Pharco doubles down on local capex and Gulf expansion amid pricing squeeze

How is Pharco trying to grow amid the mandatory pricing squeeze? Local pharma giant Pharco is leaning on industrial investment, operational efficiency, and exports to protect margins in a market where pricing reviews still lag production costs, Chairman Sherine Helmy tells EnterpriseAM. “The core challenge is not just whether some products get price increases, but the continued gap between actual production costs and the speed at which prices are updated,” he says — a gap weighing on profitability across the sector.

The familiar pressure point

Egypt imports more than 90% of its pharma raw materials, leaving local manufacturers exposed to FX swings and supply chain disruptions, Egyptian Drug Authority (EDA) head Ali El Ghamrawy previously told us. The Madbouly government recently settled 90% of arrears owed to pharma companies — after the Unified Procurement Authority lagged badly last year, racking upbns in unpaid arrears.

Why the arrears exist: Egypt’s public health system is the single largest pharma buyer in the country, purchasing through the Unified Procurement Authority — a centralized bulk-buying model designed to drive down costs. While it’s a sound strategy in theory, it also centralizes the payment bottleneck, so when the government is money-strapped — which it has been chronically in the past few years — payments get delayed.

Pricing adjustment is moving slow

Pharco has seen some of its portfolio go through regulatory pricing reviews, Helmy says, yet the gap between costs and prices remains wide. Hundreds of firms called for price hikes across the board last year — a demand EDA has resisted, arguing that the EGP's appreciation against the USD should offset squeezed margins.

The government is preparing to hike prices for around 150 imported meds without local alternatives — instead of reviewing the list of over 3k drugs that pharma companies have been lobbying for, Egyptian Chambers of Commerce's pharma division head Ali Ouf told us earlier this month.

How we got here: Egypt regulates drug prices to keep medicines affordable. The catch is prices are set in EGP, but most inputs are imported and priced in USD. When the EGP devalued sharply between 2022 and 2024, manufacturers' costs spiked while selling prices stayed mostly fixed.

Pharco’s answer?

Chase efficiency, not just a price hike. Rather than wait for pricing approvals to catch up with costs, the company is pushing operating efficiency, higher-value local manufacturing, and exports as margin buffers, Helmy says. They are targeting EGP 18 bn in sales by year-end, up from EGP 15 bn in 2025, with local market share aimed at around 9%.

Saudi Arabia is the other hedge: The company is moving ahead with its SAR 155 mn plant in Medina, covering the first two phases of the project, with production expected to begin in 2028, Helmy says. The plant will start with solid dosage forms — meeting around 70% of the Saudi market's needs — before expanding into biologics and vaccines.

But Egypt remains the export base. “Operating the Saudi plant will not reduce our exports from Egypt to the Gulf,” Helmy tells us. “Our factories in Egypt will remain a main export hub serving around 50 global markets, while the Medina plant will focus on meeting local Saudi demand.” The Saudi expansion also spreads the funding burden through Pharco's partnership with Ashmore and the Saudi Investment Company, while giving the group another FX revenue stream to support the supply chains for its Egypt-based factories.