Pakistan’s listed pharmaceutical sector delivered record-breaking profitability in 2025, with earnings soaring 78 percent year-on-year to Rs. 42.2 billion, marking the highest profit level in the industry’s history, according to a report by Topline Research.

The surge was fueled by stronger sales growth, falling active pharmaceutical ingredient (API) costs, and sharply lower finance expenses, creating a powerful earnings boost across the sector.

Net sales climbed 14 percent to Rs. 365.7 billion in 2025, compared with Rs. 319.6 billion a year earlier. Growth was largely price-driven following the deregulation of non-essential medicines. Momentum remained strong in the final quarter, where sales rose 18 percent year-on-year to Rs. 102.1 billion.

Profit margins expanded significantly during the year, with gross margins improving to 41 percent from 35 percent in 2024. Lower raw material costs played a decisive role, as more than half of API products recorded a median price decline of 11 percent between January and October 2025. Fourth-quarter margins strengthened further to 44 percent, with AGP Limited, Highnoon Laboratories Limited, and The Searle Company Limited leading the sector in gross profitability.

Finance costs dropped 49 percent to Rs. 4.2 billion amid declining interest rates and reduced leverage, providing additional support to bottom-line growth. The sector’s effective tax rate remained largely stable at 39.9 percent.

Shareholders also benefited from the industry’s exceptional performance, as total dividend payouts surged to Rs. 21.1 billion, up from Rs. 12 billion in 2024. Major dividend contributors included GlaxoSmithKline Pakistan Limited, Abbott Laboratories Pakistan Limited, and Haleon Pakistan Limited.

Topline Research expects profitability to remain strong going forward as pharmaceutical companies expand product portfolios and shift toward higher-margin segments. However, fluctuations in API prices linked to global oil market trends remain a key risk for future earnings.