The Nigerian pharmaceutical industry is experiencing a significant resurgence, driven by strategic corporate initiatives and supportive government policies. This renewed momentum has bolstered the sector, making it one of the most vibrant in West Africa. Deputy Group Business Editor, Taofik Salako, reports that investors are increasingly turning their attention to healthcare stocks, as evidenced by the steady recovery in share prices.
In the first half of the year, the Nigerian pharmaceutical sector recorded an impressive average income growth of over 70%. This growth has been fueled by increased sales, improved operational efficiency, and optimized capacity utilization, signaling a robust and visible rebound. The global outlook for the pharmaceutical industry, coupled with a favorable domestic environment, suggests a positive trajectory for the sector. Globally, the pharmaceutical market surged by more than $100 billion, reaching N1.6 trillion in 2023. The African pharmaceutical market, where Nigeria plays a significant role, is expected to grow to $111 billion by the end of the decade. Despite the challenges posed by the fragmented nature of the Nigerian pharma industry, leading indigenous companies like Neimeth International Pharmaceuticals are stepping up to fill the gap left by the exit of some multinational firms, with new projects aimed at increasing capacity and global competitiveness.
The Nigerian government has introduced several fiscal measures to further stimulate growth in the pharmaceutical sector. A recent Executive Order targeting the healthcare industry removed import duties, Value Added Tax (VAT), and excise duties on pharmaceutical raw materials, intermediate products, medical diagnostic equipment, and machinery. These measures are expected to lower production costs, leading to reduced medication prices and increased accessibility, which should drive continued top-line growth and profitability for the industry. As the impact of these policies becomes more pronounced, pharmaceutical companies are already showing significant growth in both sales and profitability.
Neimeth International Pharmaceuticals, one of Nigeria’s largest and oldest pharma companies, exemplifies the sector’s renewal. Founded in August 1957 and becoming an indigenous company in 1997 after Pfizer Inc. divested, Neimeth has undergone several transformations. Today, it stands as one of the best-performing stocks in the market, reflecting its strong recovery.
Operational Success
Neimeth has made a remarkable turnaround, now earning an average profit of N12 per unit, compared to previous losses of more than N47. This recovery is highlighted in the company’s interim report for the six months ending June 30, 2024, released by the Nigerian Exchange (NGX). The report shows strong growth, driven by fundamental changes in business operations, with a focus on cost management and market strategy. Total sales increased by 73%, from N957.4 million in the first half of 2023 to N1.66 billion in the first half of 2024. Gross profit surged by 211%, from N300.56 million to N933.86 million. Operating profit recovered by 142%, rising from a loss of N475.38 million to a profit of N198.27 million. Profit before tax also improved, shifting from a loss of N452.56 million to a profit of N198.23 million. Net profit stood at N120.57 million, compared to a net loss of N452.56 million in the previous year. Earnings per share rose from a loss of 11 kobo in 2023 to 5.0 kobo in 2024, an increase of 144%.
Neimeth’s balance sheet also strengthened during this period, with total assets increasing from N8.94 billion in December 2023 to N9.56 billion by June 2024. Shareholders’ funds grew from N1.47 billion to N1.67 billion.
Growth Strategy
Neimeth’s growth is not only a reflection of the industry’s recovery but also of the company’s strategic initiatives under the leadership of Managing Director Pharm Valentine Okelu, appointed in 2023. The company has set ambitious targets, aiming to double its revenue and deliver significant returns to shareholders. At the recent annual general meeting, Okelu outlined plans to increase revenue from N2.2 billion in 2023 to N5 billion by December 2024 and to build profitability from N211 million in 2024 to N700 million by 2029. The first-half results suggest that these targets may be exceeded, with the momentum of recovery expected to continue into the second half.
Neimeth, having raised N3.67 billion through a fully subscribed rights issue in 2023, is implementing a comprehensive growth plan. This includes optimizing existing production and research capabilities and developing new facilities. The company is constructing a world-class factory in Amawbia, Anambra State, compliant with the World Health Organization’s current Standards of Good Manufacturing Practice (cGMP). It has also upgraded its Oregun factory, increasing production capacity by 300%.
Okelu emphasized that Neimeth’s ambitious growth targets are a bold step towards solidifying its position as a leading healthcare provider in Africa. Despite recent operational challenges, the company remains focused on expanding production capacity to meet market demand and increase its market share.
Market Expansion
The Nigerian pharmaceutical market, projected to be worth $1.7 billion by 2024 with an annual growth rate of 8.08%, offers significant opportunities for Neimeth. The company’s growth plan focuses on aggressive sales expansion, product portfolio diversification, and competitive returns for shareholders. Neimeth is also pioneering research and development of African home-grown solutions to various diseases, including a local formula for sickle cell anemia. The company is partnering with overseas pharmaceutical firms to develop medicaments for common ailments on the continent. Several human pharmaceutical lines are currently undergoing registration with the National Agency for Food and Drug Administration and Control (NAFDAC), with more products expected to be introduced to the market this year.
Investors have responded positively to Neimeth’s performance, with the company’s share price rising from N1.60 at the beginning of July 2024 to N1.95 by the end of the month, representing a 21.9% capital gain. Analysts believe Neimeth is poised for further growth.
Future Prospects
The Nigerian pharmaceutical sector holds substantial promise, both in the domestic market and beyond. The African Continental Free Trade Area (AfCFTA) offers Nigerian pharmaceutical companies opportunities to expand and diversify their sales, reducing the risks associated with a concentrated national market. Commitment to global standards, as seen in Neimeth’s WHO-compliant facilities, will enable Nigerian companies to participate in major health transactions across the region.
With strategic initiatives and supportive policies in place, the Nigerian pharmaceutical industry is set for continued growth and success.
