Nigeria’s largest publicly listed drugmakers are pushing ahead with efforts to surmount the pain of foreign exchange scarcity in a bid to maintain earnings growth, BusinessDay’s findings have shown.
BusinessDay’s findings showed Fisdon, GlaxoSmithKline Consumer Nigeria Plc, May & Baker Nig Plc, and Neimeth are grappling with lower profits, surging finance costs, rising operating expenses, and a disappointing decline in revenue.
Findings by BusinessDay showed the pharmaceutical companies operating in Nigeria experienced a slight decline in profitability in Q1 2023; the combined profits of drugmakers dropped from N1.64 billion in Q1 2022 to N1.61 billion. The slight decline was exacerbated by factors such as increased competition, pricing pressures and rising manufacturing costs.
The drug makers’ finance costs rose by 31.78 percent to N1.808 billion in the quarter under review.
Experts attribute the increase to rising interest rates, mounting debt burdens, and escalating expenses associated with research and development (R&D) activities.
The combined revenue of drugmakers declined by 45.39 percent to N4.019 billion in the quarter under review from N7.36 billion recorded in the same quarter of 2022.
Amidst the financial challenges faced by the pharmaceutical industry, a surge in finance income was observed during the first quarter of 2023.
Among the four pharmaceutical firms under review, Fisdon, GlaxoSmithKline Consumer Nigeria Plc, and May & Baker Nig Plc experienced a remarkable increase in finance income.
The income rose by 188.89 percent to N1.586 billion in the first three months of 2023, compared to N0.55 billion recorded in the same period of 2022.
Sammy Ogunjinmi, group chief executive officer of Codix Pharma Ltd, told BusinessDay that pharmaceutical firms have over the last year launched new products and also expanded operations and market reach, which has impacted their business positively.
“We have some remnant effect of COVID and that helped; we also embarked on some expansion activities and the introduction of new products helped to increase our revenue and income,” he said.
Ogunjimi, who is also the vice president of Nigerian Representative of Overseas Pharmaceutical Manufacturers (NIROPHARM), however, described 2023 as a year to watch out for, saying the first quarter of the year was tough for operators due to various challenges that could dampen the potential of the industry.
McKinsey & Company, in an article titled ‘Winning in Nigeria: Pharma’s next frontier’, said the Nigerian pharmaceutical industry has the potential to contribute significantly to the economy, but there is a need to address its health infrastructure deficit.
“The value of the Nigerian pharma market could rise by as much as 9 percent a year over the next ten years to reach $3.6 billion by 2026 (exhibit), making it as large as the South African market today. Over the same period, Nigeria could contribute between $1.9 billion and $2.2 billion to pharma sales growth, 55 percent of it from prescription drugs,” it said.
The report stated that Nigeria is a complex market, and companies will need to address short-term economic setbacks and deep-rooted structural challenges before they can take advantage of growth in the longer term.
Highlighting some of the challenges, Ogunjimi said FX availability and accessibility is a big problem with a ripple effect on industry activities and competitiveness, even as naira depreciation, rising cost of production and raw materials, among other issues, remain major problems facing operators.