Square Pharma takes off on contract manufacturing deal to meet demand

Square Pharmaceuticals took off from the floor on Thursday after eight months following a disclosure of a business deal that will allow another pharma company to produce some of its products to meet the growing demand.

The flagship company of Square Group decided to sign an agreement with Aristopharma the day before on contract manufacturing of some of its regular products.

Non-listed Aristopharma, one of the top 10 pharmaceutical companies in the country, will manufacture Square products as per the demand, said Company secretary Khandaker Habibuzzaman.

"The board will formally sign the deal shortly," he said, adding that new products would be included in the deal if the demand went up.

Aristopharma, that began its journey in 1986, has a state-of-the-art manufacturing plant at Shampur-Kadamtali in Dhaka division.

The news of the business deal drew buyers to the stock from the very beginning of the trading session on Thursday.

It traded at between Tk 209.8 and Tk 211.9, before closing at Tk 210.40, rising 0.29 per cent from the floor price.

About 1.37 million shares of Square Pharma worth nearly Tk 289 million changed hands, making it the third most-traded stock on the Dhaka Stock Exchange for the day.

The stock made it to the top turnover list more than a year after the imposition of the floor price.

The market was in the bear grip for most of FY23. The floor price has turned a majority of the stocks illiquid since buyers have shown reluctance to buy stocks at the lowest price set.

The well-performing companies, including Square Pharma, which used to dominate the turnover list earlier, suffered and remained stuck at floor, while low-performing and junk stocks have been flying high on speculations.

Most of the fundamentally-strong stocks have seen no trading for days and months due to a lack of buyers.

Square Pharma is considered one of the best performing blue-chip stocks, with an excellent reputation. But the stock had been stuck at the floor price since November 30 last year.

Market insiders said investors showed buying interest in Square Pharma after a long time as they deemed the current price level lucrative ahead of the dividend declaration.

Some investors might show interest in betting on the stock due to the news over contract manufacturing, said Mir Ariful Islam, managing director & CEO of Sandhani Asset Management.

"Square Pharma's breaking the floor price is good news, but it's early to say whether the price is sustainable above the floor."

The recent discussion on floor price withdrawal may be a reason too behind the movement of large-cap stocks on the bourses, added Mr Islam.

Prof Shibli Rubayet Ul Islam, chairman of the Bangladesh Securities and Exchange Commission, on Tuesday said the floor price would be withdrawn as soon as the economy reached a stable condition and investments of small investors were safe.

Meanwhile, Square Pharma's annual profit surged 14 per cent to Tk 18.18 billion in FY22, thanks to the launching of new drugs as well as strong marketing strategies.

The profit figures include that of its subsidiary companies.

However, companies separately also posted a growth in profit.

On the financial strength, Square Pharma disbursed 100 per cent cash dividend for FY22, the highest in 15 years.

In the nine months through March this year, it showed 5.50 per cent year-on-year growth in profit to Tk 13.45 billion.

The profit growth boosted the pharma company's earnings per share to Tk 16.82, from Tk 16.03 in the same period a year ago.

As the FY23 ended, some investors started investing in fundamentally-sound stocks to secure dividends, said a stockbroker. "Investors are expecting good dividends this year," he said requesting not to be named.

Square Pharma, the leading drug maker in Bangladesh, held the leadership position in the domestic industry since 1985 and is now on its way to becoming an important global player.

Earlier in 2020, it signed agreements with Renata Oncology and Apex Pharma for contract manufacturing of some of its products to meet the demand.

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