The pace of profit growth of pharmaceutical companies in Bangladesh slowed in the January-March period of the current financial year compared to a year ago because of higher operating costs despite bigger sales.

The profits of all 18 pharmaceutical companies listed on the Dhaka Stock Exchange (DSE) grew around 5 per cent to Tk 850 crore in the third quarter of 2021-22.

The profits had increased by 21 per cent to Tk 807 crore in the same period a year ago, data compiled by Sandhani Asset Management Company showed.

An analysis of the financial reports showed that the pharmaceutical companies spent more money on marketing from January to March this year, compared to the same quarter in 2021.

The costs related to sales, marketing and distribution of the top five listed drug makers—Square Pharmaceuticals, Renata, Beximco Pharmaceuticals, Acme, and Orion—surged 31 per cent year-on-year to Tk 770 crore in the recently concluded quarter.

The sales growth of the companies was higher but the higher costs of marketing pushed up the operating costs, thus impacting their profits.

The average sales growth was 16 per cent.

A senior official of a listed drug maker says the hiring of new employees almost came to a halt during the height of the pandemic and the movement of marketing representatives was also limited. This had driven the operating costs down.

Since almost all companies have started recruiting and spending on marketing also picked up thanks to the rebounding of the economy, the operating expenses rose.

"It will, however, give better results soon," said the official.

The demand for medicines rose in the first quarter of 2021 as the pandemic was still raging across Bangladesh. But as the coronavirus caseloads fell sharply in the first quarter of 2022, the profit growth was comparatively low.

However, the average growth rate is almost similar to the market growth rate, he added.

Of the listed drug makers, the profits of 12 rose in the first quarter, one returned to profits while the rest logged lower profits.

Square Pharmaceuticals, the largest drug maker in Bangladesh, clocked 15 per cent higher growth in profit, the highest among the medicine-makers, fetching Tk 406 crore in the third quarter.

Profits of Beximco Pharmaceuticals dropped 27 per cent to Tk 106 crore.

Renata's profit rose 10.5 per cent to Tk 136 crore while Acme Laboratories saw 28 per cent higher profits of Tk 50 crore. Orion Pharma's profits were up 8 per cent to Tk 26 crore.

The market capitalisation of pharma stocks is Tk 70,821 crore, accounting for around 14 per cent of the total market capitalisation of the DSE. This is the highest among all the sectors, according to UCB Stock Brokerage.

The price-earnings ratio of the sector was 17 against the market PE ratio of 13.98.

The annual turnover of the entire pharmaceuticals sector stands at about Tk 27,000 crore.

Exports of pharmaceuticals products rose 21 per cent to $40 million during the January-March period of 2021-22, data from the Export Promotion Bureau showed.