SA firms win part of ARV tender
Two biggest pharmaceutical manufacturers awarded a quarter of R18.3bn drug contract
SA’s two biggest local pharmaceutical manufacturers have been awarded a quarter of the government’s R18.3bn Aids drug tender announced last week.
SA’s two biggest local pharmaceutical manufacturers have been awarded a quarter of the government’s R18.3bn Aids drug tender announced last week.
The low-margin, high-volume Aids drug business is an important part of maintaining a good relationship with the state and using spare manufacturing capacity, rather than boosting the bottom line.
The three-year tender is a key aspect of the government’s strategy for meeting its goal of ensuring 6-million people are on treatment by 2020/21.
SA has the world’s worst HIV/Aids epidemic and the world’s biggest treatment programme. There were an estimated 7-million people living with HIV by the end of 2017, and at the last count the state was treating 4.2-million patients.
Sasfin equity analyst Alec Abraham said the value of Aids drug contracts for local pharmaceutical companies hinged on whether they had spare capacity in their manufacturing plants.
“If they have spare capacity, the throughput of the ARV [antiretroviral] tender helps them generate economies of scale. If, however, they don’t have spare capacity and are producing their own drugs at a higher margin, getting an ARV tender is not to their advantage and would be diluting profitability,” he said.
Adcock Ingram was awarded 12% of the tender (R2.2bn), while Aspen Pharmacare was awarded 11% (R1.9bn), according to figures provided by the companies. The values include VAT.
Aspen Pharmacare s head of strategic trade, Stavros’ Nicolaou, said the volumes specified in the tender were only a guide and the volumes ordered by provincial health departments could be higher or lower, depending on patient demand and whether other suppliers were able to fulfil their contracts.
It is not uncommon for pharmaceutical companies to step in when their rivals fail to meet their obligations.
Nicolaou said Aspen’s Port Elizabeth plant had the capacity to provide the quantities it had been awarded, but the company would consider repurposing equipment if the volumes purchased by the state were significantly lower than those specified in the tender.
Adcock Ingram declined to answer Business Day’s questions about the utilisation of its Wadeville plant, as it is in a closed period. It is due to announce its interim results to December 31 on Thursday.
In a statement issued on Monday morning it said: “The tender award reflects positively on our manufacturing capability, breadth of our product offering and our historic service delivery levels. Our investment into the oral solid dosage facility situated in Wadeville has increased our ability to manufacture and supply antiretroviral medicines.”
The most important part of the tender is the supply contract for a new generic pill called TLD, which combines tenofovir, lamivudine and dolutegravir.
It is cheaper and has fewer side effects than the mainstay treatment TEE, which contains tenofovir, emtricitabine and efavirenz.
The tender calls for 147-million patient packs of TLD over the three years from July 1. It has been split between eight companies with varying degrees of local manufacturing capacity. In addition to Adcock Ingram and Aspen, they are local firm Sonke Pharmaceuticals and Indian generic drug manufacturers Mylan, Hetero, Aurobindo, MacLeods and Cipla Medpro.
IF THEY HAVE SPARE CAPACITY, THE THROUGHPUT OF THE ARV TENDER HELPS THEM GENERATE ECONOMIES OF SCALE