• Saturday, April 20, 2024
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Drugmakers see decline in fortunes despite soaring prices

Drugmakers see decline in fortunes despite soaring prices

The prices of drugs jumped last year in Nigeria but five of the major manufacturers saw a decline in their financial performance on the back of the worsening shortage of foreign exchange and rising inflation.

The firms are Fidson Healthcare Plc, May & Baker Plc, Morison Industries Plc, GlaxoSmithKline (GSK) Consumer Nigeria Plc and Neimeth International Pharmaceuticals Plc.

BusinessDay analysis of the latest unaudited financial statements of the pharmaceutical firms shows that Fidson Healthcare, May & Baker and GSK Consumer Nigeria reported a combined after-tax profit of N4.81 billion in 2023, down from N6.47 billion in the previous year.

Neimeth reported an after-tax loss of N2.58 billion compared to a profit of N19.1 million, while Morison Industries posted a loss of N89.4 million, down from N107.5 million.

“The pharmaceutical industry is in a very difficult situation now. Everything in the industry is imported from raw materials to the packaging,” Gabriel Idahosa, president of Lagos Chamber of Commerce and Industry, said.

He said the industry is just a part of the manufacturing sector and that they are just another set of manufacturers who are affected by the challenges facing other manufacturers in the country. “Whatever will improve the manufacturing sector will also improve the pharmaceutical one.”

Since President Bola Tinubu announced petrol subsidy removal during his inauguration on May 29, pump prices have more than tripled to N600, while the value of the naira has plunged following the floating of the currency.

Last June, the Central Bank of Nigeria merged all segments of the FX market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.

The naira has continued to depreciate against the dollar and other major foreign currencies since then.

The official exchange rate fell from N463.38/$ to N1,665.5/$ as of Friday. The naira has hit N1,800/$ at the parallel market, up from 762/$.

Nigeria’s headline inflation rate rose for the 13th consecutive time in January to 29.90 percent from 28.92 percent in the previous month, according to the National Bureau of Statistics.

Food inflation, which constitutes 50 percent of the inflation rate, rose to 35.41 percent from 33.93 percent.

Sam Ohuabunwa, the immediate past president of the Pharmaceutical Society of Nigeria, said the devaluation of the naira led to a depression in the demand for drugs.

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“And with high inflation and devaluation, it becomes difficult for businesses in the pharmaceutical industry to recover the price and when they try to recover it, their products become unaffordable,” he added.

The high cost of sourcing FX drove down the importation of pharmaceutical products into Africa’s biggest economy for the second straight time to $1.05 billion in 2022 from $1.37 billion in 2021. It also declined by 63 percent from $2.84 billion in 2020. Pharmaceutical exports reduced by 65 percent to $779 million in 2022.

A recent report by SBM Intelligence, a research consulting and data analytics firm, titled ‘Paying the price on health’, showed that between 2019 and 2023, a pack of 500-milligram Ampiclox capsules recorded the highest jump, with the cost price increasing by 1,390 percent and the selling price increasing by 1,100 percent.

It said a pack of 500-milligram Amoxil capsules grew the fastest among all the medicines analysed, with the selling price jumping by 456 percent between 2022 and 2023.

“Over the years, the rate of increase in the cost price was faster than the rate of increase in the selling price. This signals that a larger percentage of the proceeds from the sales of medicines are returned to the manufacturers, giving the retailers less wiggle room to expand their businesses,” the report said.

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Boladele Silva, a pharmaceutical professor at the University of Lagos, said in the SBM report that Nigeria’s pharmaceutical industry is highly exposed to shocks from foreign exchange volatility.

“In Nigeria, what we have are packaging hubs. The active pharmaceutical ingredients and most excipients used by the manufacturers are imported. That makes them very vulnerable to economic shocks,” he said.

Africa’s most populous nation relies heavily on imported drugs, active pharmaceutical ingredients and equipment used in drug manufacturing from China, India, Malaysia and the Netherlands.

Pharma West Africa, a major pharmaceutical exhibition in Africa, said that over 70 percent of medicines in Nigeria are imported, with medicines accounting for a chunk of the country’s total healthcare spend of $10 billion.

Capacity utilisation in the industry is below 50 percent, according to industry players, who complain that the lack of a reliable petrochemical industry in the country means most raw materials are imported.

“Nigerian manufacturers suffer from poor infrastructure and low patronage, which make them uncompetitive in both local and global markets,” they said.

Last August, GSK announced plans to exit the country this year ending a 51-year-old history of doing business. Another French pharmaceutical multinational also announced in November announced plans to exit the country. Both countries said it would adopt a third-party distribution model to continue product supply in Nigeria.

Analysis of data from individual firms

Fidson Healthcare

Fidson’s after-tax profit in 2023 declined to N3.28 billion from a profit of N4.19 billion in the previous year. The firm reported a 30.7 percent increase in its revenue to N53.1 billion.

Cost of sales grew to N34.1 billion from N23.45 billion and finance cost increased to N2.08 billion from N1.77 billion.

May & Baker

May & Baker’s after-tax profit dropped to N985.6 million from a profit of N1.49 billion. The firm recorded a 37.7 percent rise in its revenue to N19.7 billion.

Cost of sales grew to N13.1 billion from N10.5 billion and finance cost increased to N346.1 million from N286.0 million.

GSK Nigeria

GSK’s after-tax profit declined to N510.8 million from a profit of N771.2 million. The firm recorded a 35.4 percent drop in its revenue to N16.4 billion. The cost of sales was N10.4 billion, down from N18.5 billion.

Morison Industries

Morison recorded an after-tax loss of N89.4 million from a loss of N107.5 million. Its revenue dropped to N145.2 million from N154.8 million.

Cost of sales declined to N118.9 million from N131.3 million and finance expenses rose marginally to N19.7 million from N19.6 million.


Neimeth recorded an after-tax loss of N2.58 billion from a profit of N19.1 million. The firm’s revenue dropped to N2.21 billion from N3.46 billion.

Cost of sales declined to N1.46 billion in 2023 from N2.09 billion while finance cost rose to N560.9 million from N187.9 million.