Wyeth Pakistan Limited (PSX: WYETH) was set up in Pakistan soon after its independence, in 1949. It is a public limited company that imports, markets and distributes “research based ethical specialties and other pharmaceutical products”.
Pfizer Inc. is the ultimate parent company. It follows a November year end.
As at November 30, 2020, a major chunk of the shares, about 72 percent, are held by associated companies- Wyeth LLC, U.S.A holding 40 percent, and Wyeth Holdings Corporation, U.S.A. holding 31.5 percent. Some 10 percent shares are with the resident individuals followed by 8 percent in modarabas and mutual funds. The directors, CEO, their spouses and minor children hold a very negligible shares, at less than 1 percent. The remaining roughly 10 percent shares are with the rest of the shareholder categories.
Historical operational performance
Topline of Wyeth Pakistan Limited has largely followed a declining trend, while profit margins have also remained mostly in the negative.
During MY16, the company’s topline contracted by 9 percent for the third consecutive time. Majority of the sales revenue is contributed by domestic sales, while export sales constitute a small share in the total revenue pie. During the year, both export sales and domestic sales registered a decline by 35 percent and 5 percent, respectively. Cost of production decreased in line with the topline, keeping gross margin intact, while operating margin was lower year on year at a negative almost 4 percent. This was due to increase in other expense that were nil last year and reduced contribution by other income. However, the bottomline was supported through Rs 165 million coming in from discontinued operations.
Wyeth Pakistan witnessed yet another year of declining revenue as it fell by nearly 10 percent during MY18. This was attributed to lower sales of Ativan and Anti TB products. The former saw higher than usual sales previous year in MY16 since it was made available after several years, while Anti TB sales were lower due to lower and delayed orders from institutions. However, despite the decreased revenue, gross margin improved on the back of reduced cost of sales as a percentage of sales. This was due to a notable reduction in salary expense, among others. This is also reflected in lower number of total employees for the year. During the year, the company received proceeds from “disposal of manufacturing facility along with some non-core brands” and “divestiture of Anne French®” that raised the bottomline to nearly Rs 1 billion.
After four consecutive years of a contracting topline, the company saw revenue increasing by close to 6 percent during MY18. At 16 percent growth rate, domestic sales made significant contribution to the total revenue pie, on the back of better sales of Myrin and Enbrel; another product, Tazocin which had been unavailable for two years was also back on the market during the year. Cost of production and hence gross margin remained relatively flat, whereas operating margin improved notably on the back of higher income. This was derived primarily from profit on saving accounts and term deposits. Although net margin was again negative, it was contained at close to 1 percent.
Wyeth Pakistan saw one of its highest decline in revenue in MY19, by a little over 20 percent; domestic sales fell by 16 percent, while export sales disappeared entirely. Cost of production jumped to nearly 89 percent of revenue. Most of this incline was associated with “purchases”. Despite the lower revenue and higher costs that lowered gross margin to 11 percent during the year, compared to 17 percent in MY18, operating margin and bottomline improved significantly, owing to higher than usually seen historically other income of Rs 148 million. Again, this came primarily from profit on saving accounts and term deposits. This essentially supported the bottomline that rose to Rs 22 million for the year as opposed to a loss of Rs 12 million seen in MY18.
Recent results and future outlook
The year MY20 began with a loss incurred for the first quarter. Overall, revenue contracted marginally by a little over 1 percent during the year ended November 2020. The outbreak of the Covid-19 pandemic brought nearly all economic activities to a halt barring the essential services. Although the pharmaceutical industry was part of the essential services, hence was allowed to function, yet certain sections such as clinics and outpatient departments (OPDs) were closed, in addition to fewer patients visiting hospitals; sales force also did not make visits to health care professionals. Thus, the company could not cover its cost of production. The gross loss further worsened to a 14 percent negative net margin, despite Rs 128 million brough tin through other income.
Although the Covid-19 vaccinations have begun and activities may begin to return to normal soon, over the years the continuous decline in the topline would have to be rectified for the company to enter profitability.