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Drug makers see 5-fold jump in Q1 profit amid pandemic

Fidson Healthcare, May & Baker Nigeria and Neimeth plc, three of Nigeria’s largest publicly listed pharmaceutical companies, recorded combined profit growth of 551 percent in the first quarter (Q1) 2021, as demand for prescription drugs continues to rise amid COVID-19 pandemic.

Fidson’s Q1 profit increased by 281 percent to N579 million from N152 million a year ago, as revenue surged 68 percent to N6.3 billion from N3.7 billion in Q1 2020. The performance follows from last year’s bumper earnings buoyed by the pandemic, which helped drug makers to attain their highest profit in five years.

While the pandemic slowed activities in major sectors of Africa’s largest economy, which slumped into a recession last year on the back of the virus, drug makers had the pandemic to thank for putting them back on the path of profitability.

Fidson’s share price is up some 126 percent in the last one year, according to Bloomberg data. That is a sign that investors are taking note of the company’s impressive financial performance since the pandemic.

The drug maker’s share price is however down from the N6.15 peak it attained on February 4 to N5.28 as at the last trading day, April 30, a possible bargain hunting trigger for investors.

May & Baker is another drug maker benefiting from the pandemic with its first-quarter 2021 results showing a 478 percent increase in profit to N247 million from N42 million in the same period of 2020. The drug maker reported revenues of N2.7 billion, a 50 percent increase compared to the N1.8 billion revenues reported last year.

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May & Baker has also not gone unnoticed by investors. Its share price is up 68 percent in the last one year. The price is however down from its peak of N5.02 this year (attained on February 1) to N4.20, a 16 percent decline.

Neimeth Pharmaceuticals was able to turn a loss-making Q1 2020 around this year with profit of N207 million. Revenues jumped 58 percent to N887 million in Q1 2021 from N558 million in Q1 2020.

Neimeth is up 188 percent in the last one year but is also down from its peak of N2.23 on January 4 to N1.7 as at the last trading day on April 30.

The drug makers will keep their strong performance well into 2021 as the COVID-19 pandemic remains a concern and more people become more health conscious, according to Tajudeen Ibrahim, head of research at investment bank, Chapel Hill Denham.

“We have a situation where the world is gearing up for a possible third wave of the pandemic, which means the drug makers can at least sustain the momentum we are seeing for the rest of this year,” Ibrahim said.

In the long term, a huge deficit of local medical supplies and pharmaceutical products also bodes well for the drug makers.

Interventions by the Central Bank of Nigeria to healthcare companies as part of a stimulus package to manage the health crisis, which included access to a N100 billion fund, as well as lower borrowing rates, has also been a boost to most companies in that sector thereby raising investor’s appetite in their stocks.

The industry is however not without its challenges.

A tough macro-economic environment, scarcity of foreign exchange to import raw materials and cash strapped consumers remains major challenges.

Drug makers have also battled the effect of drug smuggling through the nation’s porous border posts, while drug faking and adulterated medicines continue to thrive in quack medicine kiosks and roadside medicine shops.

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