Overview:

Pharmaceuticals, one of the highest priority sectors of Bangladesh, has recently earned much
buzz because of the export growth of the recent times. The key features of the sector:

Nearly self-sufficient; 98% demand met by local production. The remaining 2% basically
constitute import of much specialized products like vaccines, anti-cancer products and
hormone drugs.
Total market size approx. US $2 billion (2015)
Historically good growth maintained (c.>10-15% last few years)
Largest white-collar labor-intensive employment sector
2nd highest contributor to national exchequer
Registered pharmaceutical companies: 257; functional around 150
All the top 10 companies are local and they have approx. 70% market share
4 MNCs in top 20 (Sanofi, Novo Nordisk, Novartis, GSK)
Leading companies have major approvals (US FDA, EU GMP, UK MHRA, TGA Australia,
ANVISA Brazil etc.)

(Source: http://bapi-bd.com/bangladesh-pharma-industry/overview )

This survey has directly interviewed executives from two of the leading pharmaceuticals: Renata
and Sanofi. The rest of the data was collected from the financial statements of the public ltd.
enlisted companies. The companies can be divided into five broad categories: Pharma
manufacturers, API manufacturers, I.V. Fluids manufacturers, packaging materials
manufacturers, syringe & needles manufacturers.

Companies surveyed under Pharma manufacturers:

ACME Lab. Ambee Orion Pharma Renata Ltd. Square

pharmaceutica Ltd. pharma ltd.
ls ltd.

Beacon Beximco IBN SINA Central Sanofi

Pharmaceutic Pharmaceutic Pharmaceutic Pharmaceutic
als ltd. als ltd. als ltd. als ltd.

At present, only a few companies (Square, Beximco, Ganasastha Pharmaceuticals, Globe and
Active Fine) are manufacturing raw materials for drugs like paracetamol, amoxicillin,
flucloxacillin, ampicillin and metmorfin, on a limited scale. Only one company is covered under
API manufacturer. The rest of the companies surveyed are listed in the following table with their
category:

Category Company
API manufacturer Active Fine Chemicals (AFC)
I.V. fluid manufacturer Libra Infusions Ltd.
Orion Infusions Ltd.
Packaging material manufacturer Pharma Aids Ltd.
Syringe & needles manufacturer JMI Syringes & medical Devices Ltd.
Key-words: BEC (Bangladesh Economic Corridor), Pharmaceutical sector

Findings:
Summary:
From the interviews conducted, several important points have been noted. The points are
summarized here:

Investment in BEC is feasible for pharma companies.

Pharma companies are not interested in long-term investment in BEC, but they expect a
rise in sales in the region after the completion of Padma Bridge.
One of the raw materials producer (active fine chemicals) has already started building a
plant in Khulna. The reason behind is unclear.
Leading Pharma companies plan to extend their export countries. USA is their next
destination for export.

Findings details are presented here:

Investment criteria for pharma industry:

The important factors regarding the feasibility of a new investment include:

availability of technical people,

advantage of tax-holiday (for decentralization),
uninterrupted power supply (see National power sector scenario:),
availability of important materials like pharma grade water (see Salinity scenario of
Khulna division:, Fuel solution to Khulna Division:).

If discussed in the context of the north-west belt, investment might be feasible because:

There are good technical universities,

There is huge generation expansion plan by government (see National power sector
scenario:)

The water in the region is saline due to the proximity of the sea. So, it is subject to testing
whether the water is pharma grade or not. And it is the government, who will have the say over
tax-holiday advantage.

Intention to invest in BEC:

Padma bridge, the largest construction venture will have an overall impact over the economy of
Bangladesh. Macro-economic changes, like new employment opportunity among the people of
the south-western belt, are expected to increase purchase capability among the discussed
demography. It is expected that people from this region will show more health consciousness.
These changes will be visible on a macro-level. Consumption of pharmaceutical products will be
on the rise as well. For reference, how Jamuna bridge shaped the economy of the north-west
Bangladesh can be mentioned. Interesting enough is that Khulna division is now an emerging
zone for pharma sector. This is because of the connectivity through lalon bridge-jamuna bridge.
This connectivity has the same process of impact on Kushtia zone as aforementioned in this
para, which has translated into the sales of Khulna division. The rate of this increase of sales
will surely increase through BEC. However, pharma sector players are not interested in further
investment in that area. They will supply the growing demand through increased stock in their
depot. The reduced supply time will help them achieve their enhanced goal.

Raw materials production:

The next big investments in pharma sector will be in API production. Bangladesh imports 80 per
cent of its pharmaceutical raw materials. To earn the competitive advantage against India or
China, it is fundamental to build an API park. A project to build a high tech environmentally
suitable API park in Munshiganj is already in place. The cost of raw materials procurement is on
an average 73% of the production cost. This cost is expected to be around 58% when the API
park will be completed. How the API park in Munshiganj will be benefited from the BEC is
beyond this studys scope. One of the API producers, AFC has started building a plant in
Khulna. The reasons behind were unavailable.

Bangladesh has a competitive disadvantage (when compared to India and China), since the
local pharmaceutical industry is not backward integrated. Most of the APIs (80%) have to be
imported, and even if the APIs are manufactured in the country, the basic raw materials still
have to be imported. As such construction of API Park is not likely to add too high a value in the
pharmaceutical manufacturing value chain. This results into higher factor costs, especially in
cases where the provider of the API is a competitor in selling the finished product. Building up
backward-integration for all relevant APIs is also not a realistic option because of scale
disadvantages and infrastructure constraints. The reliance on importing API remains to be the
only significant threat for the pharmaceutical industry in Bangladesh.

Export Destinations:
Pharma sector is looking for the opportunity to enter US market as the next big destination. It
will be difficult to enter Indian market for two reasons: first is government policy, second is the
distributor dominated model. African market is largely dominated by Indian companies. Direct
competition with them will not generate enough revenues. So, some B2G business (like
contraceptive pills) are done. Social security based regions, like Europe, Canada do not attract
exports because of too much govt mediation. Already attractive markets for exports are Sri
Lanka, Myanmar, Hongkong, Vietnam, Combodia. Nepal is controlled by two local
companies, whereas Bhutan is by Indian companies. So, both lose the attractiveness for the
exporters. Export to Maldives, Middle East is at the introduction stage.
Appendix:
Salinity scenario of Khulna division:
In order to solve the salinity problem, there is already a provision in the proposed Ganges
barrage project to ensure year-round supply of a minimum 250 cubic meters per second
(cumecs) of fresh water to the Gorai, which will push the saline front to the downstream of
Khulna city. By further providing 125 cumecs to the Mathabhanga, from which the Kapotakhi
and Bhairab get their water, the saline front can be pushed farther downstream.

Fuel solution to Khulna Division:

Another requirement is to extend the Natural gas pipeline from Sirajganj to Khulna or at least to
Bheramara, and build power generating units using gas. Coal is also an option for power
generation, but it will be foolish to burn it off without deriving additional benefits from coal.

(Source: http://www.khulnachamber.com/prospects-in-khulna.html )

National power sector scenario:

Table: Power sector at a glance

Installed Generation Capacity(grid) (June 2016) 12365 MW

Maximum Demand in FY 2016 9500 MW
Maximum generation so far (30June, 2016) 9036 MW
(Source: System Planning, BPDB)

Table: Customer category-wise consumption pattern

Industry 33.58%

Domestic 51.66% (Source: BPDB Annual Report 2014-15)

Agriculture 4.13%

Table: Generation and demand projection

Demand (by 2030) 33708 MW (Source: Power System Master Plan

2010 study)
Generation capacity (by 2030) 38700 MW