Red tape holding up Litha's vaccine facility

Litha's factory approval has delayed its vaccine manufacturing plans. Image: Baitong333 Free Digital Photos

Litha is the smallest healthcare company listed on the JSE‚ with a market capitalisation of about R1.5bn. It sells medical devices and drugs‚ and imports vaccines under its Biovac joint venture with the government. Biovac has suffered repeated delays in gearing up for the local production of vaccines at its Pinelands plant‚ which the government has long hoped will spearhead a revitalisation in SA's vaccine industry.

Biovac was formed 10 years ago by the state to try to regain the ground lost when SA's State Vaccine Institute‚ the South African Institute for Medical Research‚ and the National Institute for Virology ceased making vaccines. The state sold part of its stake to an empowerment consortium led by Litha in 2003.

When Litha listed in 2010‚ it said it would be making its own vaccines by this year.

However, Litha's chief executive Selwyn Kahanowitz said the Medicines Control Council (MCC) had yet to grant a manufacturing licence for Biovac's Pinelands plant.

Site inspection done but licence still pending

The MCC did a site inspection earlier this year. However, Litha is now likely to have its manufacturing licence in place sometime next year and hopefully can then start producing vaccines," said Kahanowitz. Litha planned to start by making the hepatitis B vaccine‚ which were currently undergoing stability testing with the MCC.

Kahanowitz made his remarks as Litha released a disappointing set of third-quarter results‚ as the weak rand and increased competition put a squeeze on margins in its key pharmaceutical division.

Headline earnings per share from continuing operations fell by two-thirds to 0.2c in the three months to September‚ down from 0.6c a share in the corresponding period last year. Revenue rose 10.6% from R240m last year to R266m this quarter. Operating profit fell 14.2% to R10.69m‚ from R12.47m last year.

The pharmaceutical division saw margins almost halve‚ falling from 9.4% to just 5.3% as challenging market conditions and a milder than expected winter took their toll on sales.

Medical division performs strongly

However, Litha's medical division‚ reported record revenue for the quarter, driven by sales of forensic kits to the state‚ and the sale of the Da Vinci surgical robot to the Urology Hospital in Pretoria.

Revenue rose 40% for this division from R77.6m last year to R108.6m this year but margins were maintained at 14.8%. Kahanowitz said thin margins on the Da Vinci device would‚ in future‚ be offset by higher margins on sales of consumables used by the device.

Litha's biotech division reported an operating margin of 39.9%‚ a turnaround on the previous year's loss of 10.3%‚ after it renegotiated contracts with suppliers to share foreign exchange exposure risks.

36One Asset Management analyst Jean Pierre Verster said: "Obviously these are quarterly results so one must be careful not to read too much into them. The big disappointment was the pharmaceutical division‚ which is where most of the growth is expected to come from."