Pharmaceutical industry is one of the most profitable industries around the world. Iran is not an exception in this field. As we discussed in Iran ‘s pharmaceutical industry overview, the pharmaceutical industry in Iran is developing and now 96 percent of medicine consumption in Iran and also 50 percent of materials have been produced domestically and a lot of research and development plans are in progress not only to produce new medicines and help patients but also to show a more powerful presence in foreign markets and expand export capabilities. In order to meet these goals, major pharmaceutical holdings in Iran make admirable efforts to obtaining Good Manufacturing Practice (GMP) certificates for their factories and submitting in Pharmaceutical Inspection Co-operation Scheme (PICS). In this article, we will consider ten different pharmaceutical corporates in Iran which are working in different fields such as cardiovascular, antibiotics, gastrointestinal, antidiabetics medicines and etc. In the chart below, net profit margin for Osveh (DOSE1), AlborzDarou (DALZ1), KimiDarou (KIMI1), JaberEbne Hayan(DJBR1), SobhanDarou (DSBH1), Razak Labrotories (DRZK1), Zahravi (DZAH1), Abidipharma (ABDI1), Aburaihan (DABO1), Temad (TMVD1) is shown:
As you can see, net profit margin for pharmaceutical corporates is in the range of 20% to 40%. This margin shows a high potential in this industry for investors however there is a major challenge in this industry which needs to be considered. As you know, receivables collection period is an important financial index and is the approximate amount of time that it takes for a business to receive payments owed in terms of accounts receivable and as a result, receivables collection period is better for corporates to be low. In Iran and after implementing health reform plan, receivables collection period for pharmaceutical corporates goes up because they sell their products to governmental hospitals and can’t collect their receivables on time. This challenge resulted in liquidity problems for these corporates and they have to take more loans from banks and their interest expense to sale ratio has been increased. In the charts below, receivables collection period during 2014 to 2017 for corporates that mentioned above is shown:
If we look at the chart above, we find out that receivables collection period has doubled at least and even for some of them like Zahravi pharmaceutical Co. this ratio has reached up to one year. This increase in industry’s average should be considered as an alert because it can postpone corporates’ development plans and it makes medicine`s supply difficult in the country.
It should be mentioned that the government has taken good actions to improve the challenges that pharmaceutical corporates have faced. The government has issued Murabaha Sukuk in order to settle its debts with pharmaceutical corporates. These Sukuk are generally will mature in 4 years and their interest rate is almost 16%. Corporates can use these Sukuk in three ways: pay as tax, assign to suppliers and use as collateral in order to get loans with lower interest rate.
Although these actions may be good for the mid-term and postpone the challenges, it seems to be necessary to look for a major way in order to go out of this challenge. Definitely, by solving this problem, pharmaceutical industry will move more rapidly through horizons ahead.
