THE sixth largest publicly listed pharmaceutical company has been in the spotlight ever since it unveiled an agreement with American company, Gilead Sciences, under which it would market and distribute Hepatitis-C treatment drug ‘Sovaldi’ in Pakistan.

Expecting huge addition to the company’s revenue going forward, investors have aggressively picked up the company stock at the market. In a year since Jan 8, 2015, the price of the Ferozson share has escalated by Rs342 (64 per cent) and was quoted at Rs877.80 at the close of trading previous Friday.

Ferozsons Laboratories Limited was converted into a public limited company on Sept 8, 1960. The company primarily engaged in the manufacture and sale of pharmaceutical products.

The pharmaceutical industry sources say the year 2015 was good for the health of the sector

The pharmaceutical industry sources say that the outgoing 2015 year was good for the health of the industry. Final figures have yet to arrive but reliable sources believe total industry sales to have jumped to Rs268bn, from sales at Rs240bn the earlier year.

That would include both the turnover of the multinational and the local drug firms; the MNCs posting improvement in sales to Rs103bn, from Rs97bn the year ago and the domestic peers recording sales surge to Rs165bn from Rs143bn.

According to industry sources, there are 564 pharmaceutical producers in the country. The 50 leading producers, which include Ferozsons, command 85pc of the market share.

Nothing is more in the news at the present moment, than the China Pakistan Economic Corridor (CPEC) which is banked upon to give big push to the development of several sectors associated with infrastructure. Yet the growing commercial relationship with China is not expected by the stalwarts in the pharmaceutical sector to change the dynamics of the drug industry. “There seems no immediate craze for setting up joint-ventures since the cost of production in China is still substantially lower than Pakistan”, said an official of the industry’s trade body, the Pakistan Pharmaceutical Manufacturers Association (PPMA).

The accounts of Ferozsons for the latest reported three months to Sept 30, 2015 revealed growth in profit after tax to Rs696m, from Rs06m year-on-year (YoY). Sales galloped to Rs2.7bn from Rs635m. Directors mentioned in their report that standalone net sales had grown 331pc during first quarter (July-Sept) YoY, thanks to strong growth in the company’s portfolio of imported products, particularly the franchise from Gilead Sciences Inc. However as these products carry lower gross profit margins, in percentage terms gross profit ratio decreased by 9.71pc for the latest period.

Major items on the assets side of the balance sheet included ‘short term investments’ amounting to Rs 1.8bn; stock in trade at Rs1.2bn; property, plant and equipment at Rs1.4bn and long term investment at Rs246m. All of that lifted the total assets of Ferozsons at the last count on Sept 30, to Rs5.21bn. Against the paid up capital of Rs302m, the company had retained (accumulated) profit amounting to Rs3.1bn. The long term investments perhaps represented 98pc stake in ‘Farmacia’ a subsidiary partnership registered under the Partnership Act, 1932 and engaged in operating retail pharmacies. Long term investment also represented investment in 15.2m shares of ‘BF Biosciences Limited”. BF. Biosciences Limited was set up for establishing a biotech production plant to manufacture mainly cancer and hepatitis related medicines. The company holds 80pc equity of the subsidiary.

Giving the prognosis for the future, chairperson & CEO of Ferozsons Laboratories Mrs Akhter Khalid Waheed said in the latest directors’ report:”We are confident that with the advances in therapy in Hepatitis C, the company will be able to continue having an impact on the treatment landscape for this critical disease”. The company head informed that with the addition of a licensed generic from the company’s principals, Gilead Sciences Inc. Ferozsons would be able to offer at a lower cost, locally manufactured quality assured product and thus expand access to treatment for patients in the lower income spectrum. It was reported that the company had also continued to build on its cardiology and GI franchises.

However danger may be lurking in the dark as other pharmaceutical firms were not likely to let Ferozsons take all of the cake and eat it too. Analyst Ahmed Lakhani who follows the pharmaceutical sector for brokerage Arif Habib Limited stated in a recent report quoting media sources that fourteen companies were awarded registration to manufacture a Hepatitis C drug in Pakistan at significantly lower prices to those being charged by Ferozsons for ‘Sovaldi’. “Our discussion with senior management revealed that the influx of competitors in the Hepatitis-C will possibly result in losing market share”, analyst Ahmed Lakhani said but he asserted that due to the sheer size of the market (roughly 20m patients or one-in-ten people inflicted by the disease), the company would still manage to expand/maintain sales in the coming quarters.

Published in Dawn, Business & Finance weekly, January 11th, 2016