Falling input costs, price deregulation, and lower finance charges drive the listed pharmaceutical sector to its most profitable year on record
Key Takeaways
- Pakistan’s listed pharma sector posted record net profits of Rs42.2 billion in 2025, a 78% year-on-year surge, driven by deregulation-led price growth, lower API costs, and falling finance charges.
- Gross margins expanded significantly to 41% from 35%, with AGP, Highnoon, and Searle leading at the company level, while finance costs fell nearly 50% on the back of lower KIBOR rates.
- Despite record corporate earnings and dividend payouts nearly doubling to Rs21.1 billion, consumer advocates and health officials have raised alarms over rising medicine prices, with a 32% average increase in non-essential drug prices since the February 2024 deregulation.
Islamabad, Pakistan – Pakistan’s listed pharmaceutical sector closed 2025 with a historic financial performance, posting net earnings of Rs42.2 billion, a 78% jump over the previous year. According to a sector report by Topline Securities, the record profitability was driven by a combination of strong sales growth, easing raw material costs, and a sharp decline in finance charges, marking a defining moment for one of Pakistan’s most consequential industrial sectors.
On a quarterly basis, profits rose 53% year-on-year to Rs14.2 billion in the fourth quarter of 2025, compared to Rs9.3 billion during the same period in 2024.
Pakistan’s pharmaceutical sector closed 2025 with a profit surge of 78%, but the record earnings came with a trade-off: medicine prices rose 32% for millions of ordinary Pakistanis.
Sales Growth Fueled by Deregulation
Net sales for the sector grew 14% to Rs365.7 billion in 2025, up from Rs319.6 billion in 2024, largely reflecting price-led growth. The primary catalyst was the deregulation of non-essential medicines. According to a report by Profit by Pakistan Today, the federal cabinet approved the deregulation of prices for medicines not included in the National Essential Medicines List in February 2024, exempting them from the Drugs Act 1976 and prompting amendments to the 2018 Drug Pricing Policy. Fourth-quarter sales climbed 18% year-on-year to Rs102.1 billion.
Abbott Laboratories led total sector sales contributions at 21%, followed by GlaxoSmithKline Pakistan at 18%, Haleon Pakistan at 12%, and The Searle Company at 8%.
Margins Expand on Lower API Costs
Gross margins rose to 41% in 2025 from 35% the year before, with fourth-quarter margins reaching an even stronger 44%. A key driver was a decline in active pharmaceutical ingredient (API) costs, with the Topline Securities report noting that 53% of APIs recorded a median price drop of 11% year-on-year between January and October 2025. At the company level, AGP, Highnoon Laboratories, and The Searle Company reported the highest gross margins at 60%, 55%, and 55% respectively.
Finance Costs Plunge 49%
Finance costs for the sector fell sharply by 49% year-on-year to Rs4.2 billion in 2025. According to a report by Nukta, the 6-month KIBOR benchmark lending rate declined from over 22% to around 11% in recent quarters, significantly easing the debt burden on listed pharmaceutical companies. Quarterly finance costs declined by a further 52% to Rs902 million. The sector’s effective tax rate remained broadly stable at 39.9% in 2025, compared to 40.3% in 2024, with total tax payments reaching Rs27.9 billion.
With finance costs down nearly 50% and gross margins at an all-time high of 44% in Q4, the listed pharma sector has entered 2026 from a position of remarkable financial strength.
Dividend Payouts Nearly Double
Companies distributed Rs21.1 billion in dividends during the year, up from Rs12 billion in 2024, maintaining a payout ratio of just over 50%. Major contributors included GlaxoSmithKline Pakistan at Rs5.4 billion, Abbott Laboratories at Rs3.9 billion, Haleon Pakistan at Rs3.5 billion, and Highnoon Laboratories at Rs2.6 billion.
The Consumer Side: A Cautionary Note
While the sector’s financial trajectory is impressive, the gains have not come without public concern. According to a report by Dawn, DRAP officials informed a Senate committee that an overall 32% increase in medicine prices had been observed since the February 2024 deregulation, with some medicines recording hikes of as much as 100%. According to a report by The Express Tribune, former Secretary General of the Pakistan Medical Association Dr Qaisar Sajjad warned that essential drug prices are rising every 15 to 20 days without prior notice, and that medicines for diabetes, hypertension, and psychiatric disorders are becoming increasingly unaffordable for government hospitals.
Looking ahead, the Topline Securities report expects sector profitability to remain strong as companies expand product portfolios and target higher-margin segments, though volatility in API prices tied to global oil markets remains a key risk.
