Major health care deal may be on the cards
The firm, which is listed on the Nigerian Stock Exchange (NSE), is the best performing stock on the NSE Healthcare sector year to date.
Interestingly, sources tell “Heard on the Street” that the acquiring firm is also a Healthcare firm listed on the NSE.
A merger should be growth positive for the sector which is grappling with higher input costs as the recent devaluation of the naira leads to some costs pressures for most pharmaceutical firms in Africa’s largest economy.
Nigeria’s pharmaceutical imports are forecast to reach $789 million by 2018, widening the country’s pharmaceutical trade deficit from the $475 million it posted in 2013, according to a 2015 report by PWC.
Other challenges stunting the growth of the sector are counterfeit drugs, lack of meaningful patent legislation on pricing, and a chronically underfunded healthcare sector.
Finance costs are also expected to remain a drag to Healthcare companies’ earnings, which have taken loans in a bid to expand their capacities, and align their operations to attain Good Manufacturing Practices (GMP) status.
The Pharmaceutical industry in Nigeria has spent over $600 million (N120 billion) to attain World Health Organisation (WHO) certification and pre-qualification for about four local firms in the country.
The growth potentials in the sector, from the rise in non-communicable diseases (NLS) such as diabetes, hypertension and cancer are thought to be a major rationale for the deal.
Also a takeover or merger deal should bolster the balance sheet of the new company, enabling it to invest more in innovation and research, while reducing the competition in the sector.
The industry is also becoming more attractive to foreign investors who are willing to partner with local manufacturers.
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