AGP held its analyst briefing to discuss its recently announced financial results, the current state of the industry and what lies ahead for the company.

The company’s sales improved 20% if one off impact of government hepatitis c order is ignored. Within this 20% there is an 8.2% impact of increased volumetric sales whereas the rest is on the back of price increase.

DRAP allowed a 15% price increase in Jan’19 which partially mitigated the negative impact of rupee devaluation.

Gross margins improved to 58% during 1HCY19 due to change in product mix.

The 38%YoY increase in tax expense was on the back of prior year tax expense of PKR31mn.

The size of anti allergy market is around PKR6bn where Rigix the star product of the company hold a 17% market share. Moreover, Rigix in terms of value touched the PKR1bn mark. There are a total of 56 products in the industry at PKR1bn.

Further, ceclor another product of the company is close to touch the PKR1bn mark.

The company remains sharia compliant.

Pharma spending in Pakistan is circa USD13 per capita against the regional average of USD35. Moreover, the global average stands at USD144.

The CEO explained that around 12-18 months are required to register new molecules whereas generics take up to 3 years. Slow process is hindering new products.

There were six Hardship cases out of which 5 were decided in favor of AGP while 1 was rejected.

In the perspective of recent tension with India the company has developed alternate sources to procure materials, as 24% of raw materials in value are imported from India. The company has been able to secure 80% Indian raw materials imports from other destinations.

AGP maintains a 45 days of finished goods inventory with distributors, 2 weeks in warehouse. The company usually has 5 months of coverage.

With regards to Mylan products which are imported from India, the company has an inventory of 6 months.

The contribution of Mylan products in revenue was 7% during 1HCY19, however the product has lower impact on bottom-line.

In worst case scenario keeping in view tension with India, the complete halt in import will have a major impact on top line but not in the bottom line.

The company has also started to import Chinese raw materials in Yuan to manage devaluation impact.

AGP launched 8 new products in 2018 whereas plans to introduce at least 4 new products in 2HCY19.

The company is pursuing nutraceutical segment which is growing at a fast pace.

The segment is less regulated and market forces set product prices.

The company’s nutraceutical plant will be up and running in 5 months time.

AGP has already introduced 5 nutraceutical products whereas 3 more will be introduced in the next 12 months.

Source: AGP, Next Research