Key points
- Exports up 34pc to $457m, a two-decade high
- Government eases price controls on non-essential drugs
- Margins rebound as costs stabilise, profits surge
- Investor re-rating makes pharma PSX’s top sector
ISLAMABAD: Pakistan’s pharmaceutical industry emerged as the best-performing sector on the Pakistan Stock Exchange (PSX) during the fiscal year ending June 30, 2025, for investor confidence following an export surge and price deregulation.
Analysts and market officials noted that the sector’s turnaround was based on stronger earnings and a re-rating by investors that made it the standout performer in a year when the broader market scaled record highs.
According to official trade data cited by Profit Magazine, pharmaceutical exports increased by 34 per cent in FY25, reaching $457 million, the highest level in nearly two decades. Much of this growth came from new markets in Asia and Africa, including Cambodia, Iraq and several West African countries. It marked the broadening of the industry’s reach beyond traditional buyers. A senior official at the Trade Development Authority of Pakistan told Profit that the “export momentum reflects both quality improvements and aggressive market diversification by local firms.”
Pricing reforms ease pressure
A second driver of the rally was the government’s decision to deregulate the pricing of non-essential medicines, giving companies freedom to set prices outside the National Essential Medicines List. As reported by the financial portal KSEStocks recently, this allowed increases of up to 30–35 per cent on several products, enabling firms to offset higher input costs from imported raw materials.
In simple terms, this policy change meant drugmakers could charge a little more for many medicines, except the life-saving drug. Since raw materials—known as Active Pharmaceutical Ingredients (APIs)—are mostly imported and priced in dollars, companies had been squeezed whenever the rupee lost value. The ability to raise prices helped restore margins, which means the portion of each rupee of sales left over after covering the cost of production.
Earnings and investor returns
Quarterly filings show the recovery in earnings across much of the sector. KSEStocks reported in July that Haleon Pakistan recorded a 16 per cent sales increase in the April–June 2025 quarter compared with the previous period, while its gross margin improved by 660 basis points year-on-year. Abbott Pakistan also saw double-digit profit growth.
A return in stock market terms refers to the gain an investor receives from holding shares, either through price appreciation or dividends. As investors noted improving margins and export acceleration, they were willing to pay higher valuations for pharmaceutical companies. This is what analysts described as a “re-rating”: investors decided the industry’s future earnings were worth more, pushing stock prices up faster than profits alone could explain.
Risks that remain
Yet analysts also caution that the sector’s gains are not guaranteed. A research note published by KSEStocks in August warned that “over 80 per cent of APIs are imported, leaving the sector highly exposed to currency volatility and supply chain disruptions.” If the rupee depreciates further or global shipping costs rise, profitability could again come under pressure.
Regulatory risk is another concern. Price flexibility for non-essential drugs has supported earnings, but any reversal of this policy could quickly squeeze returns. Demand sensitivity is also an issue: sharp price hikes may reduce the demand for certain medicines or force patients to cheaper alternatives.
Outlook ahead
Looking ahead, market participants expect the sector to remain strong if exports continue to grow and pricing reforms hold. A Karachi-based analyst told Dawn that “the real opportunity lies in scaling exports, because margins on international sales are often better, and diversification reduces reliance on the domestic market.”
The message for ordinary readers is clear: Pakistan’s pharmaceutical companies managed to turn a challenging environment into a breakout year by selling more abroad and gaining freedom to set prices at home. That combination improved their profitability and boosted investor confidence. But the very factors that drove the rally—exports, regulation, and currency stability—remain fragile. The sector could therefore continue to lead the market, or it could just as easily be tested by the same pressures that had weighed it down in past.
