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Drug Makers to Maintain Earnings Growth in 2023 as Fidson Leads Pack

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Analysts are sanguine that drug makers in Africa’s largest economy will surmount the macroeconomic headwinds and maintain earnings growth in 2023 as the health sector benefits from government interventions.

Of course, like other manufacturers, pharmaceutical companies pass on rising input costs in the form of a hike in price of product to ward off red- rising imported inflation and foreign exchange scarcity.

The total combined revenue of the largest players in the industry- Fidson Healthcare Plc, May and Baker Nigeria Plc, GlaxoSmithKline (GSK) Nigeria, and Neimeth Pharmaceutical Plc- was up 34.50 percent to N66.70 billion in the first nine months of 2022.

It is important to note that the top line (revenue) growth was largely driven by the introduction of new products, investment in research, and strategic alliances in the market and investment in route to market.

The pandemic that undermined economic growth in Nigeria and across the globe prompted drug makers into the manufacture of vaccines, which helped spur growth prospects.

May & Baker Nigeria has announced plans to open for its vaccine production factory in the second quarter of 2023.

“Let me also use this opportunity to announce a milestone achievement in our Joint Venture with the Federal Government of Nigeria Biovarcines. On 14th September 2022, the Federal Executive Council (FEC) approved the first part of the MOU of Biovarcines with the FMOH for supply of routine immunization vaccines,” said Patrick Patrick Ajah, Managing Director and Chief Executive Officer, May & Baker.

“This is the first/major step towards vaccine production in Nigeria, as this allows Biovaccines to commence the engagement with the chosen Technology transfer partners and subsequently initiate the design and construction of the greenfield project. We are optimistic that the groundbreaking ceremony for the vaccine production facility will happen before Q2 of 2023,” said Ajah.

To promote indigenous innovation and research Lagos State announced plans to invest N200 billion in the health sector.

The pharmaceutical (combined with chemical) sector contributed 0.27 percent to total GDP in the third quarter of 2022. And that compares with 0.25 percent contributed in the corresponding period (Q2) of 2021.

An analysis of sector players performance shows Fidson Healthcare is the cream of the crop as its return on equity of 30 percent is higher than May and Baker, 20 percent; GlaxoSmithKline, 11 percent, and Neimeth, -10 percent.

“For 2023, we expect the continuation of similar trends amongst pharmaceutical companies under our purview. We opine that access to loans, funding or capital structuring would be very important to the sustainability of companies in the sector,” said analysts at Meristem Securities.

“For players in the industry, revenue growth will likely be sustained on the back of rising prices and essential nature of the industry. Also, the ability of firms to remain resilient and innovative would be a significant catalyst impacting growth,” adds analysts at Meristem Securities.

Foreign exchange scarcity, rising inflation, and receding consumer spending remains a stumbling block to growth.

However, the incoming president and his economic team may rollout or formulate policies that will unlock the potential in the economy.

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