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 size because of
the lack of spending power of the population.
Pharmaceutical 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 healthcare
and the governments increased expenditure in
this sector is causing the demand to increase in
this sector. In addition to the demand of
therapeutic drugs, the demand for wellness
drugs such as vitamins and minerals are
increasing gradually and the future growth of the
sector lies in it.

Table 1: Health expenditure as a % of

GDP
Total expenditure
on health as % of
GDP
2000
UK

2007

7.0

8.4

13.4

15.7

Japan

7.7

8.0

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

USA

Surprisingly, the pharmaceutical sector, which is Indonesia

2.0
2.2
widely regarded as a hi-tech industry, is the Bangladesh
2.7
3.4
most developed among the manufacturing
industries in Bangladesh. Roughly 250 companies Source: World Health Statistics 2010, WHO
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.
Pharmaceutical
One of the fastest growingIngredients). Branded
are
a
sectors with an annual averagegenerics
category
of
drugs
growth rate consistently in the
double
digits,
Bangladeshsincluding prescription
that
are
pharmaceutical
industryproducts
either
novel
dosage
contributes almost 1% of GDP. It
is the third largest tax paying forms of off-patent
industry
in
the
country.products produced by
Bangladeshi pharmaceutical firmsa manufacturer that is
focus
primarily
on
brandednot the originator of
generic final formulations usingthe molecule, or a
imported
APIs
(Activemolecule copy of an

off-patents
National
Health
product Service (NHS). About
with
a80% of the drugs sold
trade
in
Bangladesh
are
name.
generics and 20% are
This
patented drugs. The
definition country manufactures
is
usedabout
450
generic
by bothdrugs
for
5,300
the FDAregistered
brands
and thewhich
have
8,300
United
different
forms
of
Kingdom' dosages
and

strengths
.
These
include a
wide
range of
products
from antiulcerants
,
flouroqui
nolones,
antirheumati

c non-steroid drugs, non -narcotic

analgesics, antihistamines, and
oral anti-diabetic drugs. Some
larger firms are also starting to
produce anti-cancer and antiretroviral drugs.

Table 2: Pharmaceutical
sector growth rate
Year
2001

2005
Growth2006
Rate

2002

22.46%2007
10.18%2008

2003

5.90%2009

attempt
to
present
an
We initiate this sectoroverview
of
research
in
anthe
sector.

Source: Bangladesh Association

of Pharmaceutical
Industries (BAPI)

2004

Withi will cover

n thisstate of
researsector,
ch westrengths

the
the
its
and

weak the overview of some

nesse leading
s, andpharmaceutical
finally 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 non-drug 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)

2009
6,149,432

2010
6,518,398

2011
6,909,502

2012
7,324,072

2013
7,763,516

2014
2015
8,229,327 8,723,087

3.4%

3.6%

3.8%

4.0%

4.2%

4.3%

4.4%

209,081

234,662

262,561

292,963

326,068

353,861

383,816

60,000

67,341

75,347

84,072

93,572

101,548

110,144

Average GDP Growth Rate

Growth Upside
CAGR

6.0%
83.6%
10.7%

Source: Bangladesh Bank, WHO, IMS Health and analysts estimate

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.
competitive. However, the
local manufacturers dominate
the industry as they enjoy
The domestic market is highly concentrated and
approximately 87% of market13%
share, while multinationals hold aAnother
the top ten German firms
generated approximately
60%.

Source: BAPI and

newspaper
reports

share.
notable

MNCs

13%

O
t
2
0
%
T
o
6

Table 4:
Domesti
Square
c market
Pharmaceuticals is share of
the
stand
out compani
market leader with es

a market share of
19.3%
which
posted
domestic
revenue of BDT
11.2 billion in the
last four quarters
Companies
(Apr 09 - Mar 10).Top
Square
Their
nearestPharmaceuticals
competitors
areIncepta
Pharmaceuticals
Incepta
Beximco
Pharmaceuticals
Pharmaceuticals
and
BeximcoOpsonin
Pharmaceuticals
Pharmaceuticals
with market sharesEskayef
of 8.5% and 7.6% Pharmaceuticals

Acme Laboratories

Figure 3: Domestic
market share of
companies

Renata Limited
ACI Limited
Aristopharma
Drug International

Top Ten Sanofi-Aventis

Company GlaxoSmithKline
Growth Novo Nordisk
Apr 09 - Sandoz
Mar 10
Novartis

ACI Limited
Acme Laboratories
Aristopharma
Square
Pharmaceuticals
Sector
Beximco
Pharmaceuticals
Eskayef
Pharmaceuticals
Renata Limited
Incepta
Pharmaceuticals
Opsonin
Pharmaceuticals
Drug International

Source: Newspaper reports

Others
Total
Source:
BAPI and
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.

Pharmaceutical Sector: Bangladesh

Table 5: Pharmaceutical Import to Bangladesh

2000-01
(USD Million)
All Products
Pharmaceutical Product Import
Pharma % of Total
YoY Growth for Pharma

2001-02
03

2002-

2004-05
2003-04

200506

2006-07 2007-08
2008-09

9335

8540

9658

10903

13147

14746

17157

21629

22507

33

39

44

45

41

50

49

62

80

0.41%
2.27%

0.31%
-8.89%

0.34%
21.95%

0.29%
-2.00%

0.35%

0.46%
0.46%
18.18% 12.82%

0.29%
0.36%
26.53% 29.03%

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
Organic Chemicals Import to
Bangladesh

Pharmaceutical Products Import to

Bangladesh

Others

Others

Indonesia

Hungary

U.S.A

India

Japan

Italy

Taiwan

Belgium
Netherlan
ds

200708
200809

Germany
Malaysia
Republic of
Korea

200708
200809

Germany
France

Singapore

Denmark

China

Spain
Switzerla
nd

India

MM BDT

1,000

2,000

3,000

4,000

5,000

6,000

7,000 8,000

MM
BDT

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

1,200

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

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 anti-cancer 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 stateowned 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.
Bangladeshs 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 professionals 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 districts 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 consumers 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:

1National Drug Policy 1940

2Drug Act 1940
3Drug Control Ordinance 1982
4Drug Control Ordinance 2004
5National 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

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 cost-effective; 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.
Bangladeshs 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

Pharmaceuticals
Pharma % of Total
YoY Growth for Pharma

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%

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 UKs 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 Bangladeshs 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 rapidly15-18% per yearand is responsible for
a significant portion of Bangladeshs 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
1
0

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 Bangladeshs 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
Bangladeshs 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 WTOs 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 WHOs 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 TRIPS-compliant 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
1
3

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 worlds 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, anti-hypertensives 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.
1
4

Pharmaceutical Sector: Bangladesh

Top Listed Pharmaceutical Companies

Square Pharmaceuticals Limited (Position in terms of domestic sales: 1)

1Square Pharmaceuticals is the largest pharmaceuticals manufacturing company in the

country.

2The company has consistently created value for its shareholders, with average Return
on Equity (ROE) of over 20% in the last 7 years.

3While maintaining the profitability in its core pharma business, the company has
created a number of other businesses inhouse in the past, and after profitable
commercial operation of the businesses commenced, spun off such subsidiary
businesses to monetize the investment.

4Square 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.

5Capital expenditure will be financed by internallygenerated cash as the company

generates a handsome amount of cash each year Current debtto 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.

6Some 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.

7We 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)

2009A 2010E 2011E 2012E 2013E

11,826 13,026 15,099 17,287 22,003
2,929 3,149 3,537 3,945 4,960
25%
24%
23%
23% 23%
2,116 2,644 3,306 4,132 5,165
18%
17%
16%
16% 16%
13%

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)

2,049 1,386 1,398 1,426 1,451

23%
20%
18%
16% 14%
12.1
15.1
15.1
15.1 15.1
140.19 175.24 219.05 273.82 342.27
40.00 50.00 60.00 70.00 80.00
3722
7000
23%

Pharmaceutical Sector: Bangladesh

Beximco Pharmaceuticals Limited (Position in terms of domestic sales: 3)

1Beximco Pharmaceuticals is one of the largest pharmaceutical companies in

Bangladesh. The company has featured consistently in the top five manufacturers for
the last decade.

2Beximco is widely regarded as one of the technological leaders among the local
pharmaceutical companies in the country.

3The 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.

4The company maintains many good partnerships with established players such as Bayer
AG of Germany and Upjohn Inc. of USA.

5The

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.

6Generally the company doubles their turnover in every three years. The company
expects to generate BDT 700 million per month in 2011.

7Despite troubled political environment during 2007 and 2008, the company has
successfully weathered the conditions and bounced back strongly under more favorable
condition in 2009.

8New production lines become operational this year which will effectively double the
capacity.

9The 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

Revenue (MM BDT)

2011
2009A 2010E
E
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

1,001
21%
625
13%
15%
1,332
34%

1,224 1,482
21% 21%
764
925
13% 13%

No. of Shares (MM)

Diluted EPS (BDT)
Dividend (BDT)
Current Price (BDT)
Target Price (BDT)
Return

151.1
2.98
0.00
146
175
20%

209.8 209.8
3.64 4.41
1.10 1.20

486
29%

460
24%

1
6

Pharmaceutical Sector: Bangladesh

Renata Limited (Position in terms of domestic sales: 7)

1Renata is one of fastest growing pharmaceutical companies in Bangladesh. It is the

seventh largest company in terms of local pharmaceutical sales.

2Successor of the business of Pfizer Bangladesh still enjoys distribution relationship

with Pfizer.

3Renata is the market leader in agrochemical business.

4Strong 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.

5The company achieved a return on equity of over 25% on average in the past five
years. 2009 seems to be on the same track.

6Renata boasts of the highest gross profit margin (almost 50%) among the local
manufacturers.

7In 3Q09, Renata declared EPS of BDT 325.94 posting a 43.55% bottom line growth QoQ;
reduction of operating expenses improved bottom line.

8Renata has a Modest dividend payment; dividend yield in 2008 was about 1%.
9A 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.

10

Manageable leverage; D/E is about 50%. The entire debt is short-term.

11

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 2010E2011E
4,103 5,128 6,154
1,020
25%
660
16%
23%
103
0%
1.4

1,179 1,415
23% 23%
783
952
15% 15%
110
0%
1.8

117
0%
1.8

456.52 541.58658.19
60.00 65.00 80.00
10677
12750
19%

1
7

Pharmaceutical Sector: Bangladesh

ACI Limited (Position in terms of domestic sales: 8)

1Advanced Chemical Industries (ACI) Limited is one of the most recognized

pharmaceutical companies in Bangladesh.

2ACI currently lies at eighth spot in the local market.

3The 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.

4However, ACI has recently issued a zero-coupon bond to improve their cash position.
5Despite cash constraint, ACI is one of the more consistent dividend paying companies in
the local market.

6Although 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.

7Although 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
300
30% 20%
19.4 19.4
31.32 34.46
10.50 10.50

1
8

Pharmaceutical Sector: Bangladesh

GlaxoSmithKline Bangladesh Limited (Position in terms of domestic sales: 12)

1One of the pioneering pharmaceutical companies in Bangladesh, GlaxoSmithKline (GSK)

started operation back in the 1960s.

2GSK is a secondary producer, principally packaging and distributing advanced

pharmaceuticals products produced by its parent company. Consequently, local value
added is low.

3In certain novelty products such as asthma and dermatology, GSK enjoys a clear

advantage because of its parents excellent research efforts and product development.
However, a significant part of the GSKs pharma portfolio comprises of price-controlled
essential products. As such, the company does not enjoy price advantage for such
products.

4Local 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.

5Although 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.

6The reliance on consumer products may hurt the companys 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.

7Although 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.

8GSK pays regular dividends at a high payout ratio (about 60%).

Table 11: GlaxoSmithKline 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)

2011
2009A 2010E
E
3,024 3,442 3,840
425

618

684

14%
324
11%
19%
75
0%
12.0
26.9
16
1183
1350

18%
375
11%

18%
415
11%

62
0%
12.0
31.1
16

70
0%
12.0
34.4
16

Return

14%

1
9

Pharmaceutical Sector:
Bangladesh

Table 12: Comparative Healthcare System

Hospital
beds
(per 10000

Health workforce
Physicians
Number

Nursing and midwifery

personnel

Density (per

Number

10000 population)

Density (per
10000
population)

Dentistry personnel
Number

Pharmaceutical
personnel

Density (per
Number
10000
population)
20002009

Density (per
10000
population)

Environment and public

health
workers
Numb
er
Density (per
10000
population)

Community health
workers
Number

population)

Density (per
10000
population)
20002009

UK

126,126

21

37,200

25,914

39

USA

793,648

27

2,927,000

98

463,663

16

249,642

31

Japan

270,371

21

1,210,633

95

95,197

241,369

19

139

India

643,520

1,372,059

13

55,344

592,577

50,393

<0.5

Sri Lanka

29,499

179,959

7,093

<0.5

7,580

<0.5

6,493

<0.5

Pakistan

127,859

62,651

15,790

8,102

106

<0.5

65,999

Malaysia

17,020

43,380

18

2,160

2,880

18

Thailand

18,987

84,683

14

4,471

7,350

2,151

<0.5

22

Indonesia

29,499

179,959

7,093

<0.5

7,580

<0.5

6,493

<0.5

Bangladesh

42,881

39,471

2,344

<0.5

9,411

6,091

21,000

Source: World Health Statistics 2010, WHO

<0.5

Pharmaceutical Sector:
Bangladesh

Table 13: Comparative Healthcare Expenditure

Health expenditure
ratios
Total exp on
health as % of
GDP

General govt
exp on health
as
% of total exp
on health

Private exp on
health as % of
total exp on
health

General govt
exp on health
as
% of total govt
exp

External resources for

health as % of
total exp on
health

Per capita health

expenditures
Social security Out-of-pocket Private prepaid Per capita total Per capita total Per capita govt Per capita govt
exp on health
exp on health
as
exp as % of
plans as % of
at
exp on health exp on health at exp on health
% of general private exp on private exp on avg exchange
(PPP int. $)
avg exchange
(PPP int. $)
govt exp on
health
health
rate (US$)
rate (US$)
health

200
0

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

2000

2007

UK

7.0

8.4

79.3

81.7

20.7

18.3

14.3

15.6

0.0

0.0

0.0

0.0

64.8

62.7

15.6

6.9

1769

3867

1833

2992

1403

3161

1454

2446

USA

13.4

15.7

43.2

45.5

56.8

54.5

17.1

19.5

0.0

0.0

33.5

27.9

25.5

22.6

60.3

63.5

4703

7285

4703

7285

2032

3317

2032

3317

Japan

7.7

8.0

81.3

81.3

18.7

18.7

16.0

17.9

0.0

0.0

80.9

78.7

90.1

80.8

1.7

13.7

2827

2751

1967

2696

2298

2237

1598

2193

India

4.4

4.1

24.5

26.2

75.5

73.8

3.8

3.7

0.5

1.4

16.9

17.2

92.2

89.9

1.0

2.1

20

40

66

109

11

16

29

Sri Lanka

3.7

4.2

47.9

47.5

52.1

52.5

6.8

8.5

0.3

1.7

0.3

0.1

83.3

86.7

12.2

9.1

33

68

102

179

16

32

49

85

Pakistan

3.0

2.7

21.3

30.0

78.7

70.0

2.4

3.5

0.8

3.3

6.2

4.2

80.3

82.1

0.2

0.3

15

23

48

64

10

19

Malaysia

3.2

4.4

52.4

44.4

47.6

55.6

6.2

6.9

0.6

0.0

0.6

0.8

75.4

73.2

11.9

14.4

128

307

304

604

67

136

159

268

Thailand

3.4

3.7

56.1

73.2

43.9

26.8

10.0

13.1

0.0

0.3

9.4

9.7

76.9

71.7

12.8

19.5

67

136

159

286

38

100

89

209

Indonesia
Banglades
h

2.0

2.2

36.6

54.5

63.4

45.5

4.5

6.2

0.0

1.7

6.2

16.0

72.9

66.2

6.4

4.7

16

42

48

81

23

17

44

2.7

3.4

38.0

33.6

62.0

66.4

7.2

8.0

7.0

7.7

0.0

0.0

95.9

97.4

0.1

0.0

15

22

42

14

Source: World Health Statistics 2010, WHO

Pharmaceutical Sector:
Bangladesh

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