Credit Course Individual Desk I

Pharmaceutical Manufacturing Industry

Presented by:

Kareem Ashraf Rizk

Table of Content
Brief on Company………………………………………………………………………... 3
Coronavirus Impact……………………………………………………………………… 3
Industry Description…………………………………………………………………….. 3
Global Industry…………………………………………………………………………... 3
MENA Region's RRI……………………………………………………………………. 3
Egypt's RRI………………………………………………………………………………. 3
Local Industry……………………………………………………………………………. 3
Company Overview………………………………………………………………………. 7
Company Operations and ACC Stages…………………………………………………. 9
Main Risks and Mitigates……………………………………………………………….. 10
Financial Statement Analysis…………………………………………………………..... 10
Guarantor (Eva Pharma) and Consolidated KPIs……………………………………… 13
Horus SWOT Analysis………………………………………………………………....... 14
Valuation by DCF………………………………………………………………………... 15
Lending Rationale……………………………………………………………………….. 15
CIB Profitability…………………………………………………………......................... 16
Conclusion and Recommendation…………………………………………………….... 16
Appendices……………………………………………………………………................. 17

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Brief on Company
• Horus Pharmaceutical Industries

• Local generic drug maker

• Joint stock company operating under investment law #8 for the year 1997 (currently law #72 for
the year 2017)

• EGP 500m authorized capital and EGP 100m paid in Capital

• 1m Issued common stocks with a par value of EGP 100

• Subsidiary of Eva Group Limited Company, Armanious Family’s local holding company

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Pharmaceutical Industry Description

• Definition: Discovers, develops, produces, and markets drugs for use as medication to be
administered (or self-administered) to patients with the aim to cure them, vaccinate them, or
alleviate the symptoms

• Two main branches: Prescription Drugs and Over the Counter Drugs (OTC)

• Prescription Drugs are drugs that legally require a medical prescription to be dispensed

• OTC drugs can be obtained without a prescription; famous examples include pain killers, anti-
inflammatory drugs, and cough suppressants

• Active participating companies usually have an up and running product pipeline; a series of
products in a state of development, preparation/testing, or production

• A pipeline helps a company predict its product portfolio and ensures a company has enough
products on the market to sustain the business

• Out of 5000 new drug discoveries, only 1 to 5 get approved for human use (companies must be
constantly looking for new drugs)

• 32% of newly discovered drugs make it past the testing phase

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Industry Description (Cont’)
• A forcible patent protection is granted upon the approval of any new drug, granting a company a
period of market exclusivity over the production of the newly approved drug

• During the patent period, the developer company enjoys the privilege of setting a price that, over
time, recover the development and production costs of the new drug as well as the cost of R&D of
other drugs that are not profitable or did not pass clinical trials

• Average cost to discover, test, and obtain approval for a new drug with a new chemical entity was
estimated to be USD 800m in 2003 and USD 2.6 billion in 2014, excluding manufacturing costs

• Companies face a “patent cliff” after a patent protection expires, which is a sharp decline in
revenues upon patent expiry of one or more leading products

• After a drug goes off-patent, it becomes either a “brand drug” when continues to be produced by
its own initial developer or a “generic drug” when copied and produced by any other market player

• Generic drugs contains the same APIs of its brand equivalent, only dispensed under a different
name

• Cost of generic drugs are significantly less for the consumer, up to 80-85% less than brand drugs

• Generic drugs are also subject to government regulations, which require a generic drug to be
identical or within an acceptable bioequivalent range to its brand counterpart

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Global Industry
• The Global market was valued at USD 1.25 trillion as of end of 2019

• In 2019, top ten players contributed to around one third of total global sales (USD 392.5 billion)

• Top 10 revenue-generating companies include Pfizer, Roche, Novartis, Johnson and Johnson, Merck
& Co., Sanofi, AbbVie, GSK, Amgen, and Gilead Sciences

• The industry’s total revenue is expected to exceed USD 1.5 trillion by 2024, a forecasted CAGR of
more than 4% over the coming 5 years

• The United States is the leading market player with around 40% in global market share

• China is second in line with around 11% market share, followed by Japan, Germany, and France,
respectively

• Raw material supplies, in the form of APIs, are mainly procured from China, the EU, India, and the US,
with 40% procured only from China

• Strong competition between European API’s and their Asian counterparts existed historically, but
China and India has the comparative advantage of cheaper labor (industry is labor intensive) and
hence lower prices, skewing the demand towards Asian API’s

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Local Industry Overview
• Local Industry is divided into three sub-segments: generic drug manufacturers, pharmaceutical
distributors, and pharmaceutical retailors

• Manufacturing sub-segment consists of state owned, privately owned and multinational companies

• Due to the great diversity of products, local and foreign companies tend to specialize, making the
Egyptian pharmaceutical manufacturing a highly fragmented Industry sub-segment

• Manufacturing sub-segment has high barrier due to relatively expensive capital requirements

• The distribution sub-segment is an oligopoly of 3 main distribution companies accounting to around 68%
of the local market share as of 2019

• Pharmacies, the third sub-segment, deal with foreign companies, state-owned local players, as well as
distributors. The sub-segment is also extremely fragmented

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Local Industry Overview (Cont’)

• Local supply covers 90% of local demand; the remaining 10% are imported, mostly brand drugs

• Multinational companies supply about 65% of local market demand through direct local manufacturing
via their own facilities (30%) and licensing agreements (35%)

• Local players supply 35% of market demand, 12% through private sector and 23% through public
sector

• Multinational leaders with production facilities in Egypt include Bristol-Myers Squibb, GlaxoSmithKline,
Novartis, and Pfizer

• Due to the lack of domestic technological innovation in production, most multinationals prefer
importing drugs or licensing production to local manufacturers, passing to local producers their
eminent know-how

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Local Generic Drug Manufacturers

• In Dec 2019, the Egyptian Council of Pharmaceutical Exports (ECPE) announced that Egypt has 150
pharmaceutical manufacturing plants

• Domestic producers are mainly small to medium-sized firms (nearly a perfect competition) that
manufacture generic drugs, with many being copies of patent-protected drugs, owing to the country's
weak patent law and the nature of local demand

• Most active pharmaceutical ingredients (APIs) are imported, leading to cost pressure in times of
negative foreign exchange fluctuations

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Local Pharmaceutical Distributors

• Distribution companies must be licensed according to the requirements and conditions set out in
the Ministerial Decree No. 25 of 2009

• Drug trading, storage, or wholesale is not allowed except through distribution companies and
warehouses licensed by the Ministry of Health

• Companies and warehouses are obliged to deal only with licensed factories and registered
importers for obtaining the drugs to be distributed

• Distribution companies and drugs’ warehouses are required to promptly notify the Central
Administration of Pharmaceutical Affairs (CAPA) of any shortage in the availability of registered
drugs within maximum one month from the shortage date, in order for CAPA to take the necessary
measures
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Local Pharmaceutical Retailors

• In Dec 2019, the ECPE announced that Egypt has around 70,000 pharmacies, or one pharmacy per
every 4000 citizens (the figure is reportedly the highest in the world)

• Pharmacies deal with both foreign companies and state-owned local players, as well as with
wholesalers

• The majority of pharmacies are publicly-owned, although a handful of chains have emerged in more
recent years

• Pharmacies must be licensed to a specific pharmacist and theoretically must not be owned by a
corporate entity

• One pharmacist cannot hold more than two pharmacy licenses

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Egypt’s Regulatory Environment
• The Egyptian Drug Authority (EDA) is the pharmaceutical regulatory body of the Egyptian Ministry of
Health (MoH)

• The EDA has three sub-organizations, namely CAPA, NODCAR, and NORCB

• In Aug 2018, the Egyptian Parliament prioritized a draft law published by the MoH on a new EDA,
making up part of a strategic decision by the MoH to further accelerate the growth of Egypt’s
pharmaceutical market

• Reporting of adverse drug effects has been made compulsory for pharmaceutical firms, which came as
part of a wider increase in the regulatory activity in the field of pharmacovigilance in Africa, which
moved up the continent's agenda in light of soaring rates of drug counterfeiting

• EDA's guidelines for the registration of biosimilars/generics consider EMA, ICH and WHO guidelines,
along with the drafted biosimilars guidelines from the Food and Drug Administration and India's
guidelines on 'similar biologics’

• The guidelines aim to facilitate the registration of biosimilar products in Egypt through a shortened
turnaround time

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Egypt’s Regulatory Environment (Cont’)

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Intellectual Property Issues
• Egypt is a member of the WTO and legal provisions do exist for granting patents to manufacturers
including those of pharmaceuticals (managed and enforced by the Egyptian Patent Office)

• However, poor intellectual property protection remains an issue in Egypt due to lack of data-exclusivity
legal provisions

• Egypt remains on the 'Watch List' of the Pharmaceutical Research and Manufacturers of America's
Special 301 Submission of 2019, with intellectual property protection cited as the key issues for
concern

• The lack of regulatory data protection laws and ineffective patent enforcement allows manufacturers to
obtain marketing licenses for generic products prior to the expiration of the original patent

• The MoH has created a committee to examine the possibility of implementing an effective patent
enforcement mechanism, though there have not been any notable improvements

• Some officials have opposed putting in place an effective patent enforcement system similar to the
process used in the US

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Egypt’s Pricing System
• Companies are subject to an unfavorable pricing system controlled by the government's Ministry of
Health (MoH), which aims to make medicines affordable to the public

• Pricing does not allow for price increases to compensate for inflation, and the pricing policy has failed
to adjust for the rising costs of importing raw materials

• The Egyptian Ministry of Health decided to revisit prices of a number of medicines in 2017 to provide
some relief for local drug makers , given the lasting effect of the 2016 floatation of the EGP

• Such increase didn’t fully cover the resultant change in imported raw materials prices, reflecting the
government’s commitment to affordability as a top priority

• The government regulate prices by imposing a cap on margins that each entity of the supply chain
has to comply with

• Distributor’s margin is capped at 7.86% for the listed drugs, 4% for subsidized drugs and 8.8% for
local and bulk drugs (percentages are markups on factory prices)

• Pharmaceutical retailors’ margins are capped at 25% for the listed drug, 10% for the subsidized
drugs, and 30% for local and bulk drugs (percentages are markups on distributors’ prices)

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Local Pharmaceutical Spending
• Healthcare spending in Egypt is generally divided between medical services spending and
pharmaceutical spending, with the latter constituting around 19% of total healthcare spending as of
2019

• Pharmaceutical spending is divided to prescription drugs spending and OTC drugs spending, with the
former constituting around 83% of total pharmaceutical spending

• Prescription drugs spending is divided to generic and patented drug spending, with the latter
constituting around 58% of the total prescription drug spending in value

• Total Pharmaceutical spending in Egypt recorded EGP 43.7bn in 2019 and is expected to grow over
the next five years at a CAGR of 7.1%

• Key growth drivers shall be volume-driven on the back of a growing population, the new universal
health coverage system, a rapidly growing local chronic disease burden (the emergence of respiratory
illness, heart disease and cardiovascular diseases), and the reforming of the Egyptian Drug Authority

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Local Prescription Drugs Spending
• Prescription drugs spending constitutes the largest portion of total pharmaceutical spending in Egypt,
currently 83%

• In 2019, Egyptians spent EGP 36.4bn on prescription drugs

• Such level is expected to increase at a CAGR of 7.8% over the coming 5 years

• By that time, prescription drug segment will account for 86% of total pharma spending

• A rapidly growing population and a rising chronic disease burden will ensure that prescription drugs
remain the dominant market segment, especially given the gradual roll-out of the country's new health
insurance system

• With cost-containment initiatives on the rise, generic drug makers are expected to be the greatest
beneficiaries from Egypt's pharmaceutical trends over the long term, given their more competitive
prices

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Local Patented Drugs Spending
• Patented Drugs spending currently constitutes about 58% of total prescription drug spending

• In 2019, Egyptians spent EGP 21bn on patented drugs

• This level is expected to increase at a CAGR of 6% over the coming five years

• Despite its absolute growth, Patented drug spending is expected to continue to lose its share as a
proportion of total prescription drug spending as the expansion of healthcare and pharmaceutical
access for all Egyptians requires more cost-effective strategies and thus also the higher-use of
generics

• Domestic drug makers in Egypt are focused mainly on generic and OTC medicines and not
patented ones, largely due to the rigid pricing policies, the regulatory environment carrying
unresolved intellectual property issues and, therefore, increased risk, and the limited local
innovation and R&D

• This means that importation is the only access to patented drugs, which is also not favorable since
importation costs and patent protection status makes a huge price differential from its generic
counterpart, further driving down demand on imported patent medicines

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Local Generic Drugs Spending
• Generic drug spending current constitutes about 42% of total prescription drug spending

• In 2019, Egyptian spent EGP 15.3bn on generic drugs

• This level is expected to increase at a CAGR of 10% over the coming 5 years

• The roll-out of the new universal health insurance has the potential to significantly boost the demand for
generic medicines in Egypt, especially given the rapid population growth and the disincentives associated
with patented drugs production and consumption

• Other factors supporting this view include a well-developed local manufacturing sector and the cost-
containment measures encouraged by the Egyptian government

• The local production of generic products is overwhelmed with the county’s local demand; however, in
value terms, patented drugs have a larger market share

• Domestic firms import the majority of their raw materials, which means they are particularly susceptible to
the fluctuations of the Egyptian currency, having to shoulder devaluation costs themselves in the absence
of a cost passing ability

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Local OTC Drugs Spending
• OTC drug spending currently constitute 16.7% of total pharmaceutical spending (compared to 83%
of total spending on prescription drugs)

• In 2019, Egyptians spent EGP 7.3bn on OTC drugs

• This level is expected to increase at a CAGR of 4.2% over the coming 5 years

• Low-income households and those without health insurance tend to favor OTC medicines

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Local Pharmaceutical Trade Deficit
• Local drug manufacturing sector is relatively advanced, though largely generic, with domestic firms
successfully targeting other less advanced markets in the African continent

• However, given the country's reliance on imported raw materials as well as imported patented
medicines, its pharmaceutical trade balance will remain firmly negative

• The government aims to boost self-sufficiency but the limited technological capacity force the
reliance on imported drugs, especially sophisticated medicines

• Around one third of pharmaceutical imports come from the EU, which mostly constitute patented
drugs

• In 2019, Egypt’s pharmaceutical imports recorded EGP 41.5 billion and exports recorded a very
modest EGP 3.7 billion

• Most exports target other Middle East and North Africa markets, with a focus on Saudi Arabia, the
UAE, Iraq, Sudan, and Jordan

• Exporting generic drugs is the main avenue to long-term gains for Egyptian firms, particularly in
keeping prices low and therefore competitive

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Industry Risk Characteristics
• Dependence: Manufacturers are highly dependent on the global industry as they import around 85%
of production needs

• Regulatory Environment: Industry is highly regulated

• Cost Structure: Labor intensive industry with a low operating leverage

• Cyclicality: Non-cyclical for chronic medications and cyclical for personal care products

• Profitability: Strict price regime which puts profitability at a great risk

• Substitutes: virtually no substitutes

• Seasonality: Industry is non-seasonal given the continuous demand throughout the year

• Maturity: Egyptian industry is at an emerging stage as evident by a 5-year 7.1% CAGR and several
investment opportunities for innovative multinational drug producers. Also the lack of R&D reflects the
industry’s premature stage

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Coronavirus Impact
• Extreme Impact on the delivery of medical products and services globally

• Greater spending on health personnel, infrastructure, administration, medical equipment and

consumables

• Less demand on patented pharmaceuticals and innovative medical devices

• More demand on generic pharmaceuticals

• Adverse consequential impact on the production and procurement of APIs, leading to a short
supply of medical products and an impact on downstream healthcare delivery

• Inward trade policies with countries restricting exports of medical products critical in containing
the virus’s spread or in satisfying the local need in light of a global trade paralysis (Indian
Government restricted the export of APIs)

• Local companies reverted to more expensive API’s from the EU, which adversely affected their
profit margins

• Unlikely to witness a vaccine within the next year due to lengthy development process and the
significant manufacturing scaling-up challenges

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Company Storyline
• Horus was established in 1999 as a small pharmaceutical factory located in the 10 th of Ramadan City

• Armanious family, a family well invested into the pharmaceutical sector since 1997 and the ultimate
owners of Eva Pharma Group, has acquired Horus in 2008 in an attempt to expand the group’s
activities in the pharmaceutical sector while benefiting from the tax exemption that Horus enjoys till
2018

• The 10th of Ramadan’s factory was not suitable for operations, therefore Armanious family decided to
rebuild it

• The construction period was halted in 2011 due to the revolution and then commenced again in 2013

• In 2009, right after the acquisition, the company acquired a piece of land in 6 th of October city to
further expand the activity of the company to establish a fully integrated pharmaceutical facility

• The capex plan of revamping the 10th of Ramadan facility and the construction of the 6 th of October
facility, costing EGP 605m, was financed by a mix of 40% equity and 60% medium term bank debt
from CIB

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Company Overview
• Horus currently specializes in the production of human pharmaceutical generic drugs

• Company’s 2 factories generally operate for one shift and employs 600 employees

• The 6th of October facility, currently the main operating facility, is divided into solid area, sterile area,
power plant, water station, and an administrative building.

• The solid area is mainly for the production of tablets and capsules, while the sterile area is for the
production of cephalosporin (general antibiotics) products

• The construction of the 6th of October facility was finalized during 2017, and the production has
commenced in the solid section and was followed by the sterile area later in Q2 2019

• The 6th of October plant operates with a capacity of 50% or 6000 packs per day)

• The 10th of Ramadan’s factory is intended to be the first in Egypt to specialize in

Immunosuppressants

• These are biologics that suppress, or reduce, the strength of the body’s immune system (reduce the
body’s various allergic, inflammatory, and autoimmune disorders and rejection probability of
transplanted organs)

• Such drugs are produced in few places globally but the company received MoH’s approval in the
beginning of 2020 and is expected to start operations by the end of 2020

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Company Overview (Cont’)
• Such new immune drugs are substitution to imported more expensive ones and will potentially
contribute to the new comprehensive health insurance scheme

• Company already started to source RM and APIs to produce these new drugs

• The company currently has around 50 drugs registered in its name, with around 35 drugs currently
being produced, and 87 drugs in the pipeline

• 10 of the 35 produced drugs contribute to 85% of the company’s sales

• Horus has two sister companies in the pharmaceutical industry, namely Eva Pharma (manufacturer)
and Akhnaton (distributor)

• There is overlapping between sister companies and Horus in terms of trade, managerial capacity,
and administrative locations

• 10 drugs of Eva Pharma’s leading products were transferred to Horus in Q4 2017, substantially
increasing Horus’s sales in 2017 and 2018

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Shareholding Structure and Main Shareholder
Shareholder Paid-in Capital (EGP) Number of Shares % of Ownership

Eva Group Limited 99,995,000 999,950 99.9950%

Mona Youssef Bassily 1,200 12 0.0012%
Linda Natalie Monir Riad Armanious 1,200 12 0.0012%
Yasmine Monir Riad Armanious 1,200 12 0.0012%
Riad Monir Riad Armanious 1,400 14 0.0014%
Total 100,000,000 1,000,000 100%

• Eva Group Limited was established on November 27 th 2012 as a limited liability company under
provisions of law #159 of year 1981

• The company’s paid-in capital reached EGP 223,955K distributed over 22,399.5K shares with a
par value of EGP 10 per share

• The purpose of the company is to provide consultancy services in the field of pharma
manufacturing, medical appliances, cosmetics, and technical solution programs for medical
research.

• The company also conducts scientific research in the pharmaceutical field. It also handles trading,
distribution, and export activities of the group

• The company owns the majority stake in Eva Pharma, Eva Cosmetics, Akhnaton for Trading,
Akhnaton for engineering, and Horus (acting as a holding company for the group)

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Eva Group Limited Co. Shareholders
Shareholder Nationality Value in EGP % of Ownership
Eva Pharma IP Holding Limited UAE 212,795,250 95%
Linda Natalie Monir Riad Armanious Egyptian 3,608,560 1.6%

Yasmine Monir Riad Armanious Egyptian 3,608,560 1.6%

Riad Monir Riad Armanious Egyptian 3,608,560 1.6%
Mona Youssef Bassily Egyptian 349,430 0.2%
Total   223,995,000 100%

• Eva Pharma IP Holding Limited was established on October 3 rd 2012 in the UAE as an offshore free
zone company

• The company’s paid-in capital reached AED 10,182K distributed over 1,018.2K shares with a par
value of AED 10 per share

• Eva Pharma IP Holding is fully owned by members of the Armanious family, which means that Eva
Group Limited, and consequently Horus, is ultimately owned by the Armanious family as follows:

Shareholder Nationality Value in EGP % of Ownership

Linda Natalie Monir Riad Armanious Egyptian 2,545,500 25%
Yasmine Monir Riad Armanious Egyptian 2,545,500 25%
Riad Monir Riad Armanious Egyptian 2,545,500 25%
Mona Youssef Bassily Egyptian 2,545,500 25%
Total   AED 10,182,000 100%

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Brief on Sister Companies
• Eva for Pharmaceutical Industries was established in 1997 and is specialized in the production of
human pharmaceutical generic products and medical appliances

• Eva Corporation for Cosmetics was established in 1999 and is among the market leaders in the
personal care products in Egypt

• Akhnaton Engineering was established in 2000 and is specialized in the manufacturing of

machinery and equipment needed for the production and packaging of pharmaceutical products and
cosmetics

• Akhnaton for Trading was established in 2014 and is the group’s distribution arm for all of its
products

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Group’s Management
Dr. Monir Riad Armanious was the founder of the Armanious Group and used to manage all the
group’s companies before he passed away in March 2014

Consequently, management of the group was divided among family members as follows:

• Dr. Riad Monir Riad Armanious: Responsible for managing Eva Group Limited, Eva Pharma,
and Horus Pharma.

• Ms. Yasmine Armanious: Responsible for managing Eva Cosmetics.

• Ms. Linda Armanious: Responsible for managing Akhnaton for Trade and Distribution.

• Mrs. Mona Rabbat Bassily: Responsible for managing Akhnaton for Engineering.

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Horus First and Second Line Management
Dr. Riad Monir Riad Armanious • Managing Director and a group board member
• Was appointed at Eva Pharma in 2008
• Graduated from the faculty of pharmacy, Cairo University in 2002 and holds an
MBA degree from Harvard
• 40 years old and has over 15 years of industry Experience
• Member of the Export Council for Medical Industries
• Member of the syndicate of Pharmacists
• Member of the American Chamber of Commerce
• Member of the Egyptian Junior Business Association
• Member of the German-Arab Chamber of Industry and Commerce

Dr. Younan El Khangary • International Markets and Business Development Director

• Appointed at Eva Pharma in 1997
• Graduated from the Faculty of Pharmacy, Cairo University in 1983
• Holds and MIBA degree from ESLSCA Business School
• 66 years old and has over 32 years of industry experience
• Responsible for all sales and marketing functions of the group

Dr. Hesham Mahmoud Owais • Finance Director

• Was appointed at Eva Pharma in 1999
• Graduated from the Faculty of Arts, Cairo University in 1978 and the Faculty of
Commerce, Helwan University in 1982
• 66 years old and has over 42 years of industry experience

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Recent Events
• CIB recently approved a one-time transaction facility for EGP 26.5m in the form of L/C and MTL
refinance under the CBE 8% initiative, to be paid over 18 equal monthly installments. Such facility
finances the purchase of a new production line of soft-gel technology

• It is worthy to note that Horus is contributing to the fight against the novel COVID -19 through
donating 30k boxes of “Carnavita Forte” to the MOH, valued at of EGP 2.7m, and by selling C-zinc to
MOH, whereas a total of 25k boxes has already been sold for a value of EGP 800k

• The company has recently obtained a license for a new product called “Tartanza” and has already
started its production

• Horus management decided to add a new packaging machine during 2019, procured from the famous
German manufacturer “Uhlmann”. The machine is worth EUR 1.1m and was financed by the
company’s internal cash flows. This machine automatically packages batches of medicine boxes with
“craft packaging” rather than the previously used “carbon paper”

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 As a lender, we are interested in the ability of the company to
successfully complete its asset conversion cycle. To assess
Company Operations this ability, we assess the embedded risks in the company’s
Supply operating cycle and evaluate the mitigates in place

• Horus imports around 85% of its production needs from India, Switzerland, China, and Germany

• Importation is mainly concentrated on active pharmaceutical ingredients and other chemical

substances used in production

• Supplier facility for said imports is usually up to 90 days

• The remaining 15% represent packaging materials and are obtained from the local suppliers with
supplier facilities that range from 30 to 60 days

Production

• All machinery used in production are sourced from globally well-known brands of European origin

• Automation to minimize cost and turnaround time by avoiding bottlenecks arising from manual
packaging

• Management is experienced and allow for a well functioning quality inspection and internal audit
functions

• The company holds a policy to keep in stock 120 days of raw material needs and 60 days of finished
goods

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Company Operations (Cont’)
Demand and Product Mix

• Horus has around 50 registered generic drugs, only 36 of which contributes to its sales (with 10
leading drugs making 85% of sales.

• Drugs are 100% marketed for and sold locally

• It mainly specializes in producing drugs that treat chronic non-communicable medical conditions, a
growing sub-segment of prescription drugs in Egypt

• Key growth factors include a rising local chronic disease burden, a rapidly growing population, and
the roll out of the new Comprehensive Health Insurance

• These factors generally indicate a potential increase in the quantity demanded of generic drugs,
and consequently the demand on most of our subject company’s production bundle

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Company Operations (Cont’)

2017 2018 2019

% of % of % of
Drug Name Medical Condition Revenue Sales Revenue Sales Revenue Sales
Milga Nerve Inflammation 56,417,188 22% 172,366,287 24% 206,365,263 27%
Gliptus Diabetes 19,722,551 8% 99,769,618 14% 130,735,306 17%
Genuphil Joint inflammation 31,369,200 12% 84,726,600 12% 102,705,730 14%
Damaged nerves pain
Pregavalex killer 12,874,691 5% 72,340,315 10% 92,679,508 12%
Virecta Erectile dysfunction 79,284,854 31% 66,208,747 9% 79,542,135 11%
Myofen Muscle pain killer 6,797,083 3% 35,118,546 5% 41,116,395 5%
Powerecta Erectile dysfunction - - 34,717,740 5% 45,831,850 6%
Chromax Metabolic syndromes - - 33,737,050 5% 40,901,109 5%
Donifoxate Gout - - 12,971,317 2% 9,627,291 1%
Paroxetine Depression/anxiety 9,810,181 4% 8,285,733 1% 6,021,289 1%
Total 216,275,748 85% 620,241,956 85% 755,525,877 87%

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Company Operations (Cont’)
Collection

• 100% of output is sold locally, 90% through Akhnaton Trading (Eva Group’s distribution arm) and 10%
through UCP

• Akhnaton Trading’s 3 main clients are UCP, Ibn Sina, and Pharma Overseas, the three main local
distributors (worth noting that Akhnaton does not keep inventory on hand and distributes for sister
companies by order)

• Credit terms extended to Akhnaton and UCP are 120 days and 150-180 days, respectively

• UCP specialize in tenders with MoH, public hospitals and Hospitals of the Egyptian Armed Forces

• The exact credit terms that Horus grant to UCP completely depend on the terms and conditions of the
tender in which UCP participates

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Risks and Mitigates

Risk Mitigate

Horus chooses a product mix that optimize profitability. Also,

management plans to directly export 20% of its sales in the
FX risk and a rigid price regime medium term

Experienced management that has the potential to exploit market

Competition risk opportunity to gain any possible market share

The pharmaceutical sector is strategic by nature. Hence, it’s in the

government’s best interest to revisit the pricing regime whenever
deemed necessary to sustain the industry’s financial health and
Price regulatory risk viability

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Sales and Profitability - Sales
KPI in EGP 000s 2015 2016 2017 2018 2019
Sales 8,412 12,050 254,199 725,834 864,721
Sales Growth - 43% 2010% 186% 19%

• Sales level witnessed an exponential growth throughout the period under study

• Operations started in 2015 and sales were generated from only 2 drugs (produced in 10 th of
Ramadan)

• The 2016 increase was mainly attributed to the addition of one extra drug (volume driven)

• Sales skyrocketed in 2017 due to the inauguration of the new facility in the 6 th of October city (started
operations in April 2017)

• By September 2017, 35% of the years sales were rendered and the remaining 65% took place in Q4
2017 upon the 15 leading drug transfers from sister company Eva Pharma

• In 2018, a full year effect of the 15 new products kicked-in, almost tripling previous year’s sales

• 2019 is considered the most indicative of the company’s true potential to grow its sales since no
products where transferred from Eva nor new drugs were registered by Horus

• 2019 growth reflects a transition in the company’s life cycle as it shifted from a startup company to a
growing company
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Sales and Profitability – COGS/Sales
KPI in EGP 000s 2015 2016 2017 2018 2019
COGS/Sales 47% 87% 58% 52% 48%

• COGS/Sales ratio recorded 47% in 2015, which is considered acceptable given the industry norm of
48-50%

• The 2016 level of 87% was attributed to costs of producing and clinically testing batches of new
drugs as part of the MoH registration process (which may take up to 6 months)

• This process started in 2015, upon commencement of the company’s operations, but gained huge
momentum in 2016

• Since huge batches were produced to be tested and not sold, high production costs substantially
outweighed the sales volume, resulting in a high COGS/Sales ratio

• Since the company effectively started operations in 2017, production intended for sales, and not for
stock piling for clinical testing, relaxed the ratio to near industry levels, 58%

• Such level was further reduced to industry levels and maintained in 2018 and 2019 as the company
transitioned to growing one rather than a start up

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Sales and Profitability – SG&A/Sales
KPI in EGP 000s 2015 2016 2017 2018 2019
SG&A/Sales 29% 69% 7% 15% 23%

• SG&A/Sales recorded 29% in 2015, the year in which Horus started operations (industry acceptable)

• In 2016, the ratio substantially increase due to a very high fixed costs in relation to a very low sales
volume, which is normal given that this year witnessed intensive clinical testing with a very low
volume of production being sold

• The ratio dipped to a 7% in 2017 due to the huge growth in sales in 2017, which came on the back of
the new products that were stilled being administered, marketed for, and sold by Eva Pharma’s
capacity since products were only transferred in Q4 2017

• The ratio bounced back to normal levels in 2018 and 2019 to record 15% and 23%, respectively, as
general, marketing, and selling expenses of the new 15 products are smoothly shifted to Horus

• Such level is considered industry acceptable

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Sales and Profitability – NOP & ROS
KPI in EGP 000s 2015 2016 2017 2018 2019
NOP Margin -5% -74% 27% 30% 26%
ROS -1% -36% 16% 18% 18%
NPAUI (125) (4,343) 41,487 127,465 156,425

• The company recorded negative NOP and ROS in 2015 and 2016 for the above mentioned
surges in the COGS and SG&A in relation to sales

• In 2017 onward, both the NOP and the ROS converged to industry-normal levels as the
company effectively launched its operations and transitioned into a growing company

• Such early transition in Horus’s life cycle was only supported by Eva Pharma

• NPAUI converged to industry normal levels as well

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Asset Efficiency – WI/Sales
KPI in EGP 000s 2015 2016 2017 2018 2019
Working Investment 1,421 4,446 88,031 230,195 320,909
WI/Sales 17% 37% 35% 32% 37%

• Working investment exponentially increased since the company’s start of operations in 2015,
reflecting the company’s eminent expansion of operations as sales gradually increased and the
increasing need for external finance

• This can be directly seen in a relatively steady WI/Sales ratio

• However, any minor deviations in the ratio will be discussed in the DOH analysis in the coming
slides

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Asset Efficiency – A/R and Due from DOH
KPI in EGP 000s 2015 2016 2017 2018 2019
A/R DOH 199 212 11 21 5
Due from Sis. (EVA) DOH 0 0 40 54 25
Due from Sis. (Akhnaton) DOH 0 0 245 103 92

• In 2015, A/R DOH recorded 199 days (much higher than industry level) as operations started in Q2
2015, squeezing all year’s sales in 2015’s second half and delaying a big portion of collections to the
year after, resulting in a distorted ratio

• The level remained high in 2016 due to the general market liquidity squeeze that most Egyptian
industries witnessed during the devaluation period

• Starting Q4 2017, and upon the product transfers, Horus started to channel 90% of sales to Akhnaton
and 10% to UCP (credit terms are 120 days and 150-180 days, respectively)

• The ratio was also distorted in 2017 since 65% of the year’s sales was rendered only in Q4, pushing
most year’s collection to the year after

• Such effect started to fade in 2018 onward as sales were spread throughout the yearlong, allowing the
ratios to truly reflect the company’s policy

• Due from Eva is due to accruals of export proceeds, which does not represent a substantial amount as
seen from the minimal ratio level (portion of the balance represent proceeds from tenders that Eva
honors on the transferred products on behalf of Horus)

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Asset Efficiency – Inventory DOH
KPI in EGP 000s 2015 2016 2017 2018 2019
INV DOH 432 252 143 127 104
RM DOH 176 69 51 72 47
WIP DOH 12 1 16 5 8
FG DOH 244 183 77 35 46

• In 2015 and 2016, the company produced batches of new drugs to be used for trials and clinical
testing as part of the MoH’s registration process, which may take up to 6 months to complete

• Upon commencement of operations in Q2 2015, the company started to purchase piles of raw
materials to produce drugs for MoH inspection and clinical testing purposes as seen from the high
RM and FG DOH ratios in 2015

• The high FG DOH ratio reflects the degree to which Horus has produced a considerable stock of
FG ready to be dispensed in the market but awaiting inspection by and approval of the MoH

• Clinical trials entails an extremely higher cost than that of manufacturing

• The process mostly took place in 2016, as reflected in a very high COGS/Sales ratio but it started
to gradually downsize towards 2016’s end as seen in a reduced FG and RM DOH ratios in 2016,
since a considerable portion of FD had already been sold

• Starting 2017, sales mainly depended on drugs transferred from Eva Pharma and inventory stocks
started to undergo the natural course of the company’s asset conversion cycle (with no stockpiling
for inspection and clinical testing)

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Asset Efficiency – Inventory DOH (Cont’)
KPI in EGP 000s 2015 2016 2017 2018 2019
INV DOH 432 252 143 127 104
RM DOH 176 69 51 72 47
WIP DOH 12 1 16 5 8
FG DOH 244 183 77 35 46

• This can be seen from the convergence of the INV DOH ratio from the 2015 and 2016 levels to
reach industry normal levels in 2017 and up until 2019

• After the effective kick off of the company’s operations in 2017, INV DOH reached 143 days
(which is industry acceptable) down from 252 days in 2016

• Ratio further enhanced by means of more efficient production lines that speeds up the
production process, especially the packaging phase

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Asset Efficiency – A/P and Due to DOH
KPI in EGP 000s 2015 2016 2017 2018 2019
A/P DOH 724 340 73 19 64
Due to Sis. DOH 0 0 374 214 4
• In 2015, the A/P DOH ratio is extremely distorted since payables then represented dues to
suppliers of the 10th of Ramadan factory’s revamping process (represents project based dues
and is not related to operations)

• The ratio in 2016 is also distorted as it accounts for dues for both RM and machinery suppliers

• In 2017, A/P were shifted to Due to Sis. (Eva) as Horus started to purchase Eva’s on hand
stock of the 15 transferred products in Q4 2017, which shifted all payments to the year after

• 2018 balance still pertains to finished goods sold by Eva to its sister company Horus in Q4 of
2017, post the 15 products’ transfer (it also contains payables related to the purchase of
licenses of the new products)

• Extending payables a whole year represent another form of support from sister company,
spearing any interest expense that Horus may have incurred if balance were settled by bank
short term debts

• Balance was settled in 2019 to reflect the company’s true potential to attract spontaneous
finance

• 2019 is when the company started to rely on bank STD (recorded EGP 116m as of 2019’s end)

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Short Term Liquidity
KPI in EGP 000s 2015 2016 2017 2018 2019
Current Ratio 1.41 1.58 1.37 1.38 1.46

• Horus’s capital structure was never a bank’s problem

• Although the Current ratio remained above 1 throughout the period under study

• It decreased in 2017 and 2018 due to the previously mentioned accumulation of dues to Eva
Pharma, which were settled in 2019 seen from the ratio’s rebound

• The current ratio falls within the industry norm as seen from the peer template

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Long Term Solvency
KPI in EGP 000s 2015 2016 2017 2018 2019
CIB Leverage 1.48 2.64 4.06 2.79 1.42
CIB Leverage (adjusted for 0.70 0.93 1.59 1.54 0.94
Subordinated Debt)

• CIB leverage witnessed an eminent improvement throughout the period under study, which
is mainly attributed to impressive more recent profitability and very low dividend payout
ratio of 10%, which allows for the gradual increase in the company’s equity base

• Balance of the Due to Shareholders account is completely subordinate to CIB with the
existence of corporate guarantee (cross guarantee between Eva Pharma and Horus)

• The balance gradually increased throughout the period under study until finally recorded
EGP 195m as of end of 2019, up from EGP 100m in 2015

• It is for the above reasons that the company’s leverage may be assessed after adjusted for
subordinated debt to record less than 1 as seen from the above table

• The ratio increased in 2017 and 2018 due to the accumulated dues to Eva in both years as
mentioned in the DOH analysis

• The ratio dropped to 0.94 in 2019 partially du to settlement of dues to Eva but mostly due
to an eminent increase in the company’s retained earnings to record EGP 132 in 2019 up
from EGP 23m in 2018

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Debt Service Ratio
KPI in EGP 000s 2015 2016 2017 2018 2019
DSR (COPAT) - - 3.29 3.70 1.74

• DSR demonstrates a high level of debt affordability, being substantially above 1 whenever
financial payments existed

• The DSR ratio decreased in 2018 and 2019 due to CPLTDs pertaining to the start of the
repayment schedule of the previously mentioned MTL granted by CIB to finance the
expansion project

• However, with such profitability, and given that the change in STD in 2018 and 2019 finances
a considerable portion of the company’s change in WI, debt coverage by COPAT will
continue to prove to be sufficient

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Guarantor KPIs
Eva’s Standalone KPIs in EGP 000s 2017 2018 2019
Sales 1,492,625 1,186,576 1,561,980
Sales Growth 29.64% -20.50% 31.64%
COGS/Sales 51.10% 50.40% 46.80%
NOP/Sales 14.90% 10.90% 15.90%
ROS 8.40% 4.57% 8.80%
Current Ratio 1.82 1.55 1.73
Leverage 0.73 0.81 0.64
DSR 1.38 0.81 1.92

• The group’s management decision to transfer 15 leading products from Eva to Horus in Q4 2017
have cost Eva Pharma a 20.5% sales decline in 2018

• Profit margins have drooped as well in 2018, reflecting the extent of profitability that these products
add

• Sales level, as well as profitability ratios, regained momentum in 2019 as seen above

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Consolidated KPIs
Eva and Horus Consolidated KPIs in 2017 2018 2019
EGP 000s
Sales 1,599,550 1,829,802 2,340,551
Sales Growth 37.49% 14.39% 33.70%
NOP/Sales 18.30% 19.20% 20.10%
ROS 10.44% 9.94% 12.60%
Current Ratio 1.9 1.75 1.7
Leverage 0.95 0.89 0.79
DSR 1.62 1.42 1.83

• Management evaluate sales growth as well as profitability on the entire group level and not on a
standalone basis, given the ultimate ownership of both companies

• The decision to transfer such 15 products proved worthy the group level as seen from a
consolidated Sales increase of 14%

• NOP/sales ratio improved as well by 1%

• Consolidated performance have witnessed a further enhancement in 2019 as seen from better
sales growth, operating margin, and ROS, ultimately reflecting on a better leverage and DSR

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Peer Template
Peer KPIs in EPG 000’s
KPI 2019 Horus Eva Pharma Global Napi
Sales 864,721 1,561,980 1,437,030
Sales Growth 19.13% 32.00% 28.00%
COGS/Sales 48.38% 46.80% 45.60%
SG&A/Sales 22.96% 34.50% 29.90%
NOP/Sales 25.67% 15.90% 23.50%
ROS 18.09% 8.80% 10.80%
NPAUI 156,425 137,535 154,515
A/R DOH 122 189 193
INV DOH 101 152 166
A/P DOH 66 85 84
Current Ratio 1.44 1.73 1.08
CIB Leverage 1.42 0.64 2.19
DSR (COPAT) 2.23 1.92 1.54

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Sources and Uses

2017
Sources Uses
COPAT 87,106 CHG WI (83,585)
CHG LTD 96,188 FP (26,449)
CHG DUE TO SHAREHOLDERS 36,437 NPE (150,437)
CHG INVESTMENTS 39,378    
2018
Sources Uses
COPAT 248,604 CHG WI (142,164)
CHG STD 20,999 FP (105,212)
CHG LTD 27,751 NPE (65,650)
CHG DUE TO SHAREHOLDERS 1,000    
2019
Sources Uses
COPAT 240,861 CHG WI (90,714)
CHG STD 95,337 FP (99,060)
CHG DUE TO SHAREHOLDERS 3,525 NPE (92,051)
    DIV. PAID (39,701)

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SWOT Analysis
Strengths

 Experienced management with a strong vision and excellent track record

 Shareholders that are committed to the business growth as evidenced by a very low dividend
payout ratio of 10% in Horus Pharma and Eva Pharma

 A well targeted product mix that mostly treats chronic diseases, a growing segment in the Egyptian
pharmaceutical market

 The company’s tax exemption that ended in 2018, which accelerated the growth of the company’s
equity base, being a startup company

 The existence of synergies from sister companies (the group is vertically integrated with its own
distribution arm which reflects the group’s cost-saving ability and the capacity to distribute margins
along the industry’s supply chain)

Weaknesses

 Low R&D due to limited research capabilities

 Company’s name is still new to the market; however, such issue is fading by time as the Horus
leverage on Eva’s reputation

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SWOT Analysis (Cont’)
Opportunities

 Growing population that drives demand on pharmaceuticals

 Rising chronic disease burden in Egypt that drives demand for prescription drugs and especially
cheaper generics

 Potential for growth in generic drugs segment as government becomes more cost conscious.
 Proposals for a new Egyptian Drug Authority

 The roll out of the new Comprehensive Health Insurance scheme

 Weak enforcement of intellectual property rights blocks foreign innovative drug makers from bringing in
extra competition in the Egyptian market. Such fact benefits domestic generic producers in the short
term but threatens the industry’s life cycle by postponing its maturity since progress of any pharma
industry directly depend on R/D capabilities and the development of new products

Threats

 Strict pricing controls and reference pricing system reduces drug makers' potential earnings

 Reliance on imported raw materials

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Projection Assumptions

Item Projection Assumptions

Income Statement  
Annualized 2020 based on H1 sales level of EGP 442,064K the remaining years
Net Sales are projected to increase by 7.01% to be in line with 5-years forecast of
prescription drug spending (forecasted to increase by a CAGR of 7.01%)
Source: Pharmaceuticals and Healthcare Q3 2020 Report by Fitch Solutions
COGS Projected at 49.9% being the average of the last two years
Depreciation COGS Projected at 5.49% being the average of the last two years
Depreciation SG&A Projected at 0.15% being the average of the last two years
SG&A Projected at 22.96% of sales as per the last historical year
Other Amortization Projected at 5.61% as per the last historical year
Interest Income Projected at nil conservatively
Current Tax Expense Projected at 22.5% being the tax rate
Takaful Tax Projected at 0.25% of sales

Common Stock Dividends Projected at a payout of 10%

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Projection Assumptions (Cont’)
Assets
Cash and Cash Collaterals
A/R
Raw Materials
Work in Progress
Finished Goods
GIT
Advance Payments
Due from Sis. (Eva)
Due from Sis. (Akhnaton)
Other Current Assets
Other Tangible Assets
CIP
Fixed Assets
Deferred Tax Asset
Prepaids
Other Intangible Asset
Less Accumulated Amortization
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Projected at 2.51% of sales being the average of the last two historical years
Projected at 13 days being the average last two years
Projected at an average of the past two years being 59 days
Projected at 8 days being the last historical
Projected at 46 days being the last historical
Projected at an average of the past two years being 9 days
Projected at nil
Projected at an average of the past two years being 40 days
Projected at an average of the past two years being 98 days
Projected at nil
Same as last year
Projected at LE 63m in 2020 to be finalized by 2021 on machinery
Machinery & equipment are projected to increase by 3% maintenance
Building & improv. are projected to increase by 2% maintenance
Same as last year
Same as last year
Same as last year
Projected to increase with amortization expense
57
Projection Assumptions (Cont’)
Liabilities  

Short Term Borrowing--New Based on runoff

Accounts Payable Projected at 41 days being the average of the last two historical years

Tax Payable Projected as tax expense

Accrued Expenses Projected at 6 days being the last historical

Dividends Payable Projected based on dividends payout

Due To Sis. Projected at 4 days being the last historical

Other Current Liability Straight line

LT Senior Debt--Existing Existing Based on run off

LT Senior Debt--New Projected as officer’s current and long term portions of the new MTL

Due To Shareholders Straight line

Equity  

Legal Reserve Projected to increase by 5%

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Projected Sources and Uses
2020
Projected Sources Projected Uses
COPAT 235,997 CHG WI (127,335)
CHG DUE TO SHAREHOLDERS 5,087 FP (95,115)
CHG STD 73,163 NPE (77,287)
CHG LTD 21,495 DIV. PAID (28,765)
2021
Projected Sources Projected Uses
COPAT 224,929 CHG WI (31,825)
  FP (126,275)
  NPE (17,180)
  CHG STD (30,189)
    DIV. PAID (10,876)
2022
Projected Sources Projected Uses
COPAT 237,099 CHG WI (34,085)
  FP (116,026)
  NPE (19,513)
  CHG STD (49,966)
    DIV. PAID (12,957)
2023
Projected Sources Projected Uses
COPAT 248,872 CHG WI (36,505)
  FP (87,987)
  NPE (20,025)
  CHG STD (83,859)
    DIV.PAID (15,620)

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 Valuation
Item Amount Assumption Horus Free Cash Flow to Firm
10 year bond after tax declared
Risk Free Rate 14.997%*0.8=12% (LE 000's) CASH DISCOUNT PRESENT
by the Minister of Finance
YEAR FLOW RATE VALUE
U.S. Market Premium (sourced 2020 (92,025) 15.04% (85,798)
from Dam Odaran website)
Market Premium 5.23%*1.83=9.57% 2021 98,277 16.75% 77,907
adjusted with a relative standard
deviation of 1.83 2022 170,273 18.80% 110,679
2023 182,740 21.20% 93,237
Based on World Bank Egypt GDP 2024 196,104 21.57% 81,431
FCF Terminal Growth Rate 3%
forecast 1,744,01
Beta 1 - Residual 3
15.04% 928,288
TOTAL VALUE 1,205,744
Method Shareholder Value in 000’s Value/Share ADD REDUNDANT ASSETS 17,165
EGP 817,215 EGP 817 LESS MARKET VALUE OF DEBT 405,694
FCFF TOTAL SHAREHOLDER VALUE 817,215
FCFE EGP 397,373 EGP 397 SHAREHOLDER VALUE PER SHARE 817
Average of FCFF & FCFE EGP 607,294 EGP 607        

Horus Free Cash Flow to Equity

• FCFF generates a much higher value per share since its discount (LE 000's) CASH DISCOUNT PRESENT
rate (the weighted average cost of capital) account for a cost of YEAR FLOW RATE VALUE
(81,881
debt that is much lower than the assumed cost of equity (the only 2020 ) 21.57% (74,263)
rate used to discount FCFE) (49,785
2021 ) 21.57% (37,142)
2022 9,560 21.57% 5,867
• Cost of equity is assumed to be 21.57% by using the CAPM model 2023 12,386 21.57% 6,252
and the above assumption reasoning 2024 170,619 21.57% 70,849
Residual 984,104 21.57% 408,645
TOTAL VALUE 380,208
• Cost of debt is assumed to be the current offer corridor of 9.75% ADD REDUNDANT ASSETS 17,165
LESS MARKET VALUE OF DEBT 0
plus a spread of 0.75% to be in line with CIB’s pricing for the TOTAL SHAREHOLDER VALUE 397,373
subject company’s existing MTL facility SHAREHOLDER VALUE PER SHARE 397
       

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Breakeven Analysis
Breakeven Analysis Summary
  2019 2020 2021 2022 2023 2024

Sales 864,721 926,116 991,870 1,062,293 1,137,716 1,218,494

COGS (418,340) (488,063) (522,716) (559,829) (599,576) (642,146)

SG&A (198,546) (213,007) (228,130) (244,327) (261,675) (280,254)

             
FIXED COST 356,431 396,081 426,999 448,768 446,072 379,740
COGS 15% (62,751) (73,209) (78,407) (83,974) (89,936) (96,322)
SG&A 85% (168,764) (181,056) (193,911) (207,678) (222,423) (238,216)
Interest Expense (67,060) (49,153) (37,889) (24,189) (7,291) -
CPLTDS (32,000) (48,000) (72,000) (88,000) (81,358) -
Depreciation (25,436) (44,141) (44,271) (44,404) (44,541) (44,681)
Amortization (420) (522) (522) (522) (522) (522)
             

VARIABLE COST 385,371 446,805 478,528 512,503 548,891 587,862

COGS 85% (355,589) (414,854) (444,308) (475,854) (509,640) (545,824)
SG&A 15% (29,782) (31,951) (34,220) (36,649) (39,251) (42,038)
             

BREAKEVEN SALES 642,982 765,299 825,040 867,100 861,891 733,727

SAFETY MARGIN 25.64% 17.36% 16.82% 18.37% 24.24% 39.78%

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High Point Liquidation
CBE Report as of DEC 2019
Limit Utilized Not Utilized Utilization Rate
Unsecured 600,975 413,907 187,068 68.9%
Letter of Credit 23596 1091 22,505 4.6%
Letter of Guarantees 2474 329 2,145 13.3%
Guarantees (Contingent Liabilities) 664,668 267,233 397,435 40.2%
Total Exposure 1,291,713 682,560 609,153 52.84%
Total Exposure without Guarantees 627,045 415,327 211,718

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High Point Liquidation (Cont’)
High Point Liquidation (Inflating the inventory by EGP 211,718)
Balance Balance Shrinkage
Assets (2019) (Inflated ) Shrinkage % amount NRV
Cash 17,165 17,165 100% 17,165 0
Marketable Securities 0 0 100% - 0
Net Receivables 11,874 11,874 10% 1,187 10,687
Raw Materials 53,370 148,066 10% 14,807 133,259
WIP 8,697 24,128 50% 12,064 12,064
Finished Goods 53,256 147,750 30% 44,325 103,425
GIT 4,000 11,097 100% 11,097 0
Advance Payment 0 0 100% - 0
Due from Sis. (Eva) 60,005 60,005 20% 12,001 48,004
Due from Sis. (Akhnaton) 218,138 218,138 20% 43,628 174,510
increase by
Land 32,003 32,003 20% - 38,404
Net Building and Machinery 520,609 520,609 60% 312,365 208,244
Investment 0 0 20.00% - 0
Due From sisters-Unrelated 0 0 100% - 0
Other Tangible Assets 26,784 26,784 100% 26,784 0
Deferred Tax Asset 9,898 9,898 0% - 9,898
Prepaids 4,457 4,457 100% 4,457 0
Net Intangibles 5,181 5,181 100% 5,181 0
Total Net Realizable Value 738,494

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High Point Liquidation (Cont’)
  Liquidation Period 3 Months    
  Cost of Debt 10.50%    
Accrued Total Senior
Liabilities Outstanding (2019) Balance (Inflated ) Interest Liability
STB 116,336 328,054 8,611 336,665
Total Debt (CP+LTD) 289,358 289,358 7,596 296,954
Total Lease (CP+LTD) 0 0 0 0
Account Payable 73,437 73,437 0 73,437
Tax Payable 6,166 6,166 0 6,166
Accrued Expense 10,971 10,971 0 10,971
Interest Payable 0 0 0 0
Dividends Payable 28,765 28,765 0 28,765
Down Payment 0 0 0 0
OCL 4,962 4,962 0 4,962
Due to Sis. Not Related 0 0 0 0
Due to Shareholders 195,176 195,176 0 195,176
Total Senior liabilities 953,096

Seniority
Tax Payable 6,166
Remaining TSL 946,930
Remaining NRV 732,328

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Lending Rationale – MTL I
Credit Analysis Features Description
Loan Amount 305m (current outstanding 289m)
Currency EGP
4 years and 1 months including availability period and grace period (15 step-up quarterly
Tenor
Installments)
First Disbursment Date 30th Sep 2015
Grace Period 36 months from first disbursment
Availability Period 30 months from first disbursment

0.75% over Corridor Offer (Interest is calculated monthly after first disbursement noting that
Interest Rate interest was capitalized from the date of the first drawdown up until December the 31st of
2017)

To finance the cost of building infrastructure, fittings, fixtures, machinery, and equipment
Purpose
needed for the 6th of October factory project and permanent level of WI

Company’s cash flows/profits over the facility’s tenor which extends to September 30th 2023,
Source of Repayment
the date of the last installment in the repayment schedule

Risks Absence of a sustainable stream of future cash flows

Cross guarantee (EGP 400,000K) & Unconditional Irrevocable undertaking to maintain the
Main Protection
due to shareholders account

Monitoring financial, negative, and positive covenants and monitoring validity and
Monitoring
enforceability of the main protections

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Lending Rationale – MTL II (CBE Initiative)
Credit Analysis Features Description

Loan Amount 33.5m (including L/C portion EUR 1.525m)

Currency EGP

Tenor 2 years and 6 months including availability period (18 equal installments)

Grace Period None

Availability Period 12 months from L/C issuance Date

L/C Issuance Date 6th of August 2020

Interest Rate 8% CBE Initiative

Purpose To finance and refinance 100% of the importation of Soft Gel machinery and Equipment

Source of Repayment Company’s cash flows/profits over the facility’s tenor

Risks Absence of a sustainable stream of future cash flows

Cross guarantee (EGP 400,000K) & Unconditional Irrevocable undertaking to maintain the
Main Protection
due to shareholders account

Monitoring financial, negative, and positive covenants and monitoring validity and
Monitoring
enforceability of the main protections

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Lending Rationale – MPL I

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Lending Rationale – MPL II (CBE Initiative)

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CIB Profitability
CIB Account Profitability

EGP 000's 2019 Sep-20 Annualized 2020

Total Interest Income 59,052 35,117 46,823

Total Interest Expense (50,582) (30,637) (40,849)

Net Interest Income 8,470 4,480 5,973

Total Non-Interest Income 668 1,179 1,572

Total Non-Interest Expense (4,838) (5,039) (6,719)

Gross Contribution 4,300 620 827

• As of Sep 2020, Horus has generated gross contribution of EGP 620K in 2020, a very low level
if annualized and compared to EGP 4,300K generated throughout 2019

• The decline is mainly coming from a drop in the bank’s interest income as the company
continues to amortize and settle installments under the existing MTL

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Conclusion and Recommendation

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End of Presentation

Thank you

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