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Adcock eyes Nigeria expansion

Adcock Ingram, South Africa’s second-biggest drugmaker, would consider an acquisition in Nigeria as part of its plan to enter Africa’s most populous nation, its chief executive said.

Adcock, which scrapped a bid for rival Cipla Medpro in 2009, has been looking for new revenue streams and hopes to generate 30 percent of its earnings from outside South Africa in two to three years.

It finalised the acquisition of Ghana’s Ayrton last year and increased its pipeline of drugs by teaming up with U.S. firm Merck & Co to co-promote drugs in sub-Saharan Africa. Adcock, which on Tuesday posted a flat first-half profit, is now looking at Nigeria, sub-Saharan Africa’s largest economy after South Africa. “We certainly hope to establish a presence (in Nigeria), either acquisitively or by putting in our own infrastructure,” Jonathan Louw, told analysts and reporters at the company’s results presentation.

Given the outsized valuations in Nigeria, Adcock is unlikely to make a large acquisition and would probably spend in the region of the 200 million rand ($29 million) it paid for Ayrton, said Mathew Menezes, an analyst at Avior Research.

“In Nigeria, I don’t think it would be too material. The pricing is the problem,” he said. The company also said it was working on new partnerships with two global pharmaceuticals companies, deals that could increase the amount of drugs available for distribution. Adcock declined to name the companies.

Adcock reported half-year headline earnings per share almost unchanged at 221 cents, hurt by the suspension of some of its key drugs and a sharp drop in its share of the lucrative government HIV/AIDS drug supply contract. Headline EPS, the primary profit measure in South Africa, strips out certain one-off items.

The company is supplying 166.5 million rand of drugs under South Africa’s two-year HIV/AIDS drugs supply contract, just 4 percent of the total, compared with 21 percent under the previous deal.

Adcock last year also withdrew three drugs containing the painkiller DPP for safety reason. Those drugs had contributed 200 million rand to annual sales.

It said sales rose 14 percent to 2.2 billion rand and lifted its dividend by 4 percent to 81 cents. Shares of Adcock, which are little changed this year, were up 0.53 percent at 60.42 rand, roughly in line with the All-share index.


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