Square's Kenyan venture aims to triple revenue in 2024
Square Pharma eyes for a share of the $2b generic drug market in East Africa
Square Pharmaceuticals, which began commercial production at its Kenya plant this year, has set its sights on expanding its footprint in East Africa in the coming days.
The Bangladeshi multinational company aims to achieve $1.5 million in revenue from the plant in the first year, with a goal of at least tripling it next year, according to Muhammad Zahangir Alam, executive director for Finance and Strategy at Square Pharma.
In a pioneering move to manufacture abroad, the leading drugmaker in Bangladesh started setting up its East African plant at an export processing zone in Nairobi in 2018, and went into commercial production at the beginning of this year.
Square, which began exporting medicines to Kenya in 2012, expects to generate approximately $4.5 million this year by shipping a wide range of 200 prescription drugs there.
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Not all products would be suitable for manufacturing in the Kenyan plant due to the scale factor, Zahangir Alam told The Business Standard recently.
"Right now we are manufacturing 21 products there, and the plan is to double it in the coming days," he said.
The $25 million plant has created more than 100 jobs, and currently employs 38 skilled Bangladeshis, including team leaders.
"They are also providing training to the Kenyan workers," he added.
The Nairobi factory was initially meant to sell 20% of the manufactured products locally and export the remaining 80%.
However, the Kenyan drug market, 85% of which is import-dependent, needs more local products, and Square has been allowed to sell its entire production locally, according to Zahangir Alam.
Right now, with single-shift production, 30% of the plant capacity is being utilised, and the company is planning to gear up gradually to utilise more of its installed capacity there.
"There is a fair scope for exports in the East African regional market from the Kenyan plant," Zahangir Alam said, adding that the company might apply to the authorities after March next year for regional market export approval as they need first-year production reports.
The common market of East Africa, which includes Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda, has already become an over $2 billion market for generic drugs. The International Market Analysis Research and Consulting Group forecasts that with a nearly 7% compound annual growth rate, it will become a $3.2 billion market by 2028.
Kenya is the largest market and manufacturer in the region.
Unlike Bangladesh, Kenya is not a price-regulated market. However, there is healthy competition among a large number of firms to sell more in Kenya.
Profit margin in exports to Kenya from Bangladesh and manufacturing in Kenya is not too different, as the manufacturing cost efficiency at the Bangladeshi plant helps offset the shipment and some other costs, according to Zahangir Alam.
Square Pharmaceuticals, owning 100% of the subsidiary, provided 40% of the Kenyan project's cost as equity, and the rest of the capital came from bank loans.
Initially, the plant was expected to start commercial production in 2021, but the pandemic disrupted foreign experts' entry and stay in Kenya.
Square Pharmaceuticals Plc, which began as a partnership firm in 1958, became the market leader in Bangladesh in the mid-1980s. It went public in 1994.
In fiscal 2021-22, its revenue grew by 13.81% to Tk6,641 crore (equivalent to around $600 million based on the current official exchange rate), thanks to its 18.74% share in the local market and the Tk170 crore revenue from the 42 export markets across continents.
