Founded in 1954, Ferozsons Laboratories was one of the first pharmaceutical manufacturers in a fledgling Pakistan, and the first pharma company to list itself on the KSE. It offers a wide range of branded generics and in-licensed products.
Ferozsons is the marketing and distribution partner for the Boston Scientific Corporation, USA for its cardiac and peripheral products. It also has a highly successful joint venture with the Bagó Group of Argentina called BF Biosciences Limited. Through this, the company has achieved a leadership position in the oncology and hepatology markets. More importantly though, Ferozsons recently joined hands with Gilead Sciences Inc to market a number of its products in Pakistan.
Ferozsons received DRAP approval for the sale of Gilead's Sovaldi in November. The price of the drug, however, is substantially lower than what it's worth in the US; DRAP fixed the price at Rs 55,000 per bottle of 28 tablets - a 98 percent discount to the $1,000 per tablet in the US. All that's left now is for the federal government to give final approval.
Recently, Ferozsons announced on March 5 that it is voluntarily reducing the drug's maximum retail price from Rs 55,000 to Rs 38,000. This will greatly benefit the public at large, and will make the already discounted drug even more affordable. Those concerned with the impact of the low price on Ferozsons' financials need not worry, as Ferozsons will continue reaping a pre-specified margin from Gilead.
As is evident, the bottom line of the company has not been following the same uptrend as the revenue; net profits fell in FY11 due to increased selling & distribution expenses. After that, the bottom line has been constant and growth has remained bottlenecked.
This time, the decline in gross margins is attributed to Ferozsons' growth in those divisions that carry lower margins. Moreover, tenders for the purchase of medical devices as well as medicines were largely deferred, negatively impacting the company's medical device division and institutional sales of its subsidiary - BF Biosciences Limited. This hurt both the top line as well as the bottom line growth.
There are some who are concerned that the longer the approval takes, the greater the risk of generic rivals springing up and eating up Sovaldi's market share. But in truth, generics aren't always effective, and there have been cases where people had to revert back to the original. So, at the end of the day, Ferozsons' long-term prospects are more or less golden.

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Ferozsons Laboratories Results
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Rs (mn)                    1HFY15     1HFY14   YoY change
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Revenue                     1,495      1,144          31%
Cost of Sales                 757        552          37%
Gross Profit                  737        592          24%
Gross Margin                49.3%      51.7%      250 bps
Administrative                 92         75          23%
Selling & Distribution        347        264          31%
Finance Cost                   11          7          57%
Other expenses                 26         23          13%
Other income                   45         41          10%
Profit before tax             306        264          16%
Tax                            85         75          13%
Profit after tax              221        188          18%
EPS                          9.46       7.88          20%
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