Sigma Pharmaceuticals bulks up M&A team to pursue growth
Sigma Pharmaceuticals chief executive Mark Hooper has tasked his former finance chief, Jeff Sells, with leading a new business development team to pursue deals and partnerships that help to diversify earnings.
Mr Hooper said the pharmaceutical wholesaler's move to bulk up with six new business development executives marked a move away from being "reactive" when it comes to mergers and acquisitions.
"We felt like as a businesss we were at a point where we needed to be more proactive about business development," he told
The Australian Financial Review. "I feel going forward it's gong to be more effective."
Sigma has been on a path to reduce its reliance on distributing medicines sold under the Pharmaceutical Benefits Scheme to its retail chemist customers, such as Amcal and Guardian. Moves by the government to rein in how much it spends on PBS drugs has put pressure on wholesalers.
However as Sigma's full-year results showed on Thursday, the $1.3 billion Melbourne-based company has made progress in diversifying its earnings. Sigma's profit in the year ended January 31 rose 5.3 per cent to $53.2 million and was partly boosted by the listing on the PBS
during the year of new drugs to treat Hepatitis C.
Despite expectations for further restrained government spending on PBS drugs, and therefore the commission Sigma earns to distribute them, the company maintained its previous guidance that underlying earnings would rise by at least 5 per cent in 2017-18.
Shares in Sigma closed 2.5 per cent higher to $1.23, but remain well below a 12-month high of $1.51 hit last October.
Sigma has been working with its retailers on a range of initiatives to bring more customers into stores, including rolling out health checks. The company has begun the process of
changing its name to Sigma Healthcare to better reflect its pursuit of diversification and pave the way for providing services beyond retail chemists too.
Along with the enlarged M&A team Sigma is also investing in a "re-engineering" of the way it works. "The business development and process of re engineering, don't add any value to the business today but help to set ourself up for the future," Mr Hooper said. "The nature of those things is you spend money upfront for value later."
Mr Hooper said that given the company was bearing "the full cost of our reinvestment plans" it was pleasing to still deliver on guidance. He said the plans would begin to "incrementally contribute to results" towards the end of 2017-18 and into 2018-19.
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