SA pharmaceutical industry extends to Africa

The IMS Health Global Pharma Prognosis estimates that SA will account for 23% of African pharmaceutical sales by 2014.

This is good news for investors. Frost & Sullivan health-care analyst Tinotenda Sachikonye favours Aspen in the listed pharmaceutical sector. She says Aspen's wide geographical representation gives it the competitive advantage of being protected from the operating environment in SA.

Aspen managed to report strong performance, with growth coming particularly from emerging markets. "One of the most important competitive advantages a pharmaceutical company can have is a strong product pipeline and Aspen has the strongest among the four companies," says Sachikonye.

Vestact analyst Sasha Naryshkine says Aspen is unrivalled in the sector, with a sizeable investment by multinational pharmaceutical company GlaxoSmithKline into the company, and exposure to emerging markets. He says Aspen's Australia-based Sigma acquisition was also a good strategy. "The Australian deal is a springboard to the Philippines and Southeast Asia - it needed Sigma as a base. Aspen also reduced its exposure to the SA market at the right time. Latin America is the fastest-growing area for generics, and with many international products coming out of patent, it stands to gain a link to a pipeline of other products," he adds.

Adcock, however, has its major operations in SA. It also had to deal with the dextropropoxyphene (DPP) painkillerbanning issue. "Given these tough operating circumstances, Adcock's performance was fair overall, exhibiting a strong performance in the over-thecounter (OTC) segment, but struggling in its prescription and hospital segments. Adcock has to continue to play on its strength in the OTC segment, launching some of its brands in other geographical regions, Ghana in particular," Sachikonye says.

Cipla's performance was much stronger and it remains the fastest-growing of the four listed companies. However, slow product registrations by the Medicines Control Council are preventing Cipla from using one of its competitive advantages, the partnership with Cipla India, which provides the company with a strong and attractive pipeline.

"Adcock could have managed the DPP matter better on a PR level and the antiretroviral tender allocation was not good for it either; but its Africa footprint and Nutrilida business acquisition is looking good. Adcock has really had some unfortunate events that devalued its share. But again we are talking about a business that is over 120 years old, so the setbacks should be temporary," Naryshkine says. "Cipla remains in my view a distribution and not a productbased business."

Litha Healthcare is also expanding rapidly. It made two pharmaceutical acquisitions and there is a pending Pharmaplan acquisition. Litha CEO Selwyn Kahanovitz says the company would like to move into African markets in the next five years.

Source: Financial Mail