Eyeing fur­ther growth

Phar­ma­ceu­ti­cals will pro­vide the tonic

Finweek English Edition - - COMPANIES&MARKETS - ANDILE MAKHOLWA andilem@fin­media24.com

LITHA HEALTH­CARE is evolv­ing into a di­ver­si­fied health­care busi­ness and wants to lever­age its pub­lic and pri­vate clien­tele. Its share price per­for­mance sug­gests in­vestors may be see­ing value in this AltX grad­u­ate. Over the past 12 months Litha’s share price has grown from 83c to 235c – a 183% ap­pre­ci­a­tion. Litha moved on to the JSE’s main board last year af­ter it was ac­quired by Myr­iad Med­i­cal Hold­ings.

Litha’s main busi­ness is the dis­tri­bu­tion of vac­cines un­der agency from sev­eral ma­jor in­ter­na­tional phar­ma­ceu­ti­cal com­pa­nies. The group is a sup­plier of pae­di­atric vac­cines to the South African Gov­ern­ment through The Bio­vac In­sti­tute (TBI) – a pub­lic/pri­vate part­ner­ship with the Health Depart­ment and the Depart­ment of Science & Tech­nol­ogy. Its med­i­cal de­vices divi­sion com­prises the whole­sale dis­tri­bu­tion and im­por­ta­tion of lo­cal and in­ter­na­tional med­i­cal equip­ment, while its small­est phar­ma­ceu­ti­cals divi­sion mar­kets and dis­trib­utes gener­ics and over-the­counter prod­ucts to the phar­ma­ceu­ti­cal and con­sumer-re­lated in­dus­try.

Post­ing an­nual re­sults last week, group CEO Sel­wyn Ka­hanovitz said the group’s biotech divi­sion is well po­si­tioned to

Litha com­mis­sioned the con­struc­tion of its own vac­cine man­u­fac­tur­ing fa­cil­ity a few years back

ben­e­fit from the rapidly grow­ing vac­cine mar­ket, which grew from US$5bn in 2000 to $17bn in 2009. It’s ex­pected to leap to $100bn in 2025. In SA, im­mu­ni­sa­tion spend was R90m in 2003; last year it hit R1bn.

Litha – which com­mis­sioned the con­struc­tion of its own vac­cine man­u­fac­tur­ing fa­cil­ity a few years back – will start pro­duc­ing at least one prod­uct in 2013. Ka­hanovitz says the fa­cil­ity will lift the biotech divi­sion’s op­er­a­tion mar­gin north of its cur­rent 9,7% and en­able Litha to ex­pand into the rest of the SADC coun­tries.

Its phar­ma­ceu­ti­cal divi­sion is ex­pected to dou­ble its R79m turnover over the short to medium term. The plan is to make it the sec­ond big­gest divi­sion in the group. “We have a fo­cused, ac­quis­i­tive strat­egy for the pharma busi­ness, be­cause that’s where we see growth com­ing from. We’re look­ing for brands from some multi­na­tion­als; some non-per­form­ing or ne­glected brands or pharma prod­ucts that we can put into our sales struc­ture,” says Ka­hanovitz. “There are also a few In­dian com­pa­nies that have prod­ucts about to be ap­proved or hav­ing been ap­proved, but they aren’t happy with the peo­ple mar­ket­ing them.” To ef­fect that, the divi­sion has boosted its na­tional sales team.

Though its med­i­cal de­vices divi­sion also has growth prospects, Ka­hanovitz ex­pects that to be slower than its other di­vi­sions. How­ever, it has a good bal­ance of pub­lic (45%) and pri­vate (55%) ex­po­sure.

Once ru­moured an ac­qui­si­tion tar­get by Ad­cock Ingram, Litha posted a 45% rise in an­nu­alised head­lined earn­ings/share to year-end 2010. Ka­hanovitz says with R1,2bn turnover Litha has scale to com­pete in the health­care mar­ket. How­ever, he wouldn’t re­ject po­ten­tial deals. He says: “One doesn’t want to close doors, but we’re re­ally fo­cused on build­ing our busi­ness. We now have the scale. We have to take ad­van­tage of our shared ser­vices to grow the busi­ness.”

SEL­WYN KA­HANOVITZ

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