Can Pakistan’s local drugmakers outperform multinationals?

Pakistan’s pharmaceutical sector has entered a phase of structural transformation, and one question stands out: Can local drug manufacturers truly outperform multinational companies (MNCs)? Based on recent data from Optimus Research’s May 2025 report, there’s strong evidence that they already are, and may continue to do so.

Local firms lead in market share and resilience

Local pharmaceutical companies command over 67% of Pakistan’s market share, meeting 90% of domestic demand, whereas only 26 multinational firms operate in the country. What sets locals apart is their ability to source cost-effective active pharmaceutical ingredients (APIs) and maintain better gross margins. While MNCs typically import finished products from parent companies, locals focus on affordability and adaptability, helping them weather macroeconomic volatility better.

Superior sales and growth trends

Sales growth trends illustrate this advantage vividly. Over the past few quarters, local firms have consistently outpaced MNCs in both value and volume growth. According to IQVIA data, volume growth for local companies remained positive even when MNCs saw declining sales, especially during PKR depreciation phases.

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Profit margins: a clear advantage

Gross margins for local leaders like AGP have been exceptionally robust, well above 48%, even during currency volatility. In contrast, MNCs like GlaxoSmithKline and Haleon saw margins dip to as low as 4–6% during peak PKR depreciation.

Valuations still attractive

Despite this operational outperformance, local pharmaceutical stocks are trading at a significant discount to historical forward P/E averages. For example, AGP, ABOT, and GLAXO are trading at CY25E P/Es of 12–15x, compared to the historical sector average of 20x. This indicates considerable upside potential for investors willing to bet on local innovation and resilience.

Investment in expansion and local capacity

AGP has expanded aggressively by acquiring portfolios from Sandoz and Viatris (Pfizer), boosting its topline and strengthening its market presence. Its product mix, 65% non-essential drugs—benefits directly from recent deregulation, giving it pricing flexibility and room for profitability. Such strategic moves underscore the forward-looking strategies of local players.

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Multinationals struggle with local dynamics

While MNCs bring established brands and trust, they struggle with Pakistan’s regulatory delays, IP protection issues, and limited pricing flexibility. Local firms, more agile and embedded in domestic realities, are quicker to adapt and launch new products, especially in niche segments like allergy care and generics.

Investor takeaway:

Local drugmakers in Pakistan are no longer just surviving, they’re thriving. With better margins, stronger adaptability, and regulatory tailwinds like deregulation of non-essential drugs, they’re positioned to outperform multinationals in both the near and long term. For equity investors, this opens up a compelling opportunity to invest in resilient, home-grown pharmaceutical leaders.

Source: Optimus Capital Management Research Report

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →