African Firms Up For The Fight

Although foreign, especially Indian, firms in the African pharmaceutical industry are playing a crucial role in providing effective but affordable generic drugs, Africa’s own pharmaceutical companies are setting global benchmarks in excellence of product.

An example is Aspen, a South African pharmaceutical firm, which has blossomed into a global giant. It now has a presence in more than 150 countries, including not only African countries such as Kenya, South Africa, Tanzania and Uganda, but also Western countries such as Germany, Ireland and Australia. The company also has 18 manufacturing facilities across six continents.

Adcock Ingram is another impressive African pharmaceutical company. It has captured a tenth of the private market for pharmaceutical products in South Africa and is the largest hospital supplierd. It performs particularly well in terms of supplying over-the-counter (OTC) drugs. Its presence also reaches beyond Africa to include India. Its product portfolio is diverse, from over-the-counter drugs to intravenous solutions.

However, although many African firms are doing well overall, they are largely not comparable with foreign competition.

“They have a long way to go to achieve the kind of critical mass and scale of the Indian operators. So far, the domestic operators are quite niche and they need more government support in order to become more significant regional players,” argues Gustav.

That said, recent financial results for African pharmaceuticals like Aspen have been very positive. In the year ended 30th June 2012, Aspen’s profits were up 23% to R15.3bn ($174m). Its gross profit also increased by 30% in the same period, and its operating profits surged by nearly a quarter. Its gross revenue from sub-Saharan Africa increased by 27% to R1.7bn ($196m) and its EBITA grew 40% to R248m ($29m). To a large extent, the positive results for sub-Saharan Africa were driven by its collaboration with GSK and a strong results in Nigeria and the rest of West Africa.

Adcock Ingram has suffered mixed results recently. In the six months ended 31st March 2012, according to its unaudited financial results, its turnover rose 5%. Dividends per share grew solidly by 6.2% to 86 cents. But its EBITDA dropped 15% and its HEPs (headline earnings per share) also dipped 10%. Headline earnings dropped 12% to R335.8m.

Over the last six months, the company has had to deal with a number of challenges and, by its own admission, has had to face up to some “disappointing” financial results.

For example, in Southern Africa, the firm was unable to achieve the ARV tenders they were aiming for at the latest adjudication in December 2010, which has affected their maximum potential earnings. In Kenya, a flurry of counterfeit drugs into the market compelled the company to recall stock of its OTC analgesic Pavanol. And after its manufacturing centre failed an inspection, two products had to be pulled. All these setbacks have affected final financial results. The prescription aspect of its business has achieved better profits in contrast. And its approach to dealing with those challenges is simple: investment. “The company continues to invest in its supply chain products and people, all of which give confidence for improved future performance,” say the firm, which has also profited where it has adopted aggressive marketing strategies, such as in Ghana.

Nigerian firms in the mix

It is important not to focus exclusively on the larger, more established African pharmaceutical firms: there are some smaller, younger firms doing very encouragingly indeed.

A case in point is the Nigerian firm Bolar. It was set up in 1984 and commenced operations in 1986, focusing on retail pharmacy. Now it works with high-profile companies in the health industry including AstraZeneca and Johnson & Johnson. It is growing and moving in new directions. It is now keen to introduce its own branded products to the market including drugs that treat chronic diseases such as diabetes, cancer and hepatitis.

Evans is another large Nigerian pharmaceuticals manufacturer, which has been in operation since 1984. It produces both prescription and over-the-counter drugs. Its pharmaceuticals arm consists of 23 products, including anti-malarial products, and cough and cold products. It has a manufacturing plant in Agbara and has grown to be amongst the 10 largest chemicals firms in Nigeria.

Another significant Nigerian firm is SWIPHA, which is the first pharmaceuticals company in the country to obtain ISO 9001: 2000 certification, the globally recognised standard for quality management of businesses. It manufactures 70% of its products inside the country. Emzor Chemists is also another Nigerian company to watch – it is the largest local pharmaceuticals manufacturer in the country. Many Nigerian firms, such as Evans, SWIPHA and May & Baker are currently working towards improving their production processes in order to comply with WHO pre-qualification demands. Once these firms achieve this, they will be in a much stronger position to win tenders.

Nonetheless, in Nigeria, as in other African countries, local companies have some way to go before they can compete with already established foreign firms. In Nigeria, international firms like GlaxoSmithKline and Pfizer still dominate the market. While it will be difficult to compete with them, the contribution of indigenous companies to Africa’s healthcare needs is significant. The major problem is to do with scale and research and development facilities. Perhaps if the continent were to take a more holistic approach to its medical needs, standardise regulatory regimes and create mechanisms to share best practice and research among indigenous firms, more African firms could follow in Aspen’s footsteps and become giants in emerging markets.