PACRA Upgrades Entity Rating of Pharmagen Limited

The ratings reflect strong positioning of Pharmagen Limited in its respective market. The pharmaceutical industry has witnessed a high rate of sustained growth over the years. Cost-efficiencies as well as demand in-elasticity are benefiting the industry players. The new CPI-linked pricing criteria has allowed an increase in prices with respect to inflation, indicating a positive sign. The company imports majority of its raw material, where currency fluctuation and pricing risk could affect margins, however majority of the cost increase can be passed through to its customers. Pharmagen has improved its working capital position by obtaining additional financing facilities - as a result there has been a marked improvement in profitability and turnover during the March 2019 quarter. Predominant proportion of the business is signed with eminent pharmaceutical corporates - both multinational and local. The company's ongoing supply arrangements with GSK and prospects of enhancing the range of products to be supplied will add-on to the growth levels. Pharmagen is poised to derive benefits from downward integration in Moringa Pharmaceuticals which would help Pharmagen, to diversify in different segments and reduce the concentration risk. The underway capacity enhancement plans are set to further boost Pharmagen's operations and financial results. Long association of experienced management team adds comfort.
The ratings are dependent on the company's ability to sustain margins. Improvement in business volume and profitability will be viewed positively. Meanwhile, management of debt (current and planned), thereby impacting coverages, is considered important. Furthermore, external factors such as any adverse changes in the regulatory framework and weakening of financial profile owing to delays in cash flow receipts, may impact the ratings.

About the Entity
Pharmagen Limited is a public limited-unquoted pharmaceutical company operating in Pakistan since 1990. The company is engaged in the manufacturing and sale of pharmaceutical products and over the years it has become the leading producer of APIs (Active Pharmaceutical Ingredients) in Pakistan. Pharmagen is majority owned by Parvez Hussain Sufi’s family (~60%), while other strategic partners include Rasheed Khan’s family (~15.2%), and Maj. Gen. (Retd.) Rahim Khan’s family (~2.1), along with trusts, Naghat Rasheed Trust and Kashmir Education Foundation holding (~1.8%) and (~20.9%) respectively.