PACRA assigns preliminary rating to Pharmagen Limited

July 12, 2019 (PPI-OT): The rating reflect the strength of the security
structure of the sukuk. This entails in-built advance cushion against the
upcoming repayments. The rating reflect strong positioning of Pharmagen Limited
in its respective market. The pharmaceutical industry has witnessed a high rate
of sustained growth over the years. Cost-efficiencies as well as demand in-elasticity
are benefiting the industry players. The new CPI-linked pricing criteria has
allowed an increase in prices with respect to inflation, indicating a positive

company imports majority of its raw material, where currency fluctuation and
pricing risk could affect margins, however majority of the cost increase can be
passed through to its customers. Pharmagen has improved its working capital
position by obtaining additional financing facilities – as a result there has
been a marked improvement in profitability and turnover during the March 2019
quarter. Predominant proportion of the business is signed with eminent
pharmaceutical corporates – both multinational and local.

company’s ongoing supply arrangements with GSK and prospects of enhancing the
range of products to be supplied will add-on to the growth levels. Pharmagen is
poised to derive benefits from downward integration in Moringa Pharmaceuticals
which would help Pharmagen, to diversify in different segments and reduce the
concentration risk. The underway capacity enhancement plans are set to further
boost Pharmagen’s operations and financial results. Long association of
experienced management team adds comfort. The proceeds from the sukuk will be
utilized in improving the composition of the debt book.

ratings are dependent on the company’s ability to sustain margins. Improvement
in business volume and profitability will be viewed positively. Meanwhile,
management of debt (current and planned), thereby impacting coverages, is considered
important. Furthermore, external factors such as any adverse changes in the
regulatory framework and weakening of financial profile owing to delays in cash
flow receipts, may impact the ratings.

For more information, contact:


The Pakistan Credit Rating Agency
Limited (PACRA)

Awami Complex, FB1, Usman Block New
Garden Town,

Lahore – Pakistan

Tel: +9242 586 9504 -6

Fax: +9242 583 0425