The third year of the pandemic is working in favor of the pharmaceutical sector, with the sales of all top 15 players in the market going up compared to 2020. The profits of most of them are also growing by double digits, according to Capital's K100 ranking for 2021.
The ranking traditionally includes the largest companies in the pharmaceutical sector - manufacturers of drugs for human and veterinary medicine and wholesalers of medicines. The average growth rate for the top 20 was 9.5% in 2021, up from 9.1% for 2020.
Wholesalers remain on top
Sales of medicines to pharmacies and hospitals in Bulgaria grew by around 10% in 2021, reaching BGN 5 billion (2.5 billion euro), according to data from global marketing company IQVIA. Traditionally, the largest buyers are pharmacies, which account for BGN 3.07 billion of these sales, followed by hospitals, which have ordered medicines worth BGN 1.1 billion, up 19% compared to 2020. The sale of nutritional supplements in pharmacies has contributed BGN 815 million and has a traditional double-digit growth of 17%, according to IQVIA data.
Regardless of whether the companies sell products that fall on the list for the treatment of Covid-19 or they have a solid advertising campaign on TV for their products, all representatives of the sector report growth.
Delays in payments from clinics and investments in warehouse expansion in Bulgaria and abroad were the main reasons for a drop in profits last year. "The pandemic put the global supply chain under a stress test that only those companies that had already built a flexible and modern chain passed. We maintained the continuity of our operations even in the most critical and uncertain stages, due to the fact that we have been continuously investing for 16 years in the development and automation of our logistics centers, fleet and key business processes," Ventsislav Marinov, CEO of Sopharma Trading, told the Capital Weekly.
Sopharma remains at the helm
The company retains the leadership position in the Capital 100 ranking in the Pharmaceuticals sector for yet another year, followed by Phoenix Pharma, with the revenue of each of them approaching BGN 1 billion. "The pharmacy market held a 53% share in the sales structure of Sopharma Trading last year at BGN 506 million, growing by 15%. Of course, the hospital market also remains important for us, as the share of this segment in our sales structure is 27%, growing by 17% to BGN 280 million in 2021. The challenge here remains the longer payment period and delayed payments," says Mr Marinov.
The second largest company last year was Germany's Phoenix Pharma, the sole large foreign investment in drug distribution in Bulgaria, with its sales of BGN 960 million. It is part of the Phoenix Group, which has sales of over 27 billion euro and over 39,000 employees.
Bulgarian distributor Sting, which supplies mainly independent pharmacies not part of chains, posted double-digit growth, with revenues about BGN 200 million lower than Sopharma Trading. Wholesaler Pharmnet, owned by the family of businessman Veselin Mareshki through Mareshki Hold, exclusively supplies the chain of about 300 pharmacies that operate under the Mareshki brand. The wholesaler of medicines Commercial League - Global Pharmacy Center, which distributes the products of the pharmaceutical company of the group Tchaikapharma, as well as medicines of other drug manufacturers, also reported double-digit growth in sales.
A good year for producers
At the top of the ranking in this segment is Huvepharma owned by the Domuschiev brothers Kiril and Georgi. Huvepharma owns plants for veterinary medicines in Bulgaria (Biovet) and abroad, as well as a distribution network for the sale of these drugs. Most of the sales come from the production of Biovet (487 million BGN), which recorded a revenue growth of over 22%. This is also the highest growth rate in the sector ranking. The total sales of Huvepharma rose by a more modest 2.63%, reaching BGN 732 million.
Traditionally, at the top of the rankings in human drug therapy is Balkanpharma Dupnitsa, the largest plant of Israeli concern Teva in Southeast Europe, which marks a 0.78% growth in sales revenue in 2021. A year ago, a new $42 million investment in the Dupnitsa factory was announced, which will be completed at the end of 2023. Balkanpharma is followed by Bulgarian pharmaceutical company Sopharma, which has increased its total sales in Bulgaria and abroad by 3%.
The Bulgarian unit of Swiss pharmaceutical concern Roche had one of the highest sales growth rates last year. The company markets its core portfolio of cancer drugs in Bulgaria. Its revenue rose in the double digits last year, reaching BGN 208 million. Japan's Astellas Corporation posted another year of double-digit sales growth, driven by its new oncology therapies and organ transplants.
The sales of French concern Sanofi, which left Bulgaria last year and closed its representative office, have grown. Before the French group, whose products are currently sold by distributors, the UK-US group GlaxoSmithKline also left the country. German pharmaceutical group Boehringer Ingelheim has seen another year of sales growth, driven by its new drugs introduced in Bulgaria.
Naturfarma is a Bulgarian company founded in 1997 that represents foreign manufacturers of medicines, food supplements and cosmetics, and also has offices in Serbia, North Macedonia, Romania, Albania and Hungary. The company had the highest profit margin in the ranking, 36.8%, and double-digit sales growth last year. The company's products are in the FMCG sector in pharmacies and their consumption is strongly influenced by advertising activities. Tchaikapharma, which is in the same group as Commercial League - GPC, entered the top 15 with a small increase compared to the previous year and higher sales of its generics.
Potential obstacles in 2022
It is likely that some of the ranking participants will report reduced sales in the Russian and Ukrainian markets in 2022 due to the war. Political uncertainty, soaring energy prices and rising inflation will slash the profits of major companies in the sector.
Medicines are a regulated commodity whose prices only increase after permission from the National Council on Prices and Reimbursement of Medicines. For prescription medicines, this only happens after comparing prices at the manufacturer level in the 17 EU countries with the lowest prices, and if there is no price reduction anywhere, it should remain the same. For non-prescription medicines, prices can only increase at the rate of annual inflation.
Therefore, price increases in pharmacies are felt in several different ways. The first is the price increase in the fast-moving consumer goods segment - in food supplements and cosmetics, which is already a fact. The second way that pharmacies can profit from the sale of medicines is not to give patients part of their discount, as they have done so far. Now, most medicines are being sold at the maximum set prices, so in practice patients are feeling the increase without there being a formal price hike.
According to IQVIA, in the first four months of this year, the growth of the pharmaceutical market's value topped 11% and the trend is to remain double-digit for the rest of the year.
"It is extremely difficult to make any predictions about the future at a time of great uncertainty - political and economic. We are already seeing that globally a number of large companies are, so to speak, 'tightening their belts' for a very challenging year. The main developments of recent years are likely to persist, but perhaps more slowly. I think this is absolutely true of the consolidation process we are seeing in the health care sector," Mr Marinov said. He adds that his company is also reporting steady growth in online sales of OTC medicines and cosmetics and is of the opinion that digital sales channels will become increasingly important.