PACRA Maintains Entity Ratings of Pharmagen Limited

The ratings reflect Pharmagen Limited’s (“PL or the Company”) established market position in a specific segment of the pharmaceutical industry; API (Active Pharmaceuticals Ingredients). Pharmagen Limited is a domestic player, claiming a leading position amongst the local players which is not a large universe. APIs are produced mainly in organic and inorganic synthetic drugs from refined chemicals. This is mostly and predominantly fed through imports. Being the essential element of the healthcare sector, it derives strength from the nature of the business. The profitability of the sector remained under pressure due to various factors such as global inflation, high logistics cost and massive PKR depreciation. Therefore, resulting in a major cost escalation of imported raw materials as 85% of active pharmaceutical ingredients used in the manufacturing of the drugs are imported. Pharmagen Limited has built its profile over the year and serves some top players in the larger industry. PL’s top 5 products include Amoxycillin, Cephradine, Cefixime, Paracetamol and Ciprofloxacin, these contribute ~89% of total revenue. The Company has grown and augmented its position and is seen fortifying its production capabilities and product range. The able leadership has spearheaded the company’s strategy and operations. The Company has strong sponsorship with incredible skills and experience in the sector, which is providing a smooth path to the company in a directive way. The growth prospects are optimistic, as over the years management is focusing on process improvement, cost optimization, and enriching product slates. The control and governance prospects continue to improve due to new prospects. Financial profile of the Company is considered adequate with comfortable coverages and cashflows. Capital structure is modestly leveraged to support capacity expansions. Borrowings are majorly comprised of short-term to import raw materials and to meet working capital requirements. The management intends to have a reduced appetite for borrowings. The profitability and financial matters will improve gradually.
The ratings are dependent on the successful rollout of the envisaged strategy. The respective market position needs to be maintained and profitability must be aligned with the improving size. Any dilution in business on the financial profile is unwarranted.

About the Entity
Pharmagen Limited is a public limited-unquoted Active Pharmaceutical Ingredients (API's) 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 Pervez Hussain’s family (44%), while other strategic partners include Rasheed Khan’s family (12%), Maj. Gen. (Retd.) Rahim Khan’s family, Kashmir Education Foundation (17%), and Mr. Shamim Ahmed and his family (27%).