Parvez M Chowdhury
Analyst: Pharmaceuticals and Consumer Goods
parvez@bracepl.com
An overview of the pharmaceutical sector in Bangladesh
July 2010
Introduction
The pharmaceutical market in Bangladesh remains tiny compared to the population Table 1: Health expenditure as a % of GDP
Total expenditure on
size because of the lack of spending power of the population. Pharmaceutical
health as % of GDP
spending is also amongst the lowest in the world in per capita terms. Healthcare
expenditures consist of only 3.4% of GDP. However, the increased awareness of
2000
2007
healthcare and the government’s increased expenditure in this sector is causing the
7.0
8.4
demand to increase in this sector. In addition to the demand of therapeutic drugs, UK
the demand for “wellness” drugs such as vitamins and minerals are increasing USA
13.4
15.7
gradually and the future growth of the sector lies in it.
Japan
7.7
8.0
Surprisingly, the pharmaceutical sector, which is widely regarded as a “hi-tech”
industry, is the most developed among the manufacturing industries in Bangladesh.
Roughly 250 companies are operating in the market. According to IMS, a US-based
market research firm, the retail market size is estimated to be around BDT 55
billion, which grew by 16.8% in 2009. The market size in 2008 was BDT 47 billion
with a growth of 6.9%. The actual size of the market may vary slightly since IMS
does not include the rural market in their survey. However, the deviation is
estimated to be not more than 5-10% in either direction. Unfortunately, there is no
solid information source in Bangladesh other than IMS. The retail market is about
90% of the total market. In that respect, the total market size is more than BDT 60
billion.
India
4.4
4.1
Sri Lanka
3.7
4.2
Pakistan
3.0
2.7
Malaysia
3.2
4.4
Thailand
3.4
3.7
Indonesia
2.0
2.2
Bangladesh
2.7
3.4
Source: World Health Statistics 2010, WHO
One of the fastest growing sectors with an annual average growth rate consistently Table 2: Pharmaceutical sector growth rate
in the double digits, Bangladesh’s pharmaceutical industry contributes almost 1%
Growth Rate
of GDP. It is the third largest tax paying industry in the country. Bangladeshi Year
22.46%
pharmaceutical firms focus primarily on branded generic final formulations using 2001
10.18%
imported APIs (Active Pharmaceutical Ingredients). Branded generics are a 2002
category of drugs including prescription products that are either novel dosage 2003
5.90%
forms of off-patent products produced by a manufacturer that is not the originator 2004
8.60%
of the molecule, or a molecule copy of an off-patent product with a trade name. This 2005
17.50%
definition is used by both the FDA and the United Kingdom's National Health
2006
4.08%
Service (NHS). About 80% of the drugs sold in Bangladesh are generics and 20%
15.80%
are patented drugs. The country manufactures about 450 generic drugs for 5,300 2007
2008
6.91%
registered brands which have 8,300 different forms of dosages and strengths. These
2009
16.80%
include a wide range of products from anti-ulcerants, flouroquinolones, antirheumatic non-steroid drugs, non-narcotic analgesics, antihistamines, and oral anti- Source: Bangladesh Association of Pharmaceutical
diabetic drugs. Some larger firms are also starting to produce anti-cancer and anti- Industries (BAPI)
retroviral drugs.
We initiate this sector research in an attempt to present an overview of the sector. Within this research we will
cover the state of the sector, it’s strengths and weaknesses, and finally the overview of some leading
pharmaceutical companies.
Pharmaceutical Sector: Bangladesh
Although the sector has a long way to go, the reasons we are optimistic about the sector can be summarized
in Figure 1. We believe that the strengths outweigh the weaknesses.
Figure 1: Strengths and weaknesses of the pharmaceutical sector in Bangladesh
Growth potential of the domestic drug market
In order to get a sense of what might potentially be the size of the drug market let us consider a simple
model. Here we assume that the economy will have an average GDP growth of 6%. The economy will
witness an uptrend in healthcare expenditure because of the growing health consciousness and the
increased demand for “wellness” drugs as well as government expenditure. This means that drug and nondrug healthcare expenditure will increase at about the same pace. So, we also assume that the percentage
spent on drug as part of total healthcare expenditure will remain similar current level, which is about 28%.
These simple assumptions present an impressive growth upside of 83.6% by 2015 with a 6 year CAGR of
10.7%. Recent growth figures have proved to be better than the projection, which demonstrates that the
growth prospect of the sector is justified.
Table 3: Growth potential for domestic drug market
GDP (MM BDT)
Healthcare Expenditure % of GDP
Healthcare Expenditure (MM BDT)
Drug/Medicine Sales (MM BDT)
Average GDP Growth Rate
Growth Upside
CAGR
2009
6,149,432
3.4%
209,081
60,000
2010
6,518,398
3.6%
234,662
67,341
2011
6,909,502
3.8%
262,561
75,347
6.0%
83.6%
10.7%
Source: Bangladesh Bank, WHO, IMS Health and analyst’s estimate
2
2012
7,324,072
4.0%
292,963
84,072
2013
7,763,516
4.2%
326,068
93,572
2014
8,229,327
4.3%
353,861
101,548
2015
8,723,087
4.4%
383,816
110,144
Pharmaceutical Sector: Bangladesh
Market players
Domestically, Bangladeshi companies including the locally based MNCs Figure 2: Market share concentration
produce 95%-97% of the drugs and the rest are imported. Although
about 250 pharmaceutical companies are registered in Bangladesh, less
than 100 are actively producing drugs.
The domestic market is highly concentrated and competitive. However,
the local manufacturers dominate the industry as they enjoy
approximately 87% of market share, while multinationals hold a 13%
share. Another notable feature of this sector is the concentration of
sales among a very small number of top companies. The top 10 players
control around two-third of the market share while the top 15
companies cover 77% of the market. In comparison, the top ten
Japanese firms generated approximately 45% of the domestic industry
revenue, while the top ten UK firms generated approximately 50%, and
the top ten German firms generated approximately 60%.
Square Pharmaceuticals is the stand out market leader with a
market share of 19.3% which posted domestic revenue of BDT
11.2 billion in the last four quarters (Apr 09 - Mar 10). Their
nearest competitors are Incepta Pharmaceuticals and Beximco
Pharmaceuticals with market shares of 8.5% and 7.6%
Figure 3: Domestic market share of companies
Top Ten Company Growth Apr 09 - Mar 10
ACI Limited
7.9%
Acme Laboratories
8.0%
Aristopharma
13.6%
Square Pharmaceuticals
13.9%
Sector
Beximco Pharmaceuticals
Eskayef Pharmaceuticals
Renata Limited
Incepta Pharmaceuticals
Opsonin Pharmaceuticals
Drug International
18.4%
22.0%
27.3%
28.5%
31.0%
31.7%
39.2%
Others
20%
MNCs
13%
Top Ten
67%
Source: BAPI and newspaper reports
Table 4: Domestic market share of companies
Top Companies
Revenue
April 09 Revenue
March 10 Market
2009
Market
(MM BDT) Share (MM BDT) Share
Square Pharmaceuticals
11,158
19.3%
10,701
19.5%
Incepta Pharmaceuticals
4,919
8.5%
4,524
8.2%
Beximco Pharmaceuticals
4,415
7.6%
4,239
7.7%
Opsonin Pharmaceuticals
2,817
4.9%
2,614
4.8%
Eskayef Pharmaceuticals
2,788
4.8%
2,520
4.6%
Acme Laboratories
2,717
4.7%
2,640
4.8%
Renata Limited
2,623
4.5%
2,495
4.5%
ACI Limited
2,466
4.3%
2,460
4.5%
Aristopharma
2,355
4.1%
2,240
4.1%
Drug International
2,283
3.9%
2,132
3.9%
Sanofi-Aventis
1,700
2.9%
1,634
3.0%
GlaxoSmithKline
1,266
2.2%
1,229
2.2%
Novo Nordisk
1,005
1.7%
878
1.6%
Sandoz
936
1.6%
908
1.7%
Novartis
675
1.2%
558
1.0%
13,691
57,815
23.7%
100.0%
13,158
54,929
24.0%
100.0%
Others
Total
Source: BAPI and newspaper reports
Source: Newspaper reports
respectively. Incepta and Beximco had BDT 4.9 billion and BDT 4.4 billion in domestic sales for the last four
quarters. Although a number of MNCs are operational in Bangladesh market, no MNCs are in the top ten in
terms of domestic sales.
Because Bangladesh API capacity is insignificant, pharmaceutical companies import approximately 80% of
their APIs. Fifteen to twenty Bangladeshi firms are involved in the manufacture of about twenty APIs, but
they usually run the relatively easier final chemical synthesis stage with API intermediaries, instead of the
complete chemical synthesis. The other 1,000 required APIs are imported. Approximately 75-80% of the
imported APIs are generic.
3
Pharmaceutical Sector: Bangladesh
Table 5: Pharmaceutical Import to Bangladesh
(USD Million)
All Products
Pharmaceutical Product Import
Pharma % of Total
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
9335
8540
9658
10903
13147
14746
17157
21629
22507
33
39
44
45
41
50
49
62
80
0.35%
0.46%
18.18%
0.46%
12.82%
0.41%
2.27%
0.31%
-8.89%
0.34%
21.95%
0.29%
-2.00%
0.29%
26.53%
0.36%
29.03%
YoY Growth for Pharma
Source: Bangladesh Bank, Bangladesh Bureau of Statistics
Sourcing of APIs and raw materials
Bangladesh has a competitive disadvantage when compared to India, since pharmaceutical manufacturing is
not backward-integrated. Most APIs have to be imported, and even if the API is manufactured in Bangladesh,
the raw materials have to be imported. This generates higher factor costs, especially in cases where the
provider of the API is a competitor in selling the finished product. Building up backwards-integration for all
relevant APIs is not a realistic option: scale disadvantages and infrastructure constraints are more relevant
in the early stages of the value chain, where the products have a strong commodity character.
Figures 5, 6: Organic Chemicals and Pharmaceutical Products Import to Bangladesh
Pharmaceutical Products Import to Bangladesh
Organic Chemicals Import to Bangladesh
Others
Others
Indonesia
Hungary
U.S.A
India
Japan
Italy
Taiwan
Belgium
Germany
2007-08
Malaysia
2008-09
Netherlands
2007-08
Germany
2008-09
Republic of Korea
France
Singapore
Denmark
China
Spain
India
MM BDT
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
MM BDT
Switzerland
8,000
0
200
400
600
800
1,000
Source: Bangladesh Bank, Bangladesh Bureau of Statistics
Availability of machinery, know-how and human resources
The machinery for pharmaceutical manufacturing does also have to be imported. This places Bangladeshi
companies at a cost disadvantage compared with Indian manufacturers who can source the machinery
nationally. The leading manufacturers import most of their equipment from Europe or Japan, a fact they
claim ensures quality advantages over their Indian competitors. Other manufacturers import machinery e.g.
from China or India. Part of the cost may be compensated by export subsidies these countries are giving.
However, when competing in international markets, it becomes a question of comparative export
subsidizing in these countries: whether machinery exports being more or less subsidized than drug exports.
Current drug market
The therapeutic groups
The most important therapeutic group in the Bangladeshi market are Systemic Antibiotics. They account for
almost 30% of the market. The second therapeutic group, Anti-acids, are much less relevant in terms of
4
1,200
Pharmaceutical Sector: Bangladesh
market, as well as from a public health perspective. Vitamins, Analgesics, Mineral supplements, Cough and
Cold preparations and muscle relaxants also figure prominently. It is to be noted, that typical developed
market therapeutic groups like those addressing diabetes, cardiovascular diseases, allergies or psychological
disorders also are among the most important in Bangladesh, whereas HIV/AIDS and Anti-malarial drugs are
not.
API manufacturing
In most cases, APIs have to be imported from abroad, which, together with the necessity to import machines,
is one of the main disadvantages in terms of cost when compared to India. The leading manufacturers are
therefore going into API manufacturing, focusing mainly on Antibiotics, but also other drugs, such as anticancer drugs.
However, Antibiotics are particularly demanding in terms of manufacturing conditions, as GMP procedures
require special care to avoid cross-contamination. For example, each API manufacturing line has to be in a
separate building. For many APIs, the domestic market is too small to justify an API manufacturing plant.
This stresses the fact that whereas several Bangladeshi manufacturers have the know-how to manufacture
APIs, the initial investment and the production scale required are high. This means that in order to establish
API manufacturing e.g. for Antiretroviral APIs in Bangladesh, the manufacturers would need to be sure of
their access to several export markets. This barrier is unlikely to be taken without external support.
Distribution channels
Basically, there are three distribution channel systems in Bangladesh: public hospitals, private hospitals and
private pharmacies. Public hospitals source mainly from the state-owned Essential Drugs Company Limited
(EDCL), whereas private hospitals and pharmacies source from the private sector. However, public hospitals
can also source from private pharmaceuticals through tender bids.
As for the private Sector, there is a network of wholesalers, comprising of around 1200 wholesale medicine
shops. Whereas small and medium scaled pharmaceutical companies sell to those wholesalers directly from
the factory, the large companies usually have a complementing distribution network of their own: from their
factories, the drugs are taken to a central depot in Dhaka, then to the zonal depots in the different regions
and from there, they are sold both to wholesalers and to retailers through trained sales representatives or
distribution assistants.
Retail-sales of drugs in Bangladesh are allowed only under direct supervision of a pharmacist registered
with the Pharmacy Council of Bangladesh. The licenses for retail pharmacies and for wholesalers are also
being controlled by the Drug Administration of Bangladesh. There are close to 76,000 licensed retail
pharmacies in the country, and an estimated 125,000 unregistered retail pharmacies. In addition, drugs like
antibiotics can also be found in village shops etc. without proper supervision. Whereas the law foresees no
OTC drugs, requiring all drugs to be dispensed through a prescription, in fact all medicines are available
without any prescription.
Bangladesh’s drug distribution marketplace is composed of small independent pharmacies. Pharmaceutical
firms can sell their products to private sector pharmacies, the government and its public health care
facilities, or to international organizations operating in Bangladesh (e.g., UNICEF). Government sales are not
as profitable as private sector sales because the government pays less, on consignment, and at times, after
considerable delay. Pharmaceutical firms nevertheless still target pubic facilities because doctors become
acquainted with the firms’ drugs and then prescribe them in their private practices. And, because drugs are
not readily available at public facilities, patients receiving treatment there may still go to a private pharmacy
to procure the required drugs. Without these public sector connections, many firms would turn more
attention to the private sector.
5
Pharmaceutical Sector: Bangladesh
Although there are approximately over 200,000 private pharmacies in Bangladesh, the government lists
officially around 76,000 pharmacies. The rest are illegal, without a license or a licensed pharmacist on staff.
Pharmacists have varying education levels and many lack adequate training. Most pharmacies are individual
shops, though some chains are starting to develop, especially in urban areas. Large pharmacies generally buy
medicines according to sales trends, e.g., what sells the most. The medium and small pharmacies generally
have affiliation with a medical doctor. Their sales are therefore usually skewed towards that medical
professional’s preferences.
Several brands of each drug, with variable quality levels, are on the market. In urban areas, the pharmacies
tend to sell higher quality brands, whereas in more rural areas, pharmacies tend to sell lower quality, lower
cost brands. This may be due to a district’s local influences swaying brand selection. The pharmacies tend to
have brands associated with people who hold power in that district.
Those more distant from the city center consume increasingly more indigenous medicines such as ayurvedic
and herbal medicines. Indigenous medicine has a sizeable market size of an estimated BDT 10 billion (about
15% of the total market). Majority of the users are from low-income bracket with little or no education.
However, indigenous medicine is a niche market and it is generally not considered as a competitive threat to
mainstream medicine.
The top twenty pharmaceutical manufacturing firms have established extensive sales and distribution
networks. Most pharmacies have 10-50 pharmaceutical firms supplying their medicines daily. Hundreds of
medical representatives of top pharmaceutical companies visit pharmacies daily to take drug orders. The
success in sales for pharmaceutical companies have become extremely marketing oriented. They usually
boost their sales by giving incentives to pharmacies and to doctors in the form of higher commission so that
they would recommend their products to patients.
On an average, a company incurs 10-15% of their total costs in this process. However, they usually hide
these costs in their cost of goods sold. Since Bangladeshi firms produce low cost products, the gross margin
actually is more than 60% for most of the companies. But because of this widespread practice, they usually
report 45-50% in gross margin.
Each pharmacy may receive approximately 12-15 shipments per month from a particular company.
Pharmacies do not usually restock any medicine that does not sell well. The small pharmacies keep a
medicine for a maximum of six months.
Who decides on the drugs to be consumed
A significant number of drug consumers obtain drugs without a prescription. When consumers lack a
prescription, they will usually either ask a pharmacist for a specific drug or describe their ailment to a
pharmacist who diagnoses the problem and recommends a drug on the spot. Popular products include a
variety of antibiotics, painkillers, and gastric remedies. Consumers purchase one to ten tablets or capsules at
a time. The quantity of drugs purchased often depends more on the consumer’s finances than on the
required dose of medicine.
Drug regulation
The Directorate of Drug Administration (DDA), the national drug regulative authority, regulates drug
manufacturing, import and quality control of drugs in Bangladesh. It belongs to the Ministry of Health and
Family Welfare.
The Directorate issues licenses for import of raw materials for different drugs and packed drugs from a
6
Pharmaceutical Sector: Bangladesh
selected list to pharmaceutical companies and importers. It also monitors quality control parameters of
marketed drugs through an agency called the Drug Testing Laboratory.
DDA also administers vaccines and the indigenous systems of medicine called Ayurvedic and Unani systems.
The Homeopathic system of medicine is not, however, under the regulatory control of the Directorate. There
is, in fact, no regulatory body in the country for homoeopathic medicine perhaps for the practical reason that
testing and monitoring methods are not standardized because of inadequate scientific understanding of the
system. The system, indeed, has attained the status of a handy home remedy in Bangladesh and in other
countries where it is practiced.
According to executives of leading Bangladeshi drug exporters, administrative barriers to exports have been
largely eliminated in close cooperation between the pharmaceutical industry and the Drug Administration.
However, in order to export, a drug still has to be licensed in Bangladesh.
Prevailing laws regarding drug regulations are as follows:

National Drug Policy 1940

Drug Act 1940

Drug Control Ordinance 1982

Drug Control Ordinance 2004

National Drug Policy 1982
Drug Act 1940
The Drugs Act, 1940 is a law that regulates the import, export, manufacture, distribution, and sale of drugs in
the country. It was originally enacted by the Government of India in 1940 and adopted by the Pakistan
Government in 1957 in its modified form. It was adopted in Bangladesh in 1974. This Act seeks to regulate
the import of drugs into the country, the manufacture of drugs, as well as sale and distribution of drugs.
The Drugs Act permits the import of certain classes of drugs only under the licenses or permits issued by the
relevant authority appointed by Government. In contrast to the control of the drugs manufactured in the
country, quality requirements on imported drugs are very strictly controlled, thus successfully preventing
Indian manufacturers, who could serve the Bangladeshi market at competitive prices, from entering the
market. Licenses are also required for the manufacture and for the sale or distribution of drugs in the
country. Regular control over manufacturing and sales is exercised by periodic inspection of licensed
premises by drug inspectors who are specially appointed under the Act. Surveillance over the standards of
drugs is maintained by taking samples from drugs, manufactured or offered for sale, and by testing in the
Central Drugs Laboratory.
Drug Control Ordinance 1982
The Drug Control Ordinance 1982 is an Ordinance which controls the manufacture, import, distribution, and
sale of drugs in Bangladesh. It was promulgated in 1982 as additional to the Drug Act 1940. Through this
Ordinance, the Drug Control Committee and the National Drug Advisory Council are constituted. Both gremia
consist of a Chairman and a varying number of members appointed by the government according to
necessity.
Under this Ordinance, (i) no medicine of any kind can be manufactured for sale or be imported, distributed
or sold unless it is registered with the licensing authority; (ii) no drug or pharmaceutical raw material can be
7
Pharmaceutical Sector: Bangladesh
imported into the country except with the prior approval of the licensing authority; (iii) the licensing
authority cannot register a medicine unless such registration is recommended by the Drug Control
Committee; (iv) the licensing authority may cancel the registration of any medicine if such cancellation is
recommended by the Drug Control Committee on finding that such a medicine is not safe, efficacious or
useful; (v) the licensing authority is also empowered to temporarily suspend the registration of any
medicine if it is satisfied that such a medicine is substandard; (vi) the government may, by notification in the
official gazette, fix the maximum price at which any medicine may be sold and at which any pharmaceutical
raw material may be imported or sold; (vii) no person is allowed to manufacture any drug except under the
personal supervision of a pharmacist registered in the Pharmacy Council of Bangladesh; (viii) no person,
being a retailer, is allowed to sell any drug without the personal supervision of a pharmacist registered in
any Register of the Pharmacy Council of Bangladesh; and (ix) the government may, by notification in the
official Gazette, establish Drug Courts as and when it considers necessary. The National Drug Advisory
Council advises the government on the implementation of the national drug policy; on the promotion of local
pharmaceutical industries and the production and supply of essential drugs for meeting the needs of the
country and on matters relating to the import of drugs and pharmaceutical raw materials.
Intellectual property legislation
Bangladesh is a signatory of the GATT Uruguay Round and World Trade Organization (WTO) agreements,
including the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It is also a least
developed country (LDC) and thereby is exempted by the Doha declaration from implementing patent
protection for pharmaceutical patents until 2016. This only holds for countries that have not yet
implemented a legislation that provides for such patent protection, though. It is therefore necessary to look
at the Bangladeshi law:
The Bangladeshi patent law dates from 1911 and was amended in 1985. The responsible government
institution is the Ministry of Industries, Department of Patents, Designs and Trade Marks. The patent law is
thereby largely the same as in India before adapting to the requirements of TRIPS in 2005. Although there
have been disputes about the patentability of pharmaceutical products according to this law, it is reasonable
to assume that the interpretation that was chosen in India, namely the patentability of pharmaceutical
processes but not of pharmaceutical substances, can also be adopted in Bangladesh.
Bangladesh is a member of the World Intellectual Property Organization (WIPO), and adhered to the Paris
Convention on Intellectual Property in 1991. Although its intellectual property laws are often considered as
outdated and enforcement as being weak, Bangladesh has never been on the US trade representatives
"Special 301 Watch List”. This List identifies countries that deny what the US trade representative considers
adequate and effective protection for intellectual property rights.
The industry after 1982
Bangladesh formulated its National Drug Policy (NDP) and established the Drugs Control Ordinance in 1982,
to ensure availability, affordability and safety of essential drugs. The Drugs Control ordinance bans certain
types of drugs from the market, limits the marketing rights of foreign companies and establishes a price
control for both finished drugs and their raw materials:
• Bans: Combination drugs are only allowed in cases where single drugs are not available or not costeffective; Sale and manufacturing of drugs with limited therapeutic usefulness (e.g. cough mixtures, throat
lozenges) or with abuse potential are prohibited.
• Foreign Companies: foreign brands are not allowed to be manufactured under license in Bangladesh if
similar products are being manufactured in the country. Multinational companies that do not have an own
production facility in Bangladesh are not allowed to market their products even if manufactured in the
8
Pharmaceutical Sector: Bangladesh
country by toll / contract manufacturing (manufacturing by a Bangladeshi company on behalf of the
multinational).
• Price Control: 150 drugs were defined as essential drugs. For those, level prices are fixed for the finished
drugs as well as for their corresponding raw materials. No manufacturer can set maximum retail prices for
their goods beyond that limit. Changes in these level prices are decided by the Drug Control Committee.
Since 1993, the number of price-controlled drugs has been reduced to 117 primary health care drugs.
However, currently there are 209 drugs on the essential drugs list. For drugs that do not fall into this
“Controlled Category”, the manufacturer can set their own price, which must, however, be approved by the
Drug Control Committee.
This resulted in withdrawal of many foreign companies from the market in which they had had a share of
around 70% in 1970, and strong growth in local production. This also created a boon for local
pharmaceutical manufacturers.
According to the Directorate of Drug Administration records, in the year 2002, all the essential drugs were
produced locally and about 45% of the local drugs production concerned essential drugs. Locally produced
drugs amount to over 80% of the market share and meet over 90% of the local drug demand. There are over
200 licensed pharmaceutical factories in the country, six of them are owned by multinational companies
producing about 13% of the local production. 85% of the raw materials used in the local production are
imported. Only about 1 % of the locally produced drugs is exported.
Global export market
Due to cost pressures, MNCs increasingly seek to manufacture pharmaceuticals in developing countries.
Pharmaceutical contract manufacturing and research services is a large and growing business. Worldwide
revenues totaled $100 billion in 2004. With a predicted average annual growth rate of 10.8%, revenues are
estimated to reach $168 billion by 2009. Pharmaceutical firms in Bangladesh exported approximately
$45.67 million (approximately 0.03% of the estimated global pharmaceutical market revenue) in products to
73 countries during 2008-09.
Bangladesh’s exports are growing rapidly, as shown in the table below.
Table 6: Pharmaceutical Exports from Bangladesh
(USD Million)
July-June
2005-06
July-June
2006-07
July-June
2007-08
July-June
2008-09
July-April
2009-10
All Export
10,526.2
12,177.9
14,110.8
15,565.2
12,940.1
27.5
28.2
43.0
45.7
35.4
0.26%
0.23%
0.30%
0.29%
0.27%
2.51%
52.75%
6.21%
13.39%
Pharmaceuticals
Pharma % of Total
YoY Growth for Pharma
Source: Export Promotion Bureau
Bangladeshi firms are trying export to the following markets:
Regulated: Square Pharmaceuticals, the only Bangladeshi pharmaceutical firm accredited in a regulated
market, received the UK’s regulatory approval in May 2007. The largest barriers to regulated markets are
modern manufacturing facilities which come at a cost of at least $50 million, and know-how.
Moderately Regulated: Some markets, such as Pakistan, Sri Lanka, Tanzania and Malaysia, are moderately
regulated. While countries do not always require stringent certification, a certification from a regulated
market signifies quality and provides a firm with a competitive advantage.
9
Pharmaceutical Sector: Bangladesh
Unregulated: Most Bangladeshi pharmaceuticals are exported to less than fully regulated markets such as
Bhutan, Nepal, Vietnam, Myanmar and African countries such as Ivory Coast, Male, etc.
Major exporters
The majority of Bangladesh’s pharmaceutical exports are from MNCs such as Sandoz. Sandoz, an MNC
operating in Bangladesh, has approximately 25 manufacturing sites globally. Bangladesh is one of its smaller
sites. The Bangladeshi manufacturing site is an EU certified plant which produces about 500 million tablets a
year and generates about USD 35-40 million in sales. It has been growing rapidly—15-18% per year—and is
responsible for a significant portion of Bangladesh’s pharmaceutical export growth. It imports APIs, acquires
packaging domestically, and manufactures final formulations in Bangladesh for export of USD 12 million or
for sale to the domestic market ranging from USD 23-28 million.
Exporting pharmaceutical products is not accessible for all companies. Each country has its own product
regulations, registration requirements, language requirements, cultural preferences, national packaging
requirements, and industry protection mechanisms. Sales on the global market are quite competitive with
firms from around the world vying for business.
Furthermore, initiating exports requires a significant investment in money, time and paperwork to register
the product in the target country. As generic products are branded in less regulated markets, pharmaceutical
firms also need to make significant investments in sales and marketing to create product demand. All these
investments are made without a guarantee of future sales.
Most pharmaceutical firms in Bangladesh are family owned. While many have the capacity to export, some
do not have the in-house expertise. As a result, only sixteen firms export products. There are no “majority
exporters,” e.g., companies that sell more than 50% of their output in export markets. Beximco, for example,
is one of the leading exporters. Its 2009 exports were about USD 4.0 million or 5.9% of total sales. However,
many companies initiated the process of product registration in international markets only in the last few
years. The export situation is evolving. For example, Square Pharmaceuticals increased exports by 58% from
2007-08 to 2008-09.
Indirect benefits of export
Bangladeshi firms that export are slightly more productive than non-exporting firms. Some possible reasons
for this advantage may be due to:
1. Technological lessons learned from foreign buyers.
2. Exporters improved their own technological capabilities to exploit profitable opportunities in export
markets. For example, exporters need to adopt stringent technical standards to satisfy more sophisticated
consumers, and/or they are under more pressure to fill orders in a timely fashion and to ensure product
quality for export markets which are more competitive than domestic market.
3. Better firms self-selected to enter export markets for the prestige rather than the effects of exporting
necessarily improving the firms.
The pharmaceutical industry in Bangladesh has been aggressively investing in infrastructure. Most of the
companies invested heavily in the 1990s and the late 2000s most likely to upgrade their facilities to obtain
international export certifications. The top ten firms accounted for most of the investments.
MNCs can operate in a country in multiple ways, including foreign direct investment (FDI), contract
10
Pharmaceutical Sector: Bangladesh
manufacturing, joint ventures and strategic partnerships or licensing. Each arrangement varies in terms of
which partner contributes more resources and technical knowledge, which partner assumes more risk, and
which partner accrues more benefits and profits.
Contract manufacturing
Contract manufacturing is a good business opportunity for Bangladeshi firms, and if well done, it can enable
technology transfers to domestic firms. As a result, they can acquire world-class experience in finished
dosage manufacturing, APIs or other aspects of pharmaceutical manufacturing. Square Pharmaceuticals, one
of Bangladesh’s largest pharmaceutical firms, attributes much of its success to what it learned by working
with an MNC.
Bangladeshi pharmaceutical firms can make several types of contract manufacturing arrangements with
MNCs, including:
• Contract manufacturing with the product intended for export to a regulated market. The current National
Drug Policy (NDP) permits this. Contract manufacturing for export is a significant financial opportunity, but
challenging. The domestic pharmaceutical firm must have a facility accredited by the regulators of an
advanced market. Square Pharmaceuticals is one of the very few Bangladeshi firms with a qualified facility. It
is currently initiating a contract manufacturing arrangement with a British firm.
• Contract manufacturing with the product intended for the domestic market. The Drug Control Ordinance
(DCO) prohibits foreign firms from selling products in Bangladesh unless they have a manufacturing
presence in the country. Thus, Bangladeshi firms can only contract manufacture for domestic distribution
with MNCs that already have a presence in Bangladesh. An example of this arrangement is Beximco contract
manufactures Ventolin, which is an inhaler for GlaxoSmithKline.
Demand for essential drugs
Bangladesh has a strong pharmaceutical industry represented by private enterprises and the state-owned
EDCL. Bangladesh is largely self-sufficient with regard to drugs and has no significant drug availability
problem. In fact, the availability of drugs has a stronger outreach than the availability of health care
professionals.
Due to widespread vaccination schemes, successful eradication of leprosy and widespread use of oral
rehydration for diarrhea, many of the traditional health problems are minimized and life expectancy has
risen to around 65 years – comparable to India and Pakistan rather than to African LDCs who mostly have
life expectancies below 50. The most important health issues in Bangladesh today are related to maternal
health and malnutrition, vitamin and iron deficiency. AIDS, Malaria and TBC are potential health threats.
Other important causes of death are cardiovascular diseases, diabetes and cancer. Mental disorders are an
important reason for disability. Thus, in line with the statement that there is no significant drug availability
problem in Bangladesh, the therapeutic groups do largely reflect the major health issues in the country.
The health care system
Bangladesh is a signatory to the Alma Ata Declaration on Primary Health Care (PHC) in 1978. In 1988, the
Bangladeshi Government adopted the PHC approach as a guiding principle to the health systems
development in Bangladesh. Due to resource limitations, introduction of PHC was started in selective
districts. In 2004, an estimated 48 million out of Bangladesh’s 140 million population is covered by PHC.
The public health expenditure, totaling 3.4% of GDP in 2001, comparing to 4.1% in India, 4.2 in Sri Lanka
11
Pharmaceutical Sector: Bangladesh
and 2.7% in Pakistan. Public health expenditure accounts for roughly 33.6% of the total health expenditure.
There are around 43,000 registered physicians and 40,000 nurses and midwives, resulting in about only 3
physician and 3 nurses and midwives per 10,000 population. The hospital beds per 10,000 population is
only about 4. The number of public health worker is about 6,000 (less than 0.5 per 10,000 population). With
21,000 community health workers the ratio is only 1 for 10,000 population. For details and a comparison
with selected other countries, see the tables 12 & 13 at the back of the report.
Price and price sensitivity
For those drugs that are not subject to a fixed price, there is considerable price sensitivity in Bangladesh,
which is explained by the very high variation in quality with significant incidents of health-damaging
spurious drugs and fake drugs that contain no active ingredient.
Thus, it is not uncommon for the high quality branded generics of the leading manufacturers to have a 100%
price premium over their competitors. In some cases the premium is even higher.
Unmet demand
The demand for essential drugs in Bangladesh is largely covered. In accordance with the above, in many
cases the cheap availability of essential drugs without adequate health care infrastructure is not without
problems.
The global need for essential drugs is huge in theory and the actual demand depends to a large extent on
financing possibilities and mechanisms, which are difficult to foresee in detail, but the creation and
dedication of funds and institutions like e.g. the Global Fund to combat AIDS, Malaria and Tuberculosis,
justify a significant growth expectation for the actual demand. It is also to be expected that wherever donor
funds are directly used to purchase drugs (as e. g. the Global Fund or the Gates Foundation), the demand will
come with such quality requirements that would put a country like Bangladesh with a good track record and
a lot of experience at advantage over African LDCs that are only just entering the business of pharma
manufacturing. On the other hand, the tendency of traditional donors to budget funding may lead to
governments of African LDCs giving preference to lower quality local manufacturers for political reasons,
creating high barriers of entry for Bangladeshi manufacturers in these market segments.
Diseases that are typically considered developed country diseases like cardiovascular disorders or cancer
are also on the rise in many developing countries. However, at present, both adequate diagnosis of these
diseases and availability of funding for drug needs are doubtful.
Investors and sources of capital
In Bangladesh, there are several national investors interested in building up pharmaceutical manufacturing:
many of the existing pharmaceutical corporations, like Square and Beximco, belong to large conglomerates
that have proven the commercial opportunities to invest in pharmaceutical manufacturing plants. Foreign
investors have not been particularly interested in setting up manufacturing plants in Bangladesh, notably
the investment flow from India, expected by some industry specialist following the Doha declaration, has not
materialized so far.
When investing in pharmaceutical manufacturing plants, the equity rate used by Bangladeshi investors is
significantly higher than the usual equity rate in transnational pharmaceutical companies. The reason lies
partly in the comparatively high cost of capital and also in the necessity to group together different banks for
financing a large credit sum, since the sum each bank is allowed to lend is usually not sufficient to finance a
12
Pharmaceutical Sector: Bangladesh
large drug manufacturing plant. As a result, there is a large number of very small scale manufacturer present
in the industry. These manufacturers focus mostly on a handful of basic and essential drugs.
Specific risks of national production
The dependence on import of APIs is the main risk, since the providers are also competitors. This has not
affected Bangladeshi pharmaceutical manufacturers too much as they concentrated on the national market
which was not deemed attractive by their providers. As long as Bangladeshi manufacturers concentrate on
developing country markets, they may be able to circumvent this problem by sourcing from developed
countries’ manufacturers who are not targeting these markets. However, this would probably also increase
their cost.
TRIPS
The WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) requires all
signatories to legislate twenty-year patent protection for pharmaceutical products into their domestic law.
TRIPS is not a uniform international law, but a framework for intellectual property protection with
minimum agreed standards. While signatory countries must meet its requirements through legislation,
TRIPS provides significant flexibility.
Until 2016, TRIPS provides Bangladesh with domestic, patent-free production rights and limited exporting
advantages. Bangladesh imports approximately 80% of its APIs for domestic production, 20-25% of which
are patented. These API costs will most likely rise as TRIPS phases in.
Bangladesh enjoys some export advantages from TRIPS. But these advantages are somewhat offset by the
pace and competitiveness of the Indian and Chinese generic markets. In both markets, companies can
produce drugs at highly competitive pricing—even with higher costs associated with buying patented APIs
or paying royalties.
Bangladesh will have to rely on the standard business practices of producing the highest quality product at
the lowest price to compete on the international market. Until 2016, however, Bangladesh has the following
export advantages under TRIPS:
1. Export to any country if the drug is not under patent. Any firm in any country can benefit from this
stipulation. For example, most drugs on WHO’s Model List of Essential Drugs are not patented, as
affordability is one of the criteria used in designating medicines as “essential.”
2. Export to another LDC or non-WTO country that has not implemented product patent protection. It seems
that most LDCs have instituted patent protection. Only two African LDCs have not provided for TRIPScompliant intellectual property protection, one of which was not yet a WTO member, according to a 2001
Intellectual Property Rights (IPR) Commission study. In Asia, Myanmar, which is engaged in the WTO
accession process, is perhaps the only country that has not yet put in place a patent protection regime. TRIPS
states that any country using the transitional flexibility period shall not change its laws to result in a lesser
degree of consistency with TRIPS. However, Bangladeshi firms are exporting generic versions of patented
drugs to many LDCs without a problem.
3. Export to a country where the patent holder has not filed for patent protection for the drug. Companies do
not file drug patents in all countries, particularly where sales and profit prospects are low or there is no
meaningful judicial patent protection. These gaps in patent coverage can be exploited.
4. Export to a country that has issued a compulsory drug license and awarded the production contract to
13
Pharmaceutical Sector: Bangladesh
Bangladesh. TRIPS grants governments the right to issue a compulsory license for public health purposes,
which occurs when a government overrides a patent and grants another entity the right to produce the
patented product. Although Canada, Japan, the United States and the United Kingdom have all issued
domestic compulsory pharmaceutical licenses, very few developing countries have done so. The expense and
time of litigation with developed countries can act as a deterrent. Governments must also balance fully
exploiting TRIPS flexibilities while maintaining good relations with MNCs, which often use domestic firms
for outsourcing or manufacturing.
Before 2005, many countries could fulfill a compulsory license importation request because many were
manufacturing patented drugs off patent. As of 2005, Bangladesh patented drugs off patent whereas India
and China, the world’s largest suppliers of generic drugs, will no longer be able to engage in this practice for
any drug patented after 2005. Because firms require two to three years to reverse engineer and start
producing a specific drug of quality, if any country issues an import request for a compulsory license for any
drug patented after 2005, Bangladesh will have an advantage if it is already manufacturing the drug
domestically. However, TRIPS has clearly stated that export for compulsory licensing is intended for health
policy not industrial policy.
Conclusion
The essential drugs market in Bangladesh is well supplied, and there is no availability problem of essential
drugs. The DDA, responsible for the safeguarding of the drug quality through licensing and control, lacks the
necessary capacities, equipment (notably test laboratories) and governance to perform all its tasks
effectively. WHO is supporting the DDA through capacity building and new test laboratories.
Partly due to the failure of the local authorities to provide credible quality certifications, and partly due to
their aspiration to increasingly target export markets, leading Bangladeshi manufacturers are already
successfully working on obtaining international quality certification for their products and plants, in some
cases bringing in experienced experts from MNCs or Indian competitors.
The ability of the Bangladeshi drug industry to manufacture drugs for all kinds of needs is beyond doubt.
While some manufacturers are already able to produce world class quality drugs, others would require
considerable assistance to be able to reach that target. However, the Bangladeshi industry has been largely
focused on the domestic market until recently. Knowledge about and contacts to the different players in
potential export markets is still limited and constitutes a key bottleneck to expansion of manufacturing
facilities.
In terms of cost, Bangladeshi companies can be expected to compete successfully with African players,
especially if an international quality standard is required. The ability to compete with Indian and Chinese
manufacturers is limited due to the necessity to import machinery and notably the precursor substances.
The ultimate competitiveness of Chinese and Indian manufacturers depends on the expected rigor of the
TRIPS enforcement, the viability of voluntary or compulsory licensing for Indian and Chinese players, and
the amount of license fees they would have to pay, and the competitiveness of Bangladeshi manufacturers
will largely depend on the pricing of the raw materials. Still, Bangladesh is probably one of the few LDCs
where under the TRIPS agreement new patent protected drugs and APIs can be cost-effectively produced
and at high quality.
Thus, Bangladesh is a natural candidate to supplement or substitute Indian and Chinese providers to the
developing country markets of both finished drugs and APIs, notably in antibiotics, anti-ulcerants, antihypertensives and anti-depressants. However, the domestic market is large enough to be self-sustaining and
lucrative for the domestic players until they become ready to take on the global pharmaceutical market.
14
Pharmaceutical Sector: Bangladesh
Top Listed Pharmaceutical Companies
Square Pharmaceuticals Limited (Position in terms of domestic sales: 1)

Square Pharmaceuticals is the largest pharmaceuticals manufacturing company in the country.

The company has consistently created value for its shareholders, with average Return on Equity (ROE)
of over 20% in the last 7 years.

While maintaining the profitability in its core pharma business, the company has created a number of
other businesses in‐house in the past, and after profitable commercial operation of the businesses
commenced, spun off such subsidiary businesses to monetize the investment.

Square Pharmaceuticals has undertaken an expansion program to be completed in two phases. The first
Phase will be completed in 2012 at a total cost of BDT 3.6b (we anticipate a 25% cost overrun for a final
cost of 4.5b). This first phase is expected to almost double the current production capacity. The second
phase starts in 2014, completing in 2017 for a total cost of 2.0b (including an estimated cost overrun of
25%). We expect the expansion programs contributing to revenue growth after 2012.

Capital expenditure will be financed by internally‐generated cash as the company generates a handsome
amount of cash each year Current debt‐to equity ratio is quite low at 23%; in the absence of any other
major expansion plan, we do not anticipate assumption of any more debt.

Some of the business units (e.g., Square Knit Farbics Ltd. and Square Cephalosporins Ltd.) are just
starting to become profitable and more are on the right path (e.g., Square Hospitals Ltd.). Square will
definitely benefit from this.

We believe the company is still undervalued. We need to look a for the value of the company beyond
2013 as the major value addition to the company is going to take place after 2012. We believe the
market has not yet identified the real value of the company.
Table 7: Square Pharmaceuticals Snapshot
Revenue (MM BDT)
Operating Income (MM BDT)
Operating Margin
Net Income (MM BDT)
Net Margin
5-Year Revenue Growth (CAGR)
Capex (MM BDT)
Debt/Equity
No. of Shares (MM)
Diluted EPS (BDT)
Dividend (BDT)
Current Price (BDT)
Target Price (BDT)
CAGR Return (Up to end of 2013)
2009A
2010E
2011E
2012E
2013E
11,826
2,929
25%
2,116
18%
13%
2,049
23%
12.1
140.19
40.00
3722
7000
23%
13,026
3,149
24%
2,644
17%
15,099
3,537
23%
3,306
16%
17,287
3,945
23%
4,132
16%
22,003
4,960
23%
5,165
16%
1,386
20%
15.1
175.24
50.00
1,398
18%
15.1
219.05
60.00
1,426
16%
15.1
273.82
70.00
1,451
14%
15.1
342.27
80.00
15
Pharmaceutical Sector: Bangladesh
Beximco Pharmaceuticals Limited (Position in terms of domestic sales: 3)

Beximco Pharmaceuticals is one of the largest pharmaceutical companies in Bangladesh. The company
has featured consistently in the top five manufacturers for the last decade.

Beximco is widely regarded as one of the technological leaders among the local pharmaceutical
companies in the country.

The company utilizes state of the art technology. All new plants are equipped with cutting edge
machineries. New facilities are coming online in 5 new plants. Two of them are already operational.

The company maintains many good partnerships with established players such as Bayer AG of Germany
and Upjohn Inc. of USA.

The company has outperformed the industry in terms of sales during 2009. The pharmaceutical industry
has grown around 15% on average annually and Beximco Pharma has matched that growth before 2009.
We believe they will continue to emulate the performance of 2009 for the foreseeable future.

Generally the company doubles their turnover in every three years. The company expects to generate
BDT 700 million per month in 2011.

Despite troubled political environment during 2007 and 2008, the company has successfully weathered
the conditions and bounced back strongly under more favorable condition in 2009.

New production lines become operational this year which will effectively double the capacity.

The company has undertaken a hugely ambitious plan for foreign market. The management has targeted
to have equal revenue from domestic sales and exports. That means they would have to achieve
exponential growth in exports. Although this seems quite ambitious, there are signs that the
management is on the right track to delivering what they promised.
Table 8: Beximco Pharmaceuticals Snapshot
2009A
2010E
2011E
Revenue (MM BDT)
4,868
5,951
7,205
Operating Income (MM BDT)
Operating Margin
Net Income (MM BDT)
Net Margin
5-Year Revenue Growth (CAGR)
Capex (MM BDT)
Debt/Equity
No. of Shares (MM)
Diluted EPS (BDT)
Dividend (BDT)
Current Price (BDT)
Target Price (BDT)
Return
1,001
21%
625
13%
15%
1,332
34%
151.1
2.98
0.00
146
175
20%
1,224
21%
764
13%
1,482
21%
925
13%
486
29%
209.8
3.64
1.10
460
24%
209.8
4.41
1.20
16
Pharmaceutical Sector: Bangladesh
Renata Limited (Position in terms of domestic sales: 7)

Renata is one of fastest growing pharmaceutical companies in Bangladesh. It is the seventh largest
company in terms of local pharmaceutical sales.

Successor of the business of Pfizer Bangladesh – still enjoys distribution relationship with Pfizer.

Renata is the market leader in agrochemical business.

Strong growth history; in the last five years, revenue grew by a 23% CAGR whereas net profit grew by
31%. Even if gross profit margin remained the same, the company has consistently reduced its operating
costs, thus improving the bottom line.

The company achieved a return on equity of over 25% on average in the past five years. 2009 seems to
be on the same track.

Renata boasts of the highest gross profit margin (almost 50%) among the local manufacturers.

In 3Q09, Renata declared EPS of BDT 325.94 posting a 43.55% bottom line growth QoQ; reduction of
operating expenses improved bottom line.

Renata has a Modest dividend payment; dividend yield in 2008 was about 1%.

A high retention rate is justified as the company consistently makes huge capital expenditures, financed
by internal cash. This state is supposed to continue in the near future.

Manageable leverage; D/E is about 50%. The entire debt is short-term.

Renata has good management, disciplined growth and low leverage, and appears to be an attractive
company. However, liquidity of shares is a big concern.
Table 9: Renata Limited Snapshot
Revenue (MM BDT)
Operating Income (MM BDT)
Operating Margin
Net Income (MM BDT)
Net Margin
5-Year Revenue Growth (CAGR)
Capex (MM BDT)
Debt/Equity
No. of Shares (MM)
Diluted EPS (BDT)
Dividend (BDT)
Current Price (BDT)
Target Price (BDT)
Return
2009A
2010E
2011E
4,103
5,128
6,154
1,020
25%
660
16%
23%
103
0%
1.4
456.52
60.00
10677
12750
19%
1,179
23%
783
15%
1,415
23%
952
15%
110
0%
1.8
541.58
65.00
117
0%
1.8
658.19
80.00
17
Pharmaceutical Sector: Bangladesh
ACI Limited (Position in terms of domestic sales: 8)

Advanced Chemical Industries (ACI) Limited is one of the most recognized pharmaceutical companies in
Bangladesh.

ACI currently lies at eighth spot in the local market.

The company has expanded its business beyond pharmaceuticals encompassing agro-chemical, animal
health, agro-machinery, consumer brands and retail chains. Since the company has been expanding its
business horizon rather aggressively for the last few years, ACI has found itself in a cash crunch, which
ultimately led the company to resort to a fair bit of leverage.

However, ACI has recently issued a zero-coupon bond to improve their cash position.

Despite cash constraint, ACI is one of the more consistent dividend paying companies in the local
market.

Although the core pharma segment and agribusiness segment are making respectable profits, consumer
brands and other segments are not yet fully profitable. If and when these segments become profitable,
the bottom line will see significant improvement.

Although we believe ACI is a good company, we are still not totally convinced that they are a good option
to invest at the moment.
Table 10: ACI Limited Snapshot
Revenue (MM BDT)
Operating Income (MM BDT)
Operating Margin
Net Income (MM BDT)
Net Margin
5-Year Revenue Growth (CAGR)
Capex (MM BDT)
Debt/Equity
No. of Shares (MM)
EPS (BDT)
Dividend (BDT)
Current Price (BDT)
Target Price (BDT)
Return
2009A
2010E
2011E
12,300
13,530
14,883
775
6%
553
4%
39%
571
36%
19.4
28.48
10.50
398
450
13%
853
6%
608
4%
938
6%
669
4%
400
30%
19.4
31.32
10.50
300
20%
19.4
34.46
10.50
18
Pharmaceutical Sector: Bangladesh
GlaxoSmithKline Bangladesh Limited (Position in terms of domestic sales: 12)

One of the pioneering pharmaceutical companies in Bangladesh, GlaxoSmithKline (GSK) started
operation back in the 1960s.

GSK is a secondary producer, principally packaging and distributing advanced pharmaceuticals products
produced by its parent company. Consequently, local value added is low.

In certain novelty products such as asthma and dermatology, GSK enjoys a clear advantage because of its
parent’s excellent research efforts and product development. However, a significant part of the GSK’s
pharma portfolio comprises of price-controlled “essential products”. As such, the company does not
enjoy price advantage for such products.

Local pharma companies in Bangladesh take advantage of the liberal patent regime for Least Developed
Countries (LDCs), sanctioned by the WTO, which shall remain in place till 2016. They produce copies of
patented products for the local market. As the subsidiary of a global company, GSK cannot or does not
take advantage of this liberal patent regime and does not produce copy drugs.

Although GSK has trailed the overall industry in sales growth for a few years at a stretch due to the
dominance of local manufacturers, they have managed to recover from that with large growths in the
last couple of years. However, it appears that GSK is trying to make up for the lack of sales growth
through its consumer products business which brought in almost half of the total revenue in 2009. The
company has reintroduced various health drink items (Horlicks etc.), which achieved almost 232% sales
growth in 2009 and 500% in 2008.

The reliance on consumer products may hurt the company’s profitability in the future. The health drink
market is fairly competitive and is often supplied by non-pharma food companies whose core advantage
is better management of retail marketing and distribution systems, promotional events and efficient
inventory management. Interestingly, GSK has outsourced their distribution operation which has
boosted their profitability.

Although they do not have any big expansion plan, they seemingly have improved their contract
manufacturing revenue dramatically. However, it would be interesting to see if that is going to be
repeated in the future.

GSK pays regular dividends at a high payout ratio (about 60%).
Table 11: GlaxoSmithKline Snapshot
2009A
2010E
2011E
Revenue (MM BDT)
3,024
3,442
3,840
Operating Income (MM BDT)
Operating Margin
Net Income (MM BDT)
Net Margin
5-Year Revenue Growth (CAGR)
Capex (MM BDT)
Debt/Equity
No. of Shares (MM)
EPS (BDT)
Dividend (BDT)
Current Price (BDT)
Target Price (BDT)
Return
425
14%
324
11%
19%
75
0%
12.0
26.9
16
1183
1350
14%
618
18%
375
11%
684
18%
415
11%
62
0%
12.0
31.1
16
70
0%
12.0
34.4
16
19
793,648
270,371
643,520
29,499
127,859
17,020
18,987
29,499
42,881
USA
Japan
India
Sri Lanka
Pakistan
Malaysia
Thailand
Indonesia
Bangladesh
3
1
3
7
8
1
6
21
27
21
Density (per
10000 population)
Source: World Health Statistics 2010, WHO
126,126
UK
Number
Physicians
Table 12: Comparative Healthcare System
39,471
179,959
84,683
43,380
62,651
179,959
1,372,059
1,210,633
2,927,000
37,200
Number
3
8
14
18
4
8
13
95
98
6
Density (per
10000 population)
Nursing and midwifery personnel
2,344
7,093
4,471
2,160
15,790
7,093
55,344
95,197
463,663
25,914
Number
<0.5
<0.5
1
1
1
<0.5
1
7
16
4
9,411
7,580
7,350
2,880
8,102
7,580
592,577
241,369
249,642
…
1
<0.5
1
1
1
<0.5
6
19
9
…
Density (per
10000 population)
Pharmaceutical personnel
Density (per
Number
10000 population)
2000–2009
Dentistry personnel
Health workforce
6,091
6,493
2,151
…
106
6,493
…
…
…
…
Number
<0.5
<0.5
<0.5
…
<0.5
<0.5
…
…
…
…
Density (per
10000 population)
Environment and public health
workers
21,000
…
…
…
65,999
…
50,393
…
…
…
Number
1
…
…
…
4
…
<0.5
…
…
…
Density (per
10000 population)
Community health workers
4
6
22
18
6
6
9
139
31
39
2000–2009
Hospital beds
(per 10000
population)
Pharmaceutical Sector: Bangladesh
13.4
7.7
4.4
3.7
3.0
3.2
3.4
2.0
2.7
USA
Japan
India
Sri Lanka
Pakistan
Malaysia
Thailand
Indonesia
Bangladesh
3.4
2.2
3.7
4.4
2.7
4.2
4.1
8.0
15.7
8.4
38.0
36.6
56.1
52.4
21.3
47.9
24.5
81.3
43.2
79.3
Source: World Health Statistics 2010, WHO
7.0
UK
63.4
62.0
33.6
43.9
47.6
78.7
52.1
75.5
18.7
56.8
20.7
2000
66.4
45.5
26.8
55.6
70.0
52.5
73.8
18.7
54.5
18.3
2007
Private exp on
health as % of
total exp on
health
54.5
73.2
44.4
30.0
47.5
26.2
81.3
45.5
81.7
2007
2000
2000
2007
General govt
exp on health as
% of total exp
on health
Total exp on
health as % of
GDP
Table 13: Comparative Healthcare Expenditure
7.2
4.5
10.0
6.2
2.4
6.8
3.8
16.0
17.1
14.3
2000
8.0
6.2
13.1
6.9
3.5
8.5
3.7
17.9
19.5
15.6
2007
General govt
exp on health as
% of total govt
exp
7.0
0.0
0.0
0.6
0.8
0.3
0.5
0.0
0.0
0.0
2000
7.7
1.7
0.3
0.0
3.3
1.7
1.4
0.0
0.0
0.0
2007
External resources for
health as % of
total exp on
health
Health expenditure ratios
0.0
6.2
9.4
0.6
6.2
0.3
16.9
80.9
33.5
0.0
2000
0.0
16.0
9.7
0.8
4.2
0.1
17.2
78.7
27.9
0.0
2007
Social security
exp on health as
% of general
govt exp on
health
95.9
72.9
76.9
75.4
80.3
83.3
92.2
90.1
25.5
64.8
2000
97.4
66.2
71.7
73.2
82.1
86.7
89.9
80.8
22.6
62.7
2007
Out-of-pocket
exp as % of
private exp on
health
0.1
6.4
12.8
11.9
0.2
12.2
1.0
1.7
60.3
15.6
2000
0.0
4.7
19.5
14.4
0.3
9.1
2.1
13.7
63.5
6.9
2007
Private prepaid
plans as % of
private exp on
health
9
16
67
128
15
33
20
2827
4703
1769
2000
15
42
136
307
23
68
40
2751
7285
3867
2007
Per capita total
exp on health at
avg exchange
rate (US$)
22
48
159
304
48
102
66
1967
4703
1833
2000
42
81
286
604
64
179
109
2696
7285
2992
2007
Per capita total
exp on health
(PPP int. $)
3
6
38
67
3
16
5
2298
2032
1403
2000
5
23
100
136
7
32
11
2237
3317
3161
2007
Per capita govt
exp on health at
avg exchange
rate (US$)
Per capita health expenditures
8
17
89
159
10
49
16
1598
2032
1454
2000
14
44
209
268
19
85
29
2193
3317
2446
2007
Per capita govt
exp on health
(PPP int. $)
Pharmaceutical Sector: Bangladesh
Pharmaceutical Sector: Bangladesh
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