In the last few years, several promising drug manufacturing companies in the country have closed shop with many on their way to winding down.
In 2017, Evans Medical Plc was taken over by First Bank and defunct Sky Bank Plc a defaulting on a loan facility.
Sadly, before Evans, with the World Health Organization’s prequalification license that gives it an opportunity to participate in international bids could hardly reap the dividend, the two lenders came for its jugular.
Drugmaker, Swiss Pharma Nig Ltd (Swipha) was in 2017 acquired by French pharmaceutical multinational firm, Biogaran, a subsidiary of the Servier Group specialized in generic medicines.
No doubt the doing business in Nigeria is not for the faint at heart.
Despite the uninspiring performance among drug makers in the country, Fidson Healthcare Plc has in recent times show a ray of brilliant performance which has caught the attention of Analyst desk at BusinessDay and industry watchers.
Fidson in History
Started as a local distributor of pharmaceutical products in 1995, barely a year after Fidson moved into the importation of its own brand of finished medicines. Determined to make an impact on Nigeria’s growing population, Fidson set up its first local manufacturing facility in July 2002.
In March 2005, Fidson became the first company in sub-Saharan Africa to manufacture Antiretroviral (ARVs) drugs. In February 200, Fidson set up a second manufacturing facility and ceded the former manufacturing facility to an international joint venture project, which led to setting up of Ecomed Pharma Limited.
Fidson currently run a Current Good Manufacturing Practices (CGMP) compliant manufacturing facility and are one of a few Nigerian pharmaceutical manufacturers that are candidates for the WHO GMP certification.
The GMP certification is the aspect of quality assurance that ensures that medicinal products are consistently produced and controlled to the quality standards appropriate to their intended use and as required by the product specification.
Fidson’s shares were quoted on the floor of the Nigerian Stock Exchange on June 5, 2008. As of December 31, 2018, the issued share capital is held 38.86percent directly by its directors and 5.74percent indirectly by directors while 54.94percent by the investing public.
The company realises its revenue from the sale of Ethical Products, sale of Over the counter drugs and sale of paper products and diapers.
Fidelis Ayebae, a 1976 graduate of civil engineering from the Mainland Institute of Technology is the founder, CEO& MD. Fidelis has worked in various capacities with a number of organizations among which is CitiBank Limited.
Read also: Nigeria should allocate 15% of its annual budget to health – Atueyi
As of December 31, 2018, Fidelis owns a 35.44percent stake in the healthcare company. He also doubles as the chairman of Nem Insurance Plc and as of December 31st, 2018, Fidelis owns a total of 24.37million units of shares in the insurance company. He is an Associate of the Chartered Institute of Administration and also a member of the Nigeria Institute of Management. His wife, Funmilola is a non-executive director of the company.
Source: CardinalStone Equity research report
Other non-executive directors include Emmanuel E. Imoagene, Mabel Ndagi, and Segun Adebanji, who is the chairman.
Financial Performance
A dive into the company’s financials show revenue has been on the increase.
In full-year 2018 for the period ended 31st December 2018, the revenue stood at N15.5bn as compared to N14.1bn recorded in the full year 2017.
Full-year 2019 revenue would continue its upward trajectory, supported by new product development and improved capacity utilization. It, however, recorded a loss of N97.4m as compared with 1.57bn in the full year 2017.
What is Fidson doing differently?
During its facts behind the figures held on the floor of the nation’s bourse in April, the company’s Head of Finance and Accounts, Imokha Ayebae shed lights on the rationale behind the company’s rights issue. The company raised N3 billion through a rights issue of 750 million shares at N4 per share.
Proceeds from the rights issue will be used to deleverage its balance sheet and inject more working capital. As at November 2018, the company had an outstanding debt balance amounting to N6.1 billion.
Imokha said with Fidson’s state-of-the-art factory in Ogun State and increased capacity utilization, the company carried out a number of cost-cutting measures to help achieve its target, such as lowering finance cost with fresh capital and an increase in product prices, adding that plans are in top gear to reduce energy cost from the current 40 percent of total by moving from diesel to gas-fired power generators, introducing new products and cutting out middlemen.
He blamed the drop in revenue and profit in 2018 to an increase costs due to scarcity and cost of imported raw materials, Nigeria’s port congestion and Naira devaluation, all of which, he said impact on operating costs that could not be passed to consumers.
Fidson’s penetration into the low end of the market has continued to support top-line and is expected to contribute further over the years.
A key product of the company its intravenous fluids has gained significant traction since the introduction in 2017, management expects this to increase which a bullish posture given the local demand-supply gap for intravenous fluids.
Imokha said the company is projecting to earn N20 billion in sales revenue this year, with profit before tax to hit N3.4 billion, soaring by 2020 to N23 billion and N3.92 billion respectively.
The company is also enjoying a tax holiday under the pioneer status incentive of the Federal government for a three year period which would help retain working capital and deliver more value for its shareholders.
Fidson has also enjoyed government patronage in the wake of renewed awareness for locally manufactured products and a 20percent import duties on finished pharmaceutical products.
Sector filled with several landmines
Drugmakers in the country like their counterparts in other sectors of the economy are weighed down by several challenges.
Notable among this is lack of adequate power supply, logistics worsened by congestion and bad roads at the nation’s busiest port, Apapa, harsh economic environment which has weakened consumers purchasing power.
Sadly, manufacturers have not been able to transfer the surging cost of production to consumers who are cash trapped, while some have resulted to cheaper traditional medicines with some taking their worsened health conditions to religious ‘miracle’ centers.
Drugmakers have also battled the effect of drug smuggling through the nation’s porous border post, while drug faking and adulterated medicines continue to thrive in quack medicine kiosk and roadside medicine shops.
No doubt drug makers have their hands full as the industry is laden with thorns.
Outlook
Going forward, it is expected that Fidson, with a strong fundamental will continue to deliver substantial value proposition for investors on the back of the company’s ability to continue to grow its top line, given an ultra-modern facility, robust product offerings over 300 drug products to its credit. Fidson has also been selected as the preferred local manufacturing partner for GlaxoSmithKline (GSK) Plc with effect from the third quarter in 2021.
