladeshi !o#ernment adopted the PHC approach as a guidingprinciple to the health systems de#elopment in Bangladesh. "ue to resource limitations$introduction of PHC was started in selecti#e districts. &n ,4$ an estimated 45 million out ofBangladesh%s 4 million population is co#ered by PHC.


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The public health expenditure$ totaling 3.4 of !"P in ,$ comparing to 4. in &ndia$4., in )ri Kanka

11


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and ,.7 in Pakistan. Public health expenditure accounts for roughly 33. of the totalhealth expenditure.

There are around 43$ registered physicians and 4$ nurses and midwi#es$ resulting

in about only 3 physician and 3 nurses and midwi#es per $ population. The hospitalbeds per $ population is only about 4. The number of public health worker is about$ 9less than .- per $ population:. ith ,$ community health workers theratio is only for $ population.


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hen in#esting in pharmaceutical manufacturing plants$ the eAuity rate used byBangladeshi in#estors is signi2cantly higher than the usual eAuity rate in transnationalpharmaceutical companies. The reason lies partly in the comparati#ely high cost of capitaland also in the necessity to group together di;erent banks for 2nancing a large credit sum$since the sum each bank is allowed to lend is usually not suLcient to 2nance a

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large drug manufacturing plant. /s a result$ there is a large number of #ery small scalemanufacturer present in the industry. These manufacturers focus mostly on a handful ofbasic and essential drugs.

peci6c ris0s of national production

The dependence on import of /P&s is the main risk$ since the pro#iders are alsocompetitors. This has not a;ected Bangladeshi pharmaceutical manufacturers too much asthey concentrated on the national market which was not deemed attracti#e by theirpro#iders. /s long as Bangladeshi manufacturers concentrate on de#eloping countrymarkets$ they may be able to circum#ent this problem by sourcing from de#elopedcountries% manufacturers who are not targeting these markets. Howe#er$ this wouldprobably also increase their cost.

$2#P

The T8%s /greement on Trade +elated /spects of &ntellectual Property +ights 9T+&P):reAuires all signatories to legislate twenty*year patent protection for pharmaceuticalproducts into their domestic law. T+&P) is not a uniform international law$ but a frameworkfor intellectual property protection with minimum agreed standards. hile signatorycountries must meet its reAuirements through legislation$ T+&P) pro#ides signi2cant@exibility.

1ntil ,$ T+&P) pro#ides Bangladesh with domestic$ patent*free production rights andlimited exporting ad#antages. Bangladesh imports approximately 5 of its /P&s fordomestic production$ ,*,- of which are patented. These /P& costs will most likely rise as

T+&P) phases in.

Bangladesh enDoys some export ad#antages from T+&P). But these ad#antages aresomewhat o;set by the pace and competiti#eness of the &ndian and Chinese genericmarkets. &n both markets$ companies can produce drugs at highly competiti#e pricingQe#en with higher costs associated with buying patented /P&s or paying royalties.

Bangladesh will ha#e to rely on the standard business practices of producing the highestAuality product at the lowest price to compete on the international market. 1ntil ,$howe#er$ Bangladesh has the following export ad#antages under T+&P)

1. Export to any country if the drug is not under patent. /ny 2rm in any country can bene2tfrom this stipulation.


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drug. Companies do not 2le drug patents in all countries$ particularly where sales and pro2tprospects are low or there is no meaningful Dudicial patent protection. These gaps in patentco#erage can be exploited.

4. Export to a country that has issued a compulsory drug license and awarded theproduction contract to

1

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Bangladesh. T+&P) grants go#ernments the right to issue a compulsory license for publichealth purposes$ which occurs when a go#ernment o#errides a patent and grants anotherentity the right to produce the patented product. /lthough Canada$ Iapan$ the 1nited )tates

and the 1nited =ingdom ha#e all issued domestic compulsory pharmaceutical licenses$ #eryfew de#eloping countries ha#e done so. The expense and time of litigation with de#elopedcountries can act as a deterrent. !o#ernments must also balance fully exploiting T+&P)@exibilities while maintaining good relations with 0?Cs$ which often use domestic 2rms foroutsourcing or manufacturing.

Before ,-$ many countries could ful2ll a compulsory license importation reAuest becausemany were manufacturing patented drugs o; patent. /s of ,-$ Bangladesh patenteddrugs o; patent whereas &ndia and China$ the world%s largest suppliers of generic drugs$ willno longer be able to engage in this practice for any drug patented after ,-. Because2rms reAuire two to three years to re#erse engineer and start producing a speci2c drug ofAuality$ if any country issues an import reAuest for a compulsory license for any drugpatented after ,-$ Bangladesh will ha#e an ad#antage if it is already manufacturing thedrug domestically. Howe#er$ T+&P) has clearly stated that export for compulsory licensing isintended for health policy not industrial policy.

Conclusion

The essential drugs market in Bangladesh is well supplied$ and there is no a#ailabilityproblem of essential drugs. The ""/$ responsible for the safeguarding of the drug Aualitythrough licensing and control$ lacks the necessary capacities$ eAuipment 9notably testlaboratories: and go#ernance to perform all its tasks e;ecti#ely. H8 is supporting the ""/through capacity building and new test laboratories.

Partly due to the failure of the local authorities to pro#ide credible Auality certi2cations$ andpartly due to their aspiration to increasingly target export markets$ leading Bangladeshi

manufacturers are already successfully working on obtaining international Aualitycerti2cation for their products and plants$ in some cases bringing in experienced expertsfrom 0?Cs or &ndian competitors.

The ability of the Bangladeshi drug industry to manufacture drugs for all kinds of needs isbeyond doubt. hile some manufacturers are already able to produce world class Aualitydrugs$ others would reAuire considerable assistance to be able to reach that target.Howe#er$ the Bangladeshi industry has been largely focused on the domestic market untilrecently. =nowledge about and contacts to the di;erent players in potential export marketsis still limited and constitutes a key bottleneck to expansion of manufacturing facilities.

&n terms of cost$ Bangladeshi companies can be expected to compete successfully with/frican players$ especially if an international Auality standard is reAuired. The ability to

compete with &ndian and Chinese manufacturers is limited due to the necessity to importmachinery and notably the precursor substances. The ultimate competiti#eness of Chineseand &ndian manufacturers depends on the expected rigor of the T+&P) enforcement$ the#iability of #oluntary or compulsory licensing for &ndian and Chinese players$ and theamount of license fees they would ha#e to pay$ and the competiti#eness of Bangladeshimanufacturers will largely depend on the pricing of the raw materials. )till$ Bangladesh isprobably one of the few K"Cs where under the T+&P) agreement new patent protecteddrugs and /P&s can be cost*e;ecti#ely produced and at high Auality.

Thus$ Bangladesh is a natural candidate to supplement or substitute &ndian and Chinesepro#iders to the de#eloping country markets of both 2nished drugs and /P&s$ notably inantibiotics$ anti*ulcerants$ anti*hypertensi#es and anti*depressants. Howe#er$ the domestic


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market is large enough to be self*sustaining and lucrati#e for the domestic players untilthey become ready to take on the global pharmaceutical market.

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$op /isted Pharmaceutical Companies

uare Pharmaceuticals /imited Position in terms of domestic sales% "D

1)Auare Pharmaceuticals is the largest pharmaceuticals manufacturing company in thecountry.

2The company has consistently created #alue for its shareholders$ with a#erage +eturnon EAuity 9+8E: of o#er , in the last 7 years.

3hile maintaining the pro2tability in its core pharma business$ the company hascreated a number of other businesses inhouse in the past$ and after pro2tablecommercial operation of the businesses commenced$ spun o; such subsidiarybusinesses to monetize the in#estment.

4)Auare Pharmaceuticals has undertaken an expansion program to be completed in twophases. The 2rst Phase will be completed in ,, at a total cost of B"T 3.b 9weanticipate a ,- cost o#errun for a 2nal cost of 4.-b:. This 2rst phase is expected to

almost double the current production capacity. The second phase starts in ,4$completing in ,7 for a total cost of ,.b 9including an estimated cost o#errun of ,-:.e expect the expansion programs contributing to re#enue growth after ,,.

5Capital expenditure will be 2nanced by internallygenerated cash as the companygenerates a handsome amount of cash each year Current debtto eAuity ratio is Auitelow at ,3M in the absence of any other maDor expansion plan$ we do not anticipateassumption of any more debt.

6)ome of the business units 9e.g.$ )Auare =nit


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5


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Be'imco Pharmaceuticals /imited Position in terms of domestic sales% 8D

1Beximco Pharmaceuticals is one of the largest pharmaceutical companies inBangladesh. The company has featured consistently in the top 2#e manufacturers for

the last decade.

2Beximco is widely regarded as one of the technological leaders among the localpharmaceutical companies in the country.

3The company utilizes state of the art technology. /ll new plants are eAuipped withcutting edge machineries. ?ew facilities are coming online in - new plants. Two of themare already operational.

4The company maintains many good partnerships with established players such as Bayer/! of !ermany and 1pDohn &nc. of 1)/.

5The company has outperformed the industry in terms of sales during ,6. Thepharmaceutical industry has grown around - on a#erage annually and Beximco Pharmahas matched that growth before ,6. e belie#e they will continue to emulate the

performance of ,6 for the foreseeable future.

6!enerally the company doubles their turno#er in e#ery three years. The companyexpects to generate B"T 7 million per month in ,.

7"espite troubled political en#ironment during ,7 and ,5$ the company hassuccessfully weathered the conditions and bounced back strongly under more fa#orablecondition in ,6.

8?ew production lines become operational this year which will e;ecti#ely double thecapacity.

9The company has undertaken a hugely ambitious plan for foreign market. Themanagement has targeted to ha#e eAual re#enue from domestic sales and exports.

That means they would ha#e to achie#e exponential growth in exports. /lthough this

seems Auite ambitious$ there are signs that the management is on the right track todeli#ering what they promised.

$able


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1

6


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2enata /imited Position in terms of domestic sales% +D

1+enata is one of fastest growing pharmaceutical companies in Bangladesh. &t is these#enth largest company in terms of local pharmaceutical sales.

2)uccessor of the business of P2zer Bangladesh R still enDoys distribution relationshipwith P2zer.

3+enata is the market leader in agrochemical business.

4)trong growth historyM in the last 2#e years$ re#enue grew by a ,3 C/!+ whereas netpro2t grew by 3. E#en if gross pro2t margin remained the same$ the company hasconsistently reduced its operating costs$ thus impro#ing the bottom line.

5The company achie#ed a return on eAuity of o#er ,- on a#erage in the past 2#eyears. ,6 seems to be on the same track.

6+enata boasts of the highest gross pro2t margin 9almost -: among the localmanufacturers.

7&n 3U6$ +enata declared EP) of B"T 3,-.64 posting a 43.-- bottom line growth UoUMreduction of operating expenses impro#ed bottom line.

8+enata has a 0odest di#idend paymentM di#idend yield in ,5 was about .

9/ high retention rate is Dusti2ed as the company consistently makes huge capitalexpenditures$ 2nanced by internal cash. This state is supposed to continue in the nearfuture.

10 0anageable le#erageM "FE is about -. The entire debt is short*term.

11 +enata has good management$ disciplined growth and low le#erage$ and appears tobe an attracti#e company. Howe#er$ liAuidity of shares is a big concern.

$able 9% 2enata /imited napshot

!!9A !"!!""

+e#enue 900 B"T: 4$3 -$,5 $-4

8perating &ncome 900 B"T: $, $76 $4-

8perating 0argin ,- ,3 ,3

?et &ncome 900 B"T: 753 6-,

?et 0argin - -

-*Gear +e#enue !rowth 9C/!+: ,3

Capex 900 B"T: 3 7

"ebtFEAuity

?o. of )hares 900: .4 .5 .5

"iluted EP) 9B"T: 4-.-, -4.-5-5.6

"i#idend 9B"T: . -. 5.

Current Price 9B"T: 77

Target Price 9B"T: ,7-

+eturn 6

1

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AC# /imited Position in terms of domestic sales%


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)la'omith-line Bangladesh /imited Position in terms of domestic sales% "D

18ne of the pioneering pharmaceutical companies in Bangladesh$ !laxo)mith=line 9!)=:started operation back in the 6s.

2!)= is a secondary producer$ principally packaging and distributing ad#ancedpharmaceuticals products produced by its parent company. ConseAuently$ local #alueadded is low.

3&n certain no#elty products such as asthma and dermatology$ !)= enDoys a clearad#antage because of its parent%s excellent research e;orts and product de#elopment.Howe#er$ a signi2cant part of the !)=%s pharma portfolio comprises of price*controlled'essential products(. /s such$ the company does not enDoy price ad#antage for suchproducts.

4Kocal pharma companies in Bangladesh take ad#antage of the liberal patent regime forKeast "e#eloped Countries 9K"Cs:$ sanctioned by the T8$ which shall remain in placetill ,. They produce copies of patented products for the local market. /s thesubsidiary of a global company$ !)= cannot or does not take ad#antage of this liberal

patent regime and does not produce copy drugs.

5/lthough !)= has trailed the o#erall industry in sales growth for a few years at a stretchdue to the dominance of local manufacturers$ they ha#e managed to reco#er from thatwith large growths in the last couple of years. Howe#er$ it appears that !)= is trying tomake up for the lack of sales growth through its consumer products business whichbrought in almost half of the total re#enue in ,6. The company has reintroduced#arious health drink items 9Horlicks etc.:$ which achie#ed almost ,3, sales growth in,6 and - in ,5.

6The reliance on consumer products may hurt the company%s pro2tability in the future.The health drink market is fairly competiti#e and is often supplied by non*pharma foodcompanies whose core ad#antage is better management of retail marketing anddistribution systems$ promotional e#ents and eLcient in#entory management.

&nterestingly$ !)= has outsourced their distribution operation which has boosted theirpro2tability.

7/lthough they do not ha#e any big expansion plan$ they seemingly ha#e impro#ed theircontract manufacturing re#enue dramatically. Howe#er$ it would be interesting to see ifthat is going to be repeated in the future.

8!)= pays regular di#idends at a high payout ratio 9about :.

$able ""% )la'omith-line napshot

!!9A !"!!""

+e#enue 900 B"T: 3$,4 3$44, 3$54

8perating &ncome 900 B"T: 4,- 5 548perating 0argin 4 5 5

?et &ncome 900 B"T: 3,4 37- 4-

?et 0argin

-*Gear +e#enue !rowth 9C/!+: 6

Capex 900 B"T: 7- , 7

"ebtFEAuity

?o. of )hares 900: ,. ,. ,.

EP) 9B"T: ,.6 3. 34.4

"i#idend 9B"T:

Current Price 9B"T: 53

Target Price 9B"T: 3-


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+eturn 4

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Pharmaceutical Sector:Bangladesh

Table !: Comparati"e #ealthcare System

#ealth $or%&orce#ospital

beds'per ((((

Ph#sicians'ursing and mid%ifer#

&ersonnel *entistr# &ersonnelPharmaceutical

&ersonneln+ironment and &ulic

health-ommunit# health%or!ers population)

%or!ers

'umer *ensit# (&er 'umer *ensit# (&er 'umer *ensit# (&er 'umer *ensit# (&er

'um

er *ensit# (&er 'umer *ensit# (&er

10000 &o&ula.10000

&o&ula.10000

&o&ula.10000

&o&ula.10000

&o&ula.10000

&o&ula.

tion tion tion tion tion tion

2000/200 2000/200

123,123 21 45,200 3 26,17 7 8 8 8 8 8 8 4

SA 54,379 25 2,25,000 9 734,334 13 27,372 8 8 8 8 41

a&an 250,451 21 1,210,344 6 6,15 5 271,43 1 8 8 8 8 14

India 374,620 3 1,452,06 14 66,477 1 62,655 3 8 8 60,44 ;0


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Pharmaceutical Sector:Bangladesh

Table *: Comparati"e #ealthcare +,penditure

#ealth e,penditureratios

Per capita healthe,penditures

>otal e)& on ?eneral go+t Pri+ate e)& on ?eneral go+t )ternal re. Social securit# Out.of.&oc!et Pri+ate &re&aid Per ca&ita total Per ca&ita total Per ca&ita go+t Per ca&ita

health as @ ofe)& on health

as health as @ of e)& on health

as sources for e)& on health

as e)& as @ of &lans as @ ofe)& on health

at e)& on health e)& on health at e)& on he

?*P @ of total e)& total e)& on @ of total go+t health as @ of @ of general &ri+ate e)& on &ri+ate e)& on a+g e)change (PPP int< A a+g e)change (PPP int

on health health e)& total e)& on go+t e)& on health health rate (S rate (Shealth health

2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2005 2000 2

5


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#MP>2$A?$ *#C/>,2

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