Overview:

Jamjoom Pharma, originating as a branch of Abdullatif Mohammed Salah Jamjoom and Brothers
Company in Jeddah, KSA, since its inception on September 22, 1994, stands out as a significant
contender in the pharmaceutical sector. With a core emphasis on the development, production,
and global distribution of a diverse range of generic pharmaceuticals, cosmetics, and consumer
healthcare products, the company has cultivated a robust presence across more than 36 countries,
encompassing the GCC, Levant, North Africa, and other regions. Dedicated to furnishing high-
quality products, Jamjoom Pharma’s expansive product portfolio and extensive distribution
network position it as a leading figure in the industry, ensuring that customers worldwide have
access to a broad spectrum of top-quality pharmaceuticals and healthcare solutions.

Investment thesis

Jamjoom pharma is one of the top pharmaceutical companies in the kingdom of Saudi Arabia to
benefit from the growing healthcare care not just only operating in Saudi Arabia but also in
middle east and North Africa, with a large portfolio of 118 brands across 8 therapeutic segments.
1- strong leadership position was created by a potent sales team .
2- Outstanding R&D team that reflects the healthy product pipeline.
3- art of timing in expansion
4- being ready for signing the public tender contracts.
5- discipline and commitment in paying the dividends and capital allocation.

Business Model:

In the realm of pharmaceuticals, the company is dedicated to the comprehensive cycle of

development, manufacturing, and strategic marketing of a diverse spectrum of high-quality
branded generic pharmaceutical products. The market outreach extends across 36 countries in the
Middle East, Africa, and the Commonwealth of Independent States, with Saudi Arabia, Egypt,
Iraq, and the GCC countries serving as primary arenas of significant operations and sales.
Within its core operations, the company specializes in producing pharmaceutical products
encompassing therapeutic categories such as Ophthalmology, Dermatology, General Medicine,
Gastrointestinal (GIT), Cardiovascular (CVS), Central Nervous System (CNS), Over the Counter
(OTC), and Nutraceuticals/Consumer Health. Operating with a broad product range, stringent
quality controls are maintained to garner and sustain the trust of valued customers.

A pivotal component of the strategic vision revolves around contributing to national and regional
self-sufficiency. This commitment takes tangible form through the optimization of new product
launches, exemplified by the ongoing development of a suite of high-quality diabetes
management products slated for market introduction between 2022G and 2024G.

Operational capabilities are fortified by a state-of-the-art manufacturing facility in Jeddah,

accompanied by a new sterile facility in Jeddah scheduled to open in the latter half of 2023G.
Expanding the geographic footprint, a manufacturing facility in Egypt has been established, also
scheduled to commence operations during the second half of 2023G.

At the heart of innovation lies a robust R&D department, boasting over 91 professionals with the
capacity to develop 12 to 15 products annually. These new additions complement existing
therapeutic categories, introducing essential products such as anti-diabetic medications to
address crucial needs in the markets served.

Revenue generation hinges on the strategic sale of pharmaceutical products to distributors, who
play a crucial role in distributing products downstream to hospitals, pharmacies, doctors, and
various healthcare providers.

Categorizing multifaceted operations, a distinction is made between “technical” operations,

focusing on product development and manufacturing, and “commercial” operations, centering on
the strategic marketing, sales, and distribution of finished products. This comprehensive business
model encapsulates a commitment to innovation, quality assurance, and a robust market
presence.
Industry and competitive landscape:

The overall pharmaceutical sector was valued at SAR30.5 billion (or US$8.1 billion) in 2021G,
having grown at a CAGR of 6.3% since 2019G. Pharmaceutical product growth over the review
period is attributed to positive macroeconomic drivers such as population expansion, an ageing
population, rising levels of noncommunicable diseases and strong Government funding to
expand public healthcare. Value sales of several pharmaceutical products in the Kingdom
benefitted from rising consumer awareness of maintaining a healthy and responsive immune
system as a result of the COVID-19 outbreak. The Kingdom is heavily reliant on pharmaceutical
imports, with a majority of its products still coming in from the US, Europe, China and India.
One of the core objectives of Vision 2030 is a Government push towards pharmaceutical
security, which aims to increase local production to account for at least 40% of total
pharmaceutical product consumption.

The key pharmaceutical categories that the company are working on are Ophthalmology,
Dermatology, general medicines, Gastrointestinal Products, Nutraceuticals. in ophthalmology
Jamjoom pharma has a 20.6% market share in this industry and they ranked 1 in that industry. In
dermatology Jamjoom ranked second after Avalon Pharma Pvt Ltd with 6.7% market share with
an impressive growth space. Also in the general medicine industry their market share is 2.1%
and they are so far in that industry which make it hard to compete in it. in Gastrointestinal
Products the company came fourth with 5.5% on market share and they came after AstraZeneca
and other companies that focuses in that industry. Least but not lastly Nutraceuticals industry.
Jamjoom came third with 5% on market share and they came behind bayer ag and Vitabiotics
Ltd . And we can conclude that jamjoom focuses on one main industry which is ophthalmology
and they didn’t drop the other industries but they maintained focusing on one sector which might
affect them in the long run if the industry been crashed.
| Industry | Market Value (2021) | CAGR (2019-2021) | Key Insights
|

|---------------------------------|---------------------|------------------|------------------------------------------
--------------------------------------------------------------------------------------|

| Overall Pharmaceutical Sector | SAR30.5 billion | 6.3% | Grown at a CAGR of 6.3%

since 2019G. Positive macroeconomic drivers include population expansion, ageing population,
and Government funding. Pharmaceuticals heavily reliant on imports from the US, Europe,
China, and India. Vision 2030 aims for at least 40% local production. |

| Ophthalmology |- |- | Jamjoom Pharma has a 20.6% market

share, ranking 1st in the industry. |

| Dermatology |- |- | Jamjoom Pharma ranks 2nd with 6.7%

market share after Avalon Pharma Pvt Ltd. |

| General Medicines |- |- | Jamjoom Pharma has a 2.1% market

share and faces tough competition in the industry. |

| Gastrointestinal Products |- |- | Jamjoom Pharma ranks 4th with 5.5%

market share, trailing behind AstraZeneca and other competitors. |

| Nutraceuticals |- |- | Jamjoom Pharma ranks 3rd with 5%

market share, following Bayer AG and Vitabiotics Ltd. |

Political exposure:

The company has a huge political exposure. The company exports their product to countries that
faces a huge political risks. Iraq, north Africa and Algeria is the main exposure they have. And
slightly lower exposure in Egypt and turkey. 9.2% of the total company sales in 2022 were in
Iraq. That portion of sales is in huge exposure and might vanish in any time. On the other hand
Iraq is expected to grow the fastest at a CAGR of 5.9% to reach SAR9.2 billion (or US$2.5
billion) driven by the Government’s push to increase investments and accessibility. And that
gives a huge potential to grow their net income. North Africa also have these political issues but
they have a huge gap in the industry so it worth the risks that they are taking.
Economic exposure:

The main economic issue in the countries that they sell in is the inflation. Inflation can affect that
currency and also can affect the currency exchange to SAR. Turkey inflation rate in 2022 was
72.3% and the currency dropped almost 30% to USD and that makes it hard to move the money
with that amount of loss. Egypt also had the same currency issue when they depleted their
reserves instead of counting on the USD. And the money supply last two years were very high
that also affected the currency and makes it difficult to move the money to other currencies.

Environmental, Social, Governance

The Company plans to continue to build on introducing operational efficiencies to meet the
CMA regulations and the golbal standers to the environment, implementation of efficient
governance management solutions, and improvement in local content scores. The Company
expects that these actions will help to enhance collaboration and cohesive working by the
manufacturing and commercial teams as well as refine the production and reallocation of
resources. As a result, the Company will be able to increase both, volumes and margins, for key
products through improved cost efficiency and economies of scale. In addition, the Company
plans to expand its manufacturing footprint viathe Egypt facility to serve the North African
markets which supports its strategy of selectively expanding market presence.

Environmental

JP Committed with the standers of Environment, Health, Social, through all their operations and
they responsible to deal with emissions, effluent and solid waste at the source to ensure that there
is minimum impact on environment.

Social
The company committed in the responsible and ethical management of EHS Elements in all its
activities to safe the employees and visitors and contractors.And they committed to the global
standers of ISO 14001 and ISO 45001 certified, To avoid any injury, ill-health. The EHS
function implements an hard training plan to ensure that staff have the required skills based on
their training needs assessment, to carry out routine inspections and audits to ensure EHS
compliance. Employment, the Company and its subsidiaries had 1,255 employees out of which,
401 are Saudi nationals. The Saudization rate of the Company is 45.7%,

Governance

The company committed to the standers that is requirements by the CMA, Governance
Regulations issued by the Capital Market Authority, to manage the relationship between the
Board of Directors, executive directors, And shareholders.

Board of directors

The Board of Directors shall be responsible for managing the Company and doing everything to
uphold the Company’s interests, and develop and maximize its value. the Board be vested with
the broadest powers to manage the Company and in order to achieve its objectives inside and
outside of the Kingdom. The Board of Directors has overall responsibility for establishment and
oversight of the Group’s risk management framework. The executive management team is
responsible for developing and monitoring the Group’s risk management policies. The team
regularly meets and any changes and compliance issues are reported to the Board of Directors.

Executive management

The Executive Committee shall exercise all the powers vested therein, submit its reports to the
Board, and keep direct channels of communication open therewith.
The Executive Committee consists of three (3) to five (5) members appointed by the Board of
Directors for a period equal to the membership term of the Board.
The Board shall take the necessary measures to enable the Executive Committee to carry out its
functions, including informing the Executive Committee, without any restrictions, of all data,
information.

Risks:

Risk relating to the company’s supply chain:

To make medicines, a company needs specific ingredients called APIs and other raw materials.
These ingredients must come from approved sources regulated by health authorities. Among all
the materials needed, APIs are the most important.

In the medicine industry, there aren't many suppliers for some of these key ingredients.
Sometimes, a company has to depend on just one or a few suppliers for these essential
ingredients. The company tries to have more than one reliable supplier for most products, but it's
not always possible because there aren't many suppliers available in the industry.

Risks related to the complexity of manufacturing the Company's products:

The company works hard to make really good medicines for its customers. Making these
medicines is tough because there are strict rules the company has to follow. They use
complicated machines and computer systems to help them make the medicines and talk to others
about getting the right stuff, checking the quality, and sending the medicines out.

Sometimes, things can go wrong when making these medicines. It could be because the
machines break, rules aren't followed correctly, the materials used aren't good, or other problems
like bad weather. If the problems are serious, the company might have to stop making some or
all of its medicines until they fix the issues.

Risk related to cross border sales of products in foreign countries:

A large number of sales related to medicines occur outside Saudi Arabia, and this is considered
one of the company’s plans and strategies, and the company may expand further in selling in
African countries, which it will expand sales and purchases across different countries will likely
happen. But when a company operates in different countries, there are risks involved, including,
but not limited to:

 Currency exchange rate fluctuations or imposition of foreign exchange controls.

 Increased difficulty in collecting unpaid accounts.
 Differing local product preferences and product requirements.
 Differing tax regimes.
 Risk of loss at sea or other delays in delivering the products caused by transportation
problems.

Any of these points could affect the company’s operating results.

Political and economic risk:

The majority of the Company primarily operates in Saudi Arabia, and its financial performance
depends on the prevailing economic and political conditions in Saudi Arabia, as well as global
economic conditions that impact Saudi Arabia's economy.
Saudi Arabia's economy relies heavily on the oil sector, which contributes significantly to the
GDP. Fluctuations in oil prices could have a negative impact on the economy of Saudi Arabia. In
addition, the country is facing high levels of population growth. Together, these circumstances
pose a significant risk to the Company's business, financial position, operating results and future
prospects.
The Company's performance is also influenced by various economic factors, such as the
availability of consumer credit, interest rates, unemployment rates, wage levels, tax rates, costs
associated with water and electricity consumption, and the potential removal of government
subsidies for certain materials. Changes in these factors can affect consumer spending and
demand for the Company's products. Failure to adapt to market changes can have a negative and
substantial impact on the Company's business, financial position, operating results, and
prospects.
Moreover, many countries in the Middle East, including Saudi Arabia, are currently experiencing
political and security instability. The Company's operations can be adversely affected by
negative diplomatic relations, economic and political conditions, or other factors in these
countries or other nations. Such factors can also impact the overall economy, foreign direct
investment, and financial markets in Saudi Arabia, further affecting the Company's business,
operating results, financial position, and prospects.
Any unexpected significant changes in the political, economic, or legal environment in Saudi
Arabia, other Middle Eastern countries, or countries from which the Company sources its
products, including market fluctuations, recessions, insolvency, employment weakness,
technological shifts, or other developments, can also have an adverse effect on the Company.
Additionally, substantial changes in tax or trade policies, tariffs, or trade relations between Saudi
Arabia and other countries, as well as alterations in local policies such as the imposition of
unilateral tariffs on imported products or negative sentiments towards Saudi Arabia due to
increased import tariffs and changes in trade regulations, can result in increased costs for the
Company, limited access to suppliers, and reduced economic activity.
If any of the aforementioned factors occur, they will significantly and unfavorably impact the
Company's business, operating results, financial condition, and future prospects.

Risk related to VAT:

The Company has fulfilled its obligation to submit all of its VAT declarations since its
registration (starting from January 2018 until the present time of this Prospectus), all within the
legally required timeframes. Additionally, the Company has promptly settled all outstanding
liabilities owed to the Zakat, Tax, and Customs Authority within the legally established
deadlines.
Confirmation from the Zakat, Tax, and Customs Authority has been obtained, acknowledging the
acceptance of all VAT returns submitted from the inception of the Company up to September
2022. As per the existing Tax/Zakat regulations in KSA, if the Tax/Zakat returns are submitted
within the statutory deadline, the statute of limitations for any potential penalties is set at five (5)
years from the date of filing the declaration.

Swot analysis

Strengths Weaknesses
- Human intervention is limited in
modern factories
- Decline in the Egyptian currency -Their reliance on tenders in
- Strength in research, development KSA
and health production line
- Large financial profile with sustained
growth rate
- Strong position in Saudi Arabian
domestic market
- No debt
- 118 brand
- 8 therapeutic sectors

Opportunities Threats
⁃ Business development strategy - Changes in exchange rate
 ⁃ Present in 36 countries - Spimaco a very strong competitor
⁃ High level in targeting key
markets to accelerate and prioritize
growth

Porter’s five model

Threat of new entrants
It need a large capital in terms of the cost of production, high technologies used in industry, and government approvals
that are difficult to obtain .
Power of supp
The company has factories, so it does not have many suppliers, except for some raw materials so they rely on long term
contracts with suppliers.
Power of buyers
The number of buyers is very high because it is a drug company located in 36 countries, so it is not possible to negotiate
prices and payment dates .
Competitive rivalry
Jamjoom faces fierce competition in the inner range of (Spimaco and Tabuk).
Spimaco is the largest pharmaceutical manufacturing company, with a production capacity of approximately 2.4 billion
units annually and a 14% market share in the general medicine category. Its market share for government tenders is 9%,
while Jamjoom has a market share of 1%. However, Spimaco's lower profit margins are attributed to its lower
investments in research and development expenses. In the last 5 years, it allocated only 2% of its revenues to research
and development, while Jamjoom allocates 5%. Including in its portfolio there are strong brands such as Vivadol and
sapofen .Tabuk is the second largest pharmaceutical factory in the Kingdom, with a production capacity equal to 2 billion
units annually. Its market share in government tenders is approximately 8%. Tabuk focuses on manufacturing generic
formulas for patented brands such as Nexium .

--------------------------------------------------------------------------------------------------------------------
Valuation:
Since 2022, JP did 7% of it’s total sales in Egypt due to there net currency exposure that happens
there, while Egypt faced a hundred percent depreciation in there Egyptian pound. However, they
took a loan of 57 m USD to build their facility, and invest it in egypt around this number, after
that the currency risk will depend on the sales that will come from the local market, egypt, and
other subsidiaries, once the facility starts selling the product. Furthermore, it results from the
accounting team because they converted the loan into subordinated perpetual instrument in the
fourth quarter of 2022.
Jamjoom faces fierce competition in the inner range of (Spimaco and Tabuk).
Spimaco is the largest pharmaceutical manufacturing company, with a production capacity of
approximately 2.4 billion units annually and a 14% market share in the general medicine
category. Its market share for government tenders is 9%, while Jamjoom has a market share of
1%. However, Spimaco's lower profit margins are attributed to its lower investments in research
and development expenses. In the last 5 years, it allocated only 2% of its revenues to research
and development, while Jamjoom allocates 5%. Including in its portfolio there are strong brands
such as Vivadol and Sapofen.
Tabuk is the second largest pharmaceutical factory in the Kingdom, with a production capacity
equal to 2 billion units annually. Its market share in government tenders is approximately 8%.
Tabuk focuses on manufacturing generic formulas for patented brands such as Nexium.

Jamjoom Pharma finds itself strategically positioned within a burgeoning market landscape,
primarily driven by the nation’s deliberate strategy to bolster its citizenry. This demographic
surge offers a promising backdrop for pharmaceutical companies, with increased demand for
healthcare products and services. Recognizing the pivotal markets within the region, Jamjoom
Pharma has prioritized its efforts to amplify production capabilities, particularly in Saudi Arabia
and Egypt. These countries, given their expanding populations and evolving healthcare needs,
present lucrative opportunities for the company to solidify its market presence and cater to
growing demands effectively. The first six months of 2023 marked a pivotal period for Jamjoom
Pharma, witnessing a robust growth trajectory in revenue by a notable 24.52%. Such a
substantial uptick underscores the company’s strategic initiatives, market positioning, and the
effectiveness of its product offerings in meeting consumer demands. As the year progresses, the
company is poised for further expansion and growth. The imminent establishment of two cutting-
edge manufacturing facilities in the latter half of the year signifies a significant leap. With an
anticipated surge in production capacity by nearly 67%, Jamjoom Pharma is gearing up to
capitalize on this enhanced capability. This expansion not only positions the company to cater to
escalating market demands but also aims to optimize resource utilization, driving revenues and
fostering sustained growth.
Capacity and utilization:

Income statement:
Market share and Revenue portions: (top down)
Balance sheet:

Intangible assets and PP&E:

Working capital:

Retained earnings and OCI:

Perpetuity and exit EBITDA multiple approaches:

Cost of capital (WACC):

Beta:
Free cash flow buildup:

Analysis:
Anticipated to commence production in the latter half of 2023, Jamjoom is expanding its
production capabilities. The company, with an efficient primary facility in Jeddah operating at
85% utilization (as of June 2022), is constructing two additional facilities. One, situated in
Egypt, boasts an annual production capacity of 52 million, while the other, a sterile facility in
Jeddah, has an annual production capacity of 25 million. This expansion is set to elevate the total
annual production capacity to 190 million by the end of this year. Additionally, with the
introduction of these new factories, we are increasing our growth expectations, positioning
ourselves to meet rising demand and efficiently export products to North African markets.
As of COGS JP sees that they won’t need more human force in their two new facilities. So
because of that we expect COGS to remain with the same growth rate and we don’t expect
surprising figures in there. And by stabling COGS growth rate that will directly affect the net
income. As a prominent pharmaceutical manufacturer in Saudi Arabia, the Company holds a
noteworthy position in the market. In the ophthalmic segment, one of the five key areas, the
Company secured a market share of 20.6% in 2021G, as highlighted in a market study report by
the Market Consultant in August 2022G. Jamjoom’s market share growth is influenced by
societal and macroeconomic trends, such as the increasing prevalence of generic medicines and
the Company’s belief in the strong performance of its products due to customer preferences. The
Company’s market position is further strengthened by government-led initiatives and
investments in the local healthcare and manufacturing sectors, aligning with the Vision 2030
objectives. The demand is expected to increase due to the government’s inclination to boost the
population, further contributing to the Company’s growth prospects. This national strategy aims
to enhance private sector involvement in the Kingdom of Saudi Arabia’s economy.
Pharmaceutical manufacturing holds a central role in the National Industrial Development and
Logistics Program, targeting a 40% domestic production of all pharmaceuticals consumed in the
country, up from the current approximate 30%. This governmental support serves as a significant
boost for the Company as a leading domestic manufacturer, positioning it to gain additional
market share in the coming years.

While our expectation is not for a substantial increase in the company’s market share, there is an
expectation of significant overall growth in the sector’s value. On the other hand JP was building
two factories in the same time and that will burn more cash that ever before. Due to that we
expect that the next 3 years they wont generate a lot of cash, but in the long run they will have
more and more than previous years. Also inventory will rise due to the two new facilities and that
will help delivering products fast and recognizing the revenue faster than before. In term of
payables the company sees that they don’t expect any surprises and they are trying to maintain
these numbers without taking it further much more. But the receivables in 2023 were
significantly higher than previous years and according to the financial statements of Jamjoom,
they faced an increasing in account receivable with approximately 40m SAR, due to the sales
growth, seasonal variations which they had experience fluctuations in sales level during the year,
and the finished goods that have not yet been exported from Egypt to Saudi Arabia, which we
can consider it as a customer delays. in Perpetuity and exit EBITDA multiple approaches we
used a 4.5% risk free rate because of the expectations of deducting the interest rates starting from
Q1 2024. Beta was taken from the largest companies in the world to have more accurate close
beta that we can rely on. And the cost of debt after tax that is because the debt was taken from
Egypt and there average tax rate is 8%. The industry average P/E ratio in 22.52 so we used that
multiple in the P/E valuation. After having all of these results and because the DCF model is
more accurate to evaluate JP we gave it the highest weights and the multiples were lower. Our
target price is 94.26 SAR and for now the company is sell.