By the examination of the Hungarian market, the main field of activity of the companies was the starting point where this activity is clearly defined by 4646 NACE code so the wholesale trade of pharmaceuticals has been determined according to this as an industry. It might happen because of this some companies are missing from the examined set, considering their profile they are part of the market but their field of activity is not listed in this sector. TEVA is the best example for this, its main activity is manufacture of pharmaceutical products but also has a significant share in the market which is subject of this analysis. We do not have exact figures on how much of the net revenue and profit of the company can be linked to the examined activity therefore they were not taken into consideration in the analysis and insisted to the main field of activity as a defining factor in the sector. Based on this in 2019 we found 826 active companies in Hungary which marked wholesale of pharmaceutical goods as their main activity. It is apparent at the first sight that 3 players are dominant in the market, all of them had operating turnover over 200 million HUF in 2019. Under operating turnover we mean net sales revenues and other revenues.

Market share of companies operating in pharmaceutical wholesale industry in Hungary in 2019.

Source: Ceginformacio.hu

The sectoral operating turnover has increased until the year 2011 then we can see a smaller standstill at the end of the examined period. We cannot speak about significant decline because only 1,3% decrease happened and the resulted 1300 billion HUF is 73 billion HUF higher than in 2010 and by 190 billion higher than in 2008.

Tendency of operating turnover and P/L before tax of Hungarian pharmaceutical wholesale industry. 2019-2008. Data in thousand HUF.

Source: Ceginformacio.hu

The 3 dominant companies are the already mentioned Hungaropharma Zrt, Sanofi-Aventis Magyarország Zrt. and Phoenix Pharma Zrt. Their total operating turnover was 673 billion HUF, which projected to the entire sector means 51,8% market share. With reference to the first place the order has not changed during the examined five years, Hungaropharma took this place all the time. There was a change regarding the second place the operating turnover of Sanofi-Aventis has increased by 14 billion HUF during a year, in contradistinction to Phoenix Pharma where this ratio has decreased by 20 billion HUF as well as at Hungaropharma. The biggest increase was performed by Janssen Cilag Gyógyszerkereskedelmi Marketing Szolgáltató Kft. The company has increased its net revenue by 15 billion HUF during a year and nearly octupled it compared to the value of 2006. In terms of reduction the already mentioned Hungaropharma and Phoenix Pharma take the lead. 

Tendency of operating turnover of the leading pharmaceutical wholesaler companies in Hungary. 2019-2010. Data in thousand HUF.

Source: Ceginformacio.hu

The dynamics of export growth is somehow differ from what we experienced in case of net revenue in extent and time. The increasing trend is clear, sectoral export has grown by 53% during 5 years, from 176 billion HUF to 270 billion HUF. There was a smaller decrease in 2010, the export net revenue decreased by 14 billion HUF compared to the previous year. In the following years the ratio increased by 55 billion and later 34 billion HUF and we got to 270,6 billion HUF in the current year. According to this the export share constantly increased, considering that the scale of export revenue growth exceeded the similar ratio of net revenue. The export share was 23% in the current year, it was 5 percentage points higher than in 2008.  63% of the sectoral export can be linked to one company, to Sanofi Aventis where the export share is constantly above 70%. Janssen Cilag and B Braun Medical Magyarország Kft. also have more significant export net revenue. The former realized 31,4 billion HUF the latter 13,3 billion HUF export net revenue in 2019. The export share of Hungaropharma and Phoenix Pharma is marginal, it was under 1% during the examined period. 

The sector shows fluctuating performance at P/L before tax line, it would be difficult to set a specific direction here. 35% increase can be experienced compared to the year 2011 but the growth is only 5,3% compared to the data of the previous 5 years. The culminating point was in 2019 when the P/L before tax was 29,6 billion HUF, it was less by only 350 million HUF in 2010. Phoenix Pharma performed the best at the examined result line, it has 4,43 billion HUF profit in the current year which is 360 million HUF more than the same ratio of the second Sanofi Aventis.

P/L before tax of the leading pharmaceutical wholesaler companies in Hungary. 2019-2010. Data in thosand HUF.

Source: Ceginformacio.hu

Despite the distinguished place the latter company performed the worst P/L before tax in the past 5 years. According to the net revenue the leader Hungaropharma had 1 billion HUF profit in the current year which was overperformed by several smaller companies such as Bayer Hungária, Pfizer Gyógyszerkereskedelmi Kft., Tolnagro Kft and also Immedex Europe Kft. On the negative side the 1,3 billion HUF loss of Bristol-Myers Squibb Gyógyszerkereskedelmi Kft is on the top of the list which is 28,6% of the sectoral minus. The company continuously showing a deficit except in 2008. In 2019,  505 companies managed to perform positive P/L before tax, losses were reported by 267 companies, the others operated at break even. 

Profitable ratios of the sector

It is not possible to measure the efficiency with a single index we used the system of those indexes which describe the development and level in a most comprehensive way.

The sectoral profit margin was all along under 3% during the examined period which is significantly lower from what is experienced in the pharmaceutical sector and mostly comparable to the efficiency of transporting companies. The 2,28% value in 2019 is close to the five years average, managed to perform 0,61 percentage points increase compared to 2011, compared to the beginning of the period a slight decline was observed. The same is true for the leader companies, the margin is rather low and the current year is around the average. Probably the numbers of Sanofi Aventis show somewhat higher profitability than the sectoral average, but in its case rather the beginning of the examined period stands out when they performed a profit margin above 4%. Phoenix Pharma is close to the sectoral average, Hungaropharma is underneath it and has not managed to exceed the 2% in the past 5 years.  According to the ratio Pfizer and Bayer were the most profitable from the top 10 companies by 7,66% and 7,10% ratios. At the former a constant increase can be experienced in case of the examined ratio, the latter is characterized by the stability.

Profit margin of the sector and the leading pharmaceutical wholesaler companies in Hungary. 2019-2008.

Source: Ceginformacio.hu

Total assets of the sector were 515 billion HUF in 2019,  27,5 billion HUF more than a year ago and it exceeded the value of the year 2008 by 112 billion HUF. This trend cannot be observed at the 3 determining companies, numbers at the beginning and end of the period are roughly the same, there were rather medium fluctuations during the intervening period. This suggest that the trend experienced in the sector due to small and medium-sized companies which can see more and more fantasy in pharmaceutical wholesale market in Hungary. The sectoral return on assets (ROA) steadily declined until the current year due to the above mentioned conditions, then the dynamics of the profit growth already exceeded the scale of total assets change, the 1,25 percentage points improvement is due to this. In 2019 the sectoral ROA was 5,75% which is more than  1% percentage point lower than 5 years ago. By the examination of companies the 12,3% ratio of Phoenix Pharma hits the eye first, because in case of the other two leading companies we can see much lower values (2% and 3,4%). Besides the P/L before tax which is considered high at sectoral level, assets of the company are significantly lower than the direct competitors, it is less than a third compared to Sanofi Aventis. According to the ratio we can see highly profitable companies, such as Pharmalel Gyógyszerkereskedelmi és Szolgáltató Kft. or Hospital Trade Logisztikai Kft. (with 60% and 50% ROA). A little bit closer to the leading companies we have to highlight the 38,6% ratio of Bayer Hungária and 18,6% ratio of Pfizer 

Return on assets (ROA) of the sector and the leading pharmaceutical wholesaler companies in Hungary. 2019-2008.

Source: Ceginformacio.hu

Growth was also experienced at the sectoral shareholders’ funds line, in 2019 it was 169 billion HUF which is 21% more than 5 years earlier. As in case of assets Sanofi Aventis is on the top of the list here, 41,8 billion HUF slightly less than a quarter of the capital stock of the entire sector. The examined balance sheet line has gone through significant decrease in case of Hungaropharma and Phoenix Pharma, shareholders’ funds has shrunk less than half for the former and to 56% for the latter compared to the condition in 2008. Dividend policy has a significant role in it because 8,4 billion HUF was released from accumulated profit reserve for this purpose at Phoenix Pharma in 2010. The already mentioned assumption was also confirmed here, the other players of the sector take serious efforts to get market share and increase in their capital stock is a good evidence for this. Return on equity (ROE) was 17,5% at the end of the examined period, apart from the 13,5% value of last year we cannot see larger amplitudes. As in case of ROA, Phoenix Pharma was also the most profitable here among the 3 leader companies. The ratio was 51,7% in the current year from this only the 72,3% ratio was higher in 2010 when the mentioned dividend was paid. In 2008 it was shoulder to shoulder with Sanofi-Aventis, but at Sanofi the accumulated profit reserve has not been used for significant dividend payment that is why besides the decreasing profit we can speak about permanent shareholders’ funds which is not compensated the other component of the ratio. We do not have to search for ratios around 50% or higher for a long time, we get 56,5% ratio of Euromedic Pharma with the fourth largest net revenue. Not much behind it the 48,8% ratio of Pfizer,  Bayer has 68% return on equity in the current year which is the best in the close leading group.

Return on equity (ROE) of the sector and the leading pharmaceutical wholesaler companies in Hungary. 2019-2008.

Source: Ceginformacio.hu

Staff and earning ratios

We have exact number of employees data since 2009, according to this year 2019 was the culminating point of the sector in terms of employment. At that time the average statistical number of employees were 8231 persons which is 346 more than a year ago. Hungaropharma is the largest employer with 844 employees which is less by 182 than in 2011. The list does not continue with the two regular players but with B Braun Medical Magyarország, the number of employees of this company is only 7 persons less than the leading Hungaropharma has and constantly increasing. The number of employees has increased in every year since 2008, altogether by 120 persons during the examined five years.

The average statistical number of employees of the leading pharmaceutical wholesaler companies in Hungary. 2019-2010.

Source: Ceginformacio.hu

Although the costs of employees per person does not show exactly how much the average income of the sector is but the conclusion can be drawn where the wage level is located in the national economy comparison. According to this on the average 8,1 million HUF got per employee in the current year which is much higher than in most of the sectors. By examining the previous years we can make a conclusion that the growth rate is slightly below the annual inflation rate so in real terms some decrease can be experienced. We can experience surprisingly large differences in case of leading companies, 5,7 million HUF and 5,4 million HUF values of Hungaropharma and Phoenix Pharma significantly lower from the sectoral average and also from the 10,9 million HUF value of Sanofi Aventis. Here we definitely have to note the number of employees is significantly lower at Sanofi as in case of the two competitors. Among the 10 largest companies the value over 20 million HUF is not uncommon, for example the 21,7 million HUF costs of employees per person of Bayer Hungária or 22,3 million HUF of Janssen Cilag which is not considered as a standing out value, the ratio was nearly the same during the examined period.  

Costs of employees per person of the leading pharmaceutical wholesaler companies in Hungary. 2019-2010.

Source: Ceginformacio.hu

The sectoral operating turnover per person was 157,5 million HUF in 2019, 8,4 million HUF less than a year ago. Both factors determining the ratio pointed to the direction of decrease, besides the fall of the operating turnover, the number of employees working in this sector has increased. In the leading group companies with lower number of employees have performed better according to this profitable ratio, because the ratios of Bayer and Sanofi order of magnitude superior to the other two competitors.

Operating turnover per person of the sector and the leading pharmaceutical wholesaler companies in Hungary 2019-2010.

Source: Ceginformacio.hu

At the same time Hungaropharma and Phoenix Pharma also performed far above the average by 280 million HUF and 346 million HUF operating turnover per person. It is not possible to determine a concrete direction for the latter, but in case of Hungaropharma increase is typical also at Sanofi.

Similarly to the P/L before tax, operating turnover per person of the current year also occupies a prominent place in the examined period. The culminating point was 3,7 million HUF/person in 2010,  2019 year’s data is only less by 400 thousand HUF. Similarly to the operating turnover per person members of the leading group significantly outperform the industry average, except Hungaropharma where the profit per person was just over 1 million HUF. Situation is much better at Sanofi but it should be noted the value of 12,5 million HUF/person in 2019 was the lowest ratio in the past 5 years. Outstanding is the 21,8 million HUF P/L before tax per person of Euromedic which can be explained by the constant number of employees with the continuously increasing profit. There were ratios over 10 million HUF at Bayer Hungária and Pfizer (15,4 million HUF and 18,2 million HUF), growing tendency can be observed at both companies.

P/L before tax per person of the sector and the leading pharmaceutical wholesaler companies in Hungary. 2019-2010.

Source: Ceginformacio.hu

Costs of employees expressed in percentage of net revenue is an important profitable ratio which show how much proportion of net revenue is represented by fix labour costs. Obviously the lower this ratio the greater is the profitability. The sectoral average is steadily around 5%, members of the leading group have significantly better values. The ratio of Euromedic which is less than 1% is on the first place, but in case of the top 3 companies have to look for values above 2% with magnifying glass.  Bayer and Novartis have ratios around 10%, while 20% of net revenue are used for costs of employees at B Braun Medical.

Operating revenue per costs of employees of the leading pharmaceutical wholesaler companies in Hungary 2019-2010.

Source: Ceginformacio.hu

The analysis revealed without major reorganizations, with moderate sales growth companies try to improve their profitability and make the most out of the current conditions. Although the market position of the 3 leading companies is not in danger, would not be a surprise if the places interchanged during the next few years. We can expect greater excitement in case of companies around 30-40 billion HUF, on the other hand will they be able to preserve their current position or is there any of them who try to follow in the footsteps of the three large companies.