Karachi: Pakistan's listed pharmaceutical sector has reported a significant 28% year-on-year increase in profitability, reaching Rs42.2 billion for the fiscal year 2026, driven primarily by price-led growth and reduced finance costs. Despite this annual rise, fourth-quarter earnings saw a 2% year-on-year decline and a 26% quarter-on-quarter drop, attributed to losses reported by SEARL during the same period.
According to JS Global, when excluding SEARL, the sector's profitability for the quarter rose by 6% year-on-year but fell by 4% quarter-on-quarter, amounting to Rs9.3 billion. Over the fiscal year, excluding SEARL, profitability increased by 22% year-on-year. However, the market capitalization of the sector, excluding SEARL and Liven Pharma, showed a modest 0.4% year-on-year increase, while the cumulative market cap, excluding Liven Pharma, grew by 2.3% year-on-year as of June 30, 2026.
Net sales for the fiscal year 2026 rose by 10% year-on-year to Rs377.9 billion, up from Rs342.6 billion in the previous fiscal year, largely due to price increases. In the fourth quarter, sales increased by 3% year-on-year to Rs88.9 billion but decreased by 3% quarter-on-quarter. Major sales contributors included ABOT with 20%, GLAXO with 18%, HALEON with 11%, and SEARL with 10%.
The sector's gross margins reached a record 42.8% in fiscal year 2026, up from 38.9% in fiscal year 2025. Fourth-quarter margins remained at 42.8%, compared to 40.4% in the same quarter the previous year and 42.7% in the third quarter of 2026. The margin improvements were largely due to price increases. AGP, HINOON, and SEARL reported the highest gross margins at 60.4%, 56.1%, and 52.0%, respectively.
Selling and distribution expenses increased by 21% year-on-year to Rs69.5 billion in fiscal year 2026, with fourth-quarter expenses rising by 11% year-on-year to Rs17.6 billion but decreasing by 2% quarter-on-quarter. The sector's finance costs dropped by 42% year-on-year to Rs3.6 billion, owing to stable interest rates and reduced corporate debt. Fourth-quarter finance costs decreased by 29% year-on-year and 13% quarter-on-quarter to Rs822 million.
Other income grew by 2% year-on-year to Rs6.5 billion in fiscal year 2026, with a notable fourth-quarter income surge of 85% year-on-year and 2.7 times quarter-on-quarter, driven by higher contributions from Hoechst Pakistan Limited. The sector's effective tax rate increased to 42.5% in fiscal year 2026, up from 39.8% the previous year. The fourth-quarter effective tax rate was 50.4%, compared to 42.2% in the same quarter of the previous year and 40.6% in the third quarter of 2026.
Looking ahead, the sector anticipates a rebound in volumes starting from the first half of 2027, boosted by a low base effect from 2026 and the expansion of company portfolios.