Drug makers’ profits bounce back in first quarter

Listed drug makers saw their profits rebound in the first quarter (July-September) of the ongoing fiscal thanks to an increase in the number of healthcare seekers.

The pharmaceutical sector had taken a big hit at the end of the previous quarter, when most people refrained from visiting hospitals in fear of contracting Covid-19.

But the listed companies' combined profits soared by 76 per cent compared to the April-June quarter of fiscal 2019-20 to hit Tk 734 crore in July-September.

Meanwhile, overall profits for listed drug makers grew 25 per cent year-on-year for the same period.

During the April-June quarter, local pharma companies witnessed a decrease in profitability due to the low sales of prescription medicine.

This directly contradicted the belief among many investors that it was unlikely for the pharmaceutical industry to see a drop in profits amid the ongoing pandemic.

"We thought the drug makers would benefit the most during the pandemic as people would spend more money on medicine but the reality was different," said Abdul Mannan, a stock investor.

Listed drug makers saw their profits plunge 31.1 per cent to Tk 417 crore in the April-June period compared to the previous quarter (January-March) mostly due to the Covid-19 fallout.

"The sector was affected the same way other industries were but the good thing is that it bounced back strongly in the first quarter," he added.

Md Jubayer Alam, company secretary of Renata, echoed the same.

Since most patients were confined at home amid the outbreak, almost all pharma companies saw their sales plunge between April-June, he said.

The country's first official coronavirus patient was detected on March 8 and since then, the number of positive infections has continued to rise.

In a bid to curb the spread of Covid-19, the government announced a 'general holiday' that began on March 26. The nationwide lockdown was extended numerous times until it finally came to an end on May 30.

During this period, local drug makers that source their raw materials from other countries faced numerous challenges.

"And so, as costs rose, a fall in profits was the natural outcome," Alam said.

Renata secured the second highest profits among all listed pharma companies after Square Pharmaceuticals.

During the April-June quarter, Renata's profits fell by roughly 10 per cent to stand at Tk 95 crore.

The company then witnessed a 29 per cent rebound in its profits for the first quarter of fiscal 2020-21 to hit Tk 123 crore.

This is because almost 60 to 70 per cent of all doctors returned to their chambers during that period, according to the company secretary.

However, some patients still remain sceptic about hospital visits, he added.

Of the 19 pharmaceutical companies listed with the country's bourses, three are yet to publish their financial reports.

Of the 16 that have been analysed so far, Square Pharmaceuticals booked the highest profit of Tk 393 crore, which was 37 per cent higher than that of the previous quarter.

In the April-June quarter, the company saw 20.7 per cent lower profits, which stood at profits Tk 286 crore.

The country's top pharma company plans to invest Tk 250 crore to expand its production capacity.

Similarly, other top drug makers have also announced that they will make further investments after seeing the market's growth potential for the coming years.

The domestic pharmaceutical market is worth around Tk 25,000 crore and has grown by around 14-15 per cent annually, according to the Bangladesh Association of Pharmaceutical Industries.

"Most local pharma companies have global standard equipment and facilities and due to their dream of reaching the international market, they continued to invest in the sector even amid the pandemic," said Md Rafiqul Islam, head of corporate and company secretary of ACME Laboratories.

After meeting 98 per cent of the domestic demand, local companies work to have their products enter highly regulated countries like the US and the UK.

Many firms have already started exporting to those countries and due to the huge potential for profits, they are investing even more in the sector, he added.

Acme Laboratories' profits tumbled 11 per cent to Tk 31 crore in the April-June quarter but it increased by around 32 per cent in the next quarter to reach Tk 41 crore.

Acme's profits were the fourth highest among the listed pharma companies.

Meanwhile, Beximco Pharmaceuticals' profits fell 1 per cent to Tk 89 crore in the last quarter of fiscal 2019-20 but rose by 20 per cent to Tk 107 crore in the first quarter of this year.