One should use the potential

Author: Maciej Radzki, Director of the Corporate Banking Department, Central-Eastern Macroregion, Bank Millennium

In Poland, there are approx. 140 manufacturers of pharmaceuticals and their 2015 sales volume reached 17 bn PLN, which accounted for approx. 1% of GDP. As in global terms also in Poland, this sector has been mentioned among the companies implementing the highest number of innovations. However, it should be added that in terms of 2015 R+D expenses, 740 million PLN, domestic companies were outside the top ten (GUS data). In their report ”Poland 2025. Europe’s new growth engine”, McKinsey indicated that the domestic manufacturers of pharmaceuticals, with access to proper resources of qualified specialists, may become an important production hub in Europe for complex generic and biosimilar products. However, an important condition is an increase in R+D expenses which are required for implementation of innovations with high added value. This expenditure may partially come from a long-term loan. Indispensable fixed assets, such as research centres and equipment, may be financed with an investment loan or lease products.

A material part of the Polish pharmaceutical market are wholesale distributors, who buy medicines directly from the manufacturers and deliver them to pharmacies. This segment is strongly consolidated – three largest players have approximately 70% market share. The value of the sector is generated first of all by the logistics, covering storage, packaging and physical transport to smaller distributors and pharmacies. According to the said PWC report, Polish companies stand a chance to become European-scale players in this regard.

Additionally, wholesale distributors finance pharmacies through extended payment terms for medicines. With stronger negotiation position, acting on their own, they are able to get better financing conditions than single pharmacies or smaller networks. Obviously, financing of higher levels receivables requires a source of stable working capital. Apart from the traditional working capital loan, granted in current or credit account, wholesalers are eager to use Bank Millennium’s reverse factoring, which allows to extend supplier’s payment terms so that they are longer than the total of stock and receivables rotation cycles. Contrary to the traditional credit that provides liquidity, this service additionally supports flexible control of payment terms from individual suppliers and precise recognition of the cost of money, broken down into selected groups of suppliers or even products.


*Globally, pharmaceutical production is one of the innovation leaders, apart from electronics, computers and software. In PWC’s global Top 20 R+D Spenders ranking, as many as seven companies represented pharmacy and biotechnology. In the year preceding the study, these enterprises spent close to 55 bn USD for R+D.