PETALING JAYA: Kotra Industries Bhd appears well positioned to capitalize on the growing consumption of over-the-counter (OTC) consumer health products and its competitive advantage lies in its Appeton OTC brand.
It also aims to deepen its presence in existing export markets, particularly the ASEAN region and Africa, by expanding its product portfolio and participating in more government tenders.
Gradual reopening of borders and easing of supply chains and other logistical issues boosted export sales in fiscal year 2023 (FY23), helped slightly by ringgit weakness, CGS said. -CIMB Research.
It is estimated that the out-of-pocket expenses of private pharmacies in Malaysia will increase, thanks to improved affluence and health awareness.
The OTC pharmaceutical market in Malaysia, which is Kotra’s key market, is fragmented and highly competitive, with a myriad of local and foreign brands.
Appeton accounted for approximately 60-65% of FY21 revenue. Kotra also produces ethical generic (prescription) drugs in various dosage forms, which made up the remaining 35-40% of sales.
The company operates two production sites in Melaka.
CGS-CIMB Research estimates that Kotra will be the second largest local manufacturer of over-the-counter pharmaceuticals by 2021.
Local sales of ethical generic drugs may also continue to grow, CGS-CIMB Research said.
At the end of 2018, generics accounted for around 45-50% of total ethical sales. In comparison, it is over 70% in the UK. Its price is also three times lower than that of foreign contractors on average.
However, Kotra’s export sales fell from RM74 million in FY20 to RM55 million in FY21, down 27% year-on-year (year-on-year) and increased by RM61 million in FY22 (11% year-on-year).
Its long-term growth prospects for export sales should still be supported by increasing penetration of Kotra’s products in its target markets, as they are still quite under-penetrated at this stage, CGS-CIMB Research said.
He also cited McKinsey and Co’s analysis which indicates that more than 55 blockbuster drugs will lose their exclusivity in the United States and Europe between April 2022 and 2032.
This will form the basis of Kotra’s planned product launches. It has historically launched a total of three to four OTC and ethical products per year.
Kotra intends to expand its capabilities into new therapeutic areas, such as cardiovascular disease, diabetes and oncology in the future, to complement its existing portfolio for Axcel and Vaxcel.
CGS-CIMB Research expects Kotra to experience 3.3%, 8.2%, and 8.2% year-on-year revenue growth in FY23, 24, and 25, respectively, implying an annual growth rate decent compound of 6.6% over three years. This should be driven by local and export sales.