Fidson Healthcare Plc, over the years, has made marks as an indigenous pharmaceutical company despite challenges. Kehinde Akinseinde-Jayeoba x-rays the journey of the company to its projection of becoming a Research and Development based manufacturer.
FOUNDED in 1995, Fidson Healthcare Plc has been relentless in its goal of becoming a leading player in the pharmaceutical landscape in Nigeria. The company has not failed in its five core values – Innovation, Excellence, Passion, Integrity and Ownership – which form the substructure on which the firm has built a world-class business that has earned the respect and admiration of even the fiercest of its competitors.
Fidson runs a CGMP-compliant manufacturing facility and is one of the few Nigerian pharmaceutical manufacturers that are candidates for the WHO GMP certification. The company is into technical collaboration with various overseas manufacturers, most of which are market leaders in their areas of specialization in order to deliver unique products and cost-effective services.
Over the years, the healthcare company had weathered the storm encountered by manufacturing companies in the country, ranging from multiple taxation, devaluation of the Nigerian currency and recession among others, to return to profitability in 2018.
Last year, Fidson Healthcare successfully raised about N2.345 billion from its shareholders to recapitalise its operations. Although, the healthcare company had set out to raise N3billion through a rights issue to existing shareholders, the offer was undersubscribed by N655 million.
The recapitalization became imperative to refinance some expensive debts, strengthen the working capital position of the business and fund some strategic capital expenditure. Fidson Healthcare had planned to raise N4.5 billion new equity funds through a rights issue of 900 million ordinary shares of 50 kobo each to existing shareholders at N5 per share. However, the company decided to reduce the offer size and offer price.
Last year, the company had offered 750 million ordinary shares of 50 kobo each through a rights issue to existing shareholders at N4 per share. The rights issue was pre-allotted on the basis of one new ordinary share for every two ordinary shares held as at December 28, 2018.
Regulatory filing indicated that shareholders subscribed to 586.36 million ordinary shares of 50 kobo each at N4.00, implying a subscription level of 78.18 per cent. The company has listed the additional shares at the Nigerian Stock Exchange (NSE), thus increasing its outstanding paid up shares from 1.5 billion ordinary shares of 50 kobo each to 2.086 billion ordinary shares of 50 kobo each.
According to the chairman of Fidson Healthcare Plc, Mr Segun Adebanji, the capital injection from the rights issue would enable the board and management to reposition the business in order to take advantage of visible growth opportunities.
Managing Director, Fidson Healthcare Plc, Mr Fidelis Ayebae, said the company would take advantage of the net proceeds from the rights issue to inject fresh working capital into the business in order to maximise the opportunities that exist in the market.
The company projected a revenue growth of over 20 per cent for 2020, with increased focus on growing its ethical product segments. The business development work being done in hospitals to enhance the patronage of Fidson brands is also expected to increase demand.
The healthcare company predicted that from the rights issue, better prospects await the company. The MD said the company had set aside at least N1billion which would be used mainly for the importation of raw and packaging materials, noting that this would reduce cost by 12 and 20 per cent.
“Right now we are leveraged. To deleverage, we would rather use investor funds. When we get to the point of further expansion, we would be thinking of other fund mixes. The company expects to pay off its bond by November.”
He added that further cost savings would be generated by directly importing key raw materials, taking advantage of the Central Bank of Nigeria (CBN) window for manufacturers, and renegotiating with its suppliers.
He said the company is also switching its energy source from diesel to gas, noting that Fidson expects that through its cost savings initiatives it will reduce production costs and increase gross margins significantly in 2020.
“The prospects look good for Fidson in the near-term, enabling the company to cement its leadership position in the pharmaceutical industry,” Ayebae had said.
Financials
Indeed the strategies of the management paid off as seen in the 2019 result of the company. The drug maker’s unaudited financials for the year ending December 31st 2019, as published on the Nigerian Stock Exchange, showed that the company made a N312 million profit despite reduced revenue
Fidson Healthcare Plc recorded a revenue of N14 billion, representing a 13.5 per cent decrease when compared to the N16.2 billion, which it earned during the comparable period in 2018. The company’s cost of sales for the period stood at N8.2 billion, and this is less than N9.9 billion which the company recorded in 2018.
Fidson’s gross profit in 2019 was N5.9 billion after deducting the cost of sales. When compared to N6.3 billion gross profit that was recorded during the comparable period in 2018, there was a 7.1 per cent decrease.
Profit before tax for the period stood at N458.9 million and this is 185 per cent more than the N160.9 million which the company recorded during the same period in 2018. In the same vein, the drug manufacturer recorded a profit after tax of N312 million, compared to a loss after tax of N97.4 million which it recorded in 2018.
Administrative expenses fell from N2.614 billion to N2.580 billion in FY 2019. Similarly, selling and distribution expenses were reduced from N1.905 billion to N1.446 billion, making the company to end with an operating profit of N2.118 billion, up from N2.048 billion.
A 10 per cent decline in cost of finance from N1.925 billion to N1.716 billion, enhanced its bottom-line as the company recorded PAT of N312 million in 2019, compared to a loss of N97.44 million in 2018.
Analysts believe the company’s performance reflected the impact of the equity injection the company witnessed towards the end of last year that helped to reduce the financing cost.
Partnerships
Last year, Fidson Healthcare Plc entered into a strategic partnership with Japan’s Ohara Pharmaceutical. The deal involves a rights issue which grew Ohara’s shares in Fidson Healthcare to 21.75 per cent. This is a strategic capital and business alliance between both companies that will provide both the Nigerian and Japanese markets the latest products and services in healthcare.
Part of the agreement will see Ohara enhance Fidson’s services and products by making pharmaceuticals and medical devices available to the company. These innovations and technology are expected to help Fidson compete better in the local healthcare industry.
Fidson believes the alliance holds promise as a significant growth driver for both companies, particularly as a major factor for the development of local pharmaceutical manufacturing in Nigeria.
“Given this growing population, there is no doubt that Nigeria is in urgent need of a rapid improvement in the standard of healthcare delivery. This can only be accelerated through modernisation and technological intervention which the alliance with Ohara aims to deliver,” the company said in a statement to the NSE.
Another partnership worthy of note is the GlaxoSmithKline Consumer Nigeria Plc’s transfer of the manufacture of some of its products to Fidson Healthcare Plc. GSK had chosen Fidson as its preferred local contract manufacturing partner. Effective from the third quarter of 2021, GSK will thus transfer the manufacturing of its respiratory and wellness products to Fidson. The firm, however, maintains that activities would continue at its Agbara plant till then.
Projection
The board and management of Fidson believe that with the strategic partnership, the company is on track to become a research and development based manufacturing company in Nigeria.
“In 10 years, we would have trebled in both top and bottom lines. We would be an exporting company. In 10 years from now, I am sure we would have discovered one or two proprietary medicines. I see a Fidson that is bigger, better and more scientific in her approach to doing things. When I say scientific, I mean home-grown ideas that we would incubate from our R and D,” Managing Director, Fidson Healthcare Plc, Mr Fidelis Ayebae said.
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