Searle Pakistan Limited is one of the largest national pharmaceutical companies in Pakistan. It ranked eleventh in Pakistan with a market share of around 2.4 percent in the country according to Pakistan Pharmaceutical Index-IMS-of the fourth quarter of CY08.
Searle Pakistan Limited was incorporated as a private limited pharmaceutical company back in 1960s. It was only later in CY93 that the Company was converted into a public limited company and listed on two of the country's stock exchanges: KSE and ISE. The group, which is engaged in selling of food and consumer items, manufacturing of pharmaceutical items for other companies and marketing, selling and distribution of healthcare products, consists of Searle Pakistan Limited as the holding company and IBL Healthcare (Private) Limited as the subsidiary company.
IBL HealthCare (Private) Limited, the subsidiary of the Searle Pakistan Limited is principally involved in the marketing, selling and distribution of healthcare products International Brand Private Limited, however, has now become the ultimate holding company as it acquired additional 15.9 percent shareholding, adding up to a total of 55.25 percent of the entire shareholding.
Financial Performance Though the growth in the top line of Searle Pakistan was not chunky, still the Company has been experiencing modest sales' growth over years. The Company is a big player amongst the local pharmaceutical companies, and has been witnessing healthy growth in all its product categories.
The Company earns most of its money from the pharma-segment (around 75 percent). A highlight to the total sales mix is the contribution by its consumer or food category which primarily includes the sales of the popular sweetener: Canderal Within pharmaceutical category, the Company's sales comprise mostly of solids. However, the liquids and sterile have also had their share in sales mix. During FY11, the solids had almost a 60 percent share in the total sales mix followed by liquids with 24 percent share, sterile 10 percent and consumer 7 percent. Beside local sales which have a significant 90 percent contribution, the Company also exports pharmaceutical items. The modest growth is sales during 9MFY12 was multi-sourced, highlighted by growth in brands like Gravinate, Rotec and Metrozines, etc.
The 11 percent growth in the top line for 9MFY12 versus that of 9MFY11 could not, however, be trickled down to the bottom line and this was primarily due to a significant increase in the prices of raw material and higher depreciation of the currency resulting in heightened cost of sales.
Besides, the profitability was constrained due to the domestic inflation and high cost of power and utilities. Thus, the profit for 9MFY12 increased a tad by 3.3 percent versus the profits for 9MFY11. Likewise, gross margins, operating margins and net margins slipped during the period under review on account of the above-mentioned reasons.
Leading Brands Searle Pakistan Limited has a broad portfolio of products that encircles life. This portfolio encompasses three major product divisions namely pharma, consumer health and nutrition.
Within the pharma category, the therapeutic areas include cardiovascular, respiratory care, gastroenterology, pain management, CNS, orthocare, neuropsychiatry, probiotics, antibiotics and nutritional care The Company has a leadership status in many of its brands. Hydryllin is well known for cough remedy. Nuberol is a popular muscle relaxant analgesic prescribed by the doctors. Lomotil is a leading antidiarrheal. Gravinate is a top anti-emetic.
Expanding the International Market The exports of the Company in the total revenue mix account for around 10 to 11 percent. The Company's International Business Development Division is expanding at a fast pace with the aim to establish and position the Company's products across national boundaries. The Company has plans about increasing the adding new products to the portfolio and increasing the number of employees to serve that market well. As of now, the IBD team consists of over 70 employees from different nationalities based in Vietnam, Myanmar, Bangladesh, Sri Lanka, Afghanistan, Kyrgyzstan, Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, Azerbaijan, Kenya and Uganda.
Future Prospects & Outlook On the Company level, Searle Pakistan Limited plans to continue to roll out new products and value-added services in the short term. In the long term, the Company aims to invest in green chemistry which requires state-of-the-art manufacturing facilities that ensure product affordability as well as environment friendliness.
On a broader level, the national pharmaceutical sector is faced with an array of challenges. An issue which is unique to the country is that with the passing of the functions of MOH to provinces under the 18th Amendment, concerns loom over the future of the regulatory framework of the industry.
To much extent, the viability of the pharmaceutical companies depends upon the progress in this regard. The decision on setting up an autonomous Drug Regulatory Authority (DRA) is a step that has lifted hopes in the industry with regard to the delay of registration and pricing of the medicines and pharmaceutical products. Other concerns like IPR violation, counterfeit drugs and quality issues continue to plague the industry and require concerted efforts across the board.
The pharmaceutical sector is estimated at $1.88 billion with local companies grabbing around 45 percent market share. Amid continued cost increase on the back of energy price escalation, inflation and Rupee depreciation, rationalisation of taxes is demanded by the pharmaceutical sector before the budget FY13 announcement. In response, the slashing of the customs duty on the pharmaceutical sector's 88 raw materials in the recent budget was some relief to the sector but only as long as one does not know the actual number of imported raw materials that go in the production of medicines and drugs.
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SEARLE Pakistan Limited
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FY10 FY11 9MFY12
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Profitability
Gross margins 43% 42% 41%
Operating margins 16% 17% 16%
Net margins 9% 8% 7%
ROE 25% 23% 14%
ROA 12% 10% 7%
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Liquidity & Solvency
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Current ratio 1.74 1.63 1.89
finance cost cover 5.96 2.76 2.56
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Efficiency
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Total assets turnover 1.33 1.22 1.03
Fixed assets turnover 5.64 5.93 4.63
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Market
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EPS (Rs) 11.96 13.50 8.35
Price per share (Rs) 59.00 54.35 44.26
P/E 4.93 4.03 5.30
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Source: Company Accounts
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