In tough economic times and a hugely competitive market place, timing and cost, combined with a quality product, can make the world of difference. If that is true of Pharma Dynamics, then the company itself is making the world of difference for maybe as many as a million South Africans.
South Africa’s generic medication market may be relatively new, but when Pharma Dynamics entered the fray in 2001, it needed to make an immediate impact – as history has dictated, the company could not have had a more appropriate name. Fortunately, the business’s founder (and present CEO) Paul Anley was able to call on his vast experience to ensure things were correctly positioned from Day One:
“We are essentially a generic pharmaceutical company. Our core strength is (and has been since we started) in cardiovascular treatments, for which we are the largest pharmaceutical company in South Africa.
“I had previously founded a company that became the generic arm of Warner-Lambert but in 2001 Pfizer took over Warner-Lambert and generics were not a part of their strategy and this was disposed of. At that stage I decided to leave and started up Pharma Dynamics.
“From the outset our main focus was on cardiovascular but we were already investigating opportunities across all therapeutic areas. We invested aggressively very early on and identified a number of products approaching patent expiry”.
Within a short space of time the company had diversified its portfolio and has continued to do so ever since, as Anley explains:
“The pipeline drives our business and sales and margins are driven by new product launches, so it is essential that we closely monitor new drugs that are being developed. This is a relatively new market in South Africa and the perception of generic medication is slowly changing; we have put enormous effort and marketing spend behind our brands in a market where everyone is selling the product at a discount.
“Right now we have over 40 brands and each one will have a number of SKU’s. We also have 233 dossiers that have been submitted for registration with the Medicines Control Council (MCC) and we fully intend to expand our portfolio.”
Today cardiovascular drugs account for roughly 50 per cent of Pharma Dynamics’ business but the company is also involved in the Central Nervous System (CNS) market with a number of drugs, has recently entered the female healthcare market and is also active in OTC and anti-infection treatments, including the supply of a number of seasonal antihistamine remedies and gastrointestinal products.
The drugs are primarily marketed at retail pharmacies (including the leading chains of DisChem and Clicks) and also general practitioners and specialists, with cost benefit to the customer as a big selling point.
A seminal moment in Pharma Dynamics’ history came in 2008, when the business sold a 60 per cent majority stake to Indian-based Lupin Pharamaceuticals, giving the company additional impetus, as Anley recalls:
“The Indian pharmaceutical companies have significant skills and cost advantage and we were able to transfer some of our previous manufacturing to India which resulted in savings but the sale also gave us access to Lupin’s extensive research and development capabilities. The company reinvests probably 7.5 per cent of its revenues into R&D.”
Utilising the development capabilities of pharmaceutical companies who are expert in specific fields, and then identifying opportunities has become a fine art and an important contributor to Pharma Dynamics’ continued success:
“We continue to source globally from a network of about 15 of the world’s largest generic pharmaceutical companies,” says Anley. “One of our greatest strengths has always been our ability to choose the most progressed new drugs from the development pipeline. We review market research data regularly so we know which products are coming off patent and also which ones are the largest sellers.
“Our background is as an independent generic drug company so we developed our network earlier (than other companies), focussing on companies who were looking to break into the South African market.
“We keep close tabs on which products are progressing through the regulatory process and which ones are close to being signed off by the MCC, but we also select products made by companies that specialise in certain medical areas, that is important to us.”
The company, with its headquarters in Tokai, Cape Town, currently employs in the region of 120 staff, with a strong focus on sales and marketing. Aside from a manufacturing dedicated regulatory team, sales and distribution are the core functions of the business, with drugs imported from Lupin and from Europe.
Because of the nature of these drugs, they have to be maintained at temperatures below 25 degrees and Anley says that Parma Dynamics has developed a close, long-standing relationship with UDP, who handle distribution.
“All of our distribution is outsourced to them,” he indicates, “we were one of their first distribution clients and through their capabilities, we are able to deliver drugs to anywhere in South Africa within 48 hours.
“Much of our stock is ordered on forecasts and we try to maintain six months worth of stock at all times because pharmaceutical lead times are so long (typically averaging 9 months after manufacture, transportation and quality control).
“We use sophisticated IT software to help us with forecasting and we exchange data with UPD every day – they then distribute our products from their storage facilities in Cape Town and Johannesburg, or from their smaller depots in Durban and Port Elizabeth. Our forecasting is a high priority and our meetings are attended by all senior management,” Anley continues.
Operationally, Anley feels that the biggest challenge posed comes through red tape and regulatory delays and inspectorate issues:
“We source from global partners supplying to the global market and there are always ongoing manufacturing changes and API changes – indeed as prices of generic pharmaceuticals fall, the factories change APIs for cheaper alternatives. The problem comes with the lag here in South Africa for approval; in Europe changes do not take long but it can take a year or more over here, meaning for that timeframe, the manufacturer has to make a different product just for us.
“We work with the trade associations who in turn work with our government but it would be nice to have a similar system to other countries. I am the chairman of the National Association of Pharmaceutical Manufacturers and we do work closely with the authorities and understand their challenges also.”
Despite these delays, Pharma Dynamics continues to live up to its name with meteoric growth. The next phase is the launch of a series of injectable, intravenous products, aimed at the hospital market.
“Much of our investment is going into the infrastructure of our new hospital division and will total in excess of R13 million. We have recruited and specially trained 4 additional employees and hope to launch major brands in August/September of this year.
“Our other focus is the ongoing opportunities across the sub-Sahara region where we have been submitting representations for the last three to four years. Those representations are now starting to come through and we are working with distribution partners.
“We have a business plan aiming for R650 million turnover in 2013 but we want to continue to show a bottom line growth in excess of 30 per cent, year on year. That should see us reach R1 billion in the next three years,” Anley concludes.
If his ambition is achieved, South Africa’s 14th largest pharmaceutical business will be moving steadily up the list, underlining how prophetic the company’s name has been.