According to a recent report by Topline Pakistan Research, Pakistan’s pharmaceutical sector has witnessed a significant surge in earnings, jumping 3.1 times to Rs24.8 billion in 2024.

The sector’s net sales increased by 15% year-over-year to Rs318 billion, primarily driven by a rise in drug prices following the deregulation of non-essential medicines.

Gross margins also expanded from 26% in 2023 to 36% in 2024, attributed to higher prices and a decline in raw material costs.

Analysts predict further growth in the sector, citing the ongoing impact of deregulation and expected reductions in interest rates.

Given their high-quality products and attractive valuations, AGP Limited and Searle Company have been identified as top picks in the pharmaceutical sector.

This development is expected to have a positive impact on the country’s healthcare industry and economy as a whole.

 Outlook: 

We believe that the deregulation of non-essential drugs will further enhance the margins of pharmaceutical companies, particularly those with a high proportion of non-essential products, as the full impact is yet to materialize in the coming quarters. Additionally, the recent decline in interest rates, along with the expected reduction in borrowings by a few companies, is likely to further support profitability in 2025.

We prefer high-quality stocks with a higher non-essential product mix, leverage, strong gross margins, and attractive valuations. AGP Limited (AGP) and Searle Company (SEARL) are our preferred picks in the pharmaceutical sector. For more details, please refer to our detailed reports on both stocks on Dec 28, 2024, and Mar 15, 2025, respectively.