sigma agm may 2008

It seemed a subdued AGM, with references made to their reductions to profit forecasts twice over the past year, and key regulatory changes which have impacted profitability over the short term.

The dividend yield is sitting at about 8%, and forecasts on capital growth are pretty much on hold until September 2008 when the impact of the Pharmaceutical Benefits Scheme reforms can start to be judged. In the recent past Sigma has been rated as a longterm growth stock, but has not lived upto this in recent times, despite acquisitions to diversify their activities and products. The CEO noted increased levels of cost cutting by competitors and reductions of inventories from retailers in the lead up to the Federal Government reforms to the Pharmaceutical Benefits Scheme in August 2008. The PBS seems to benefit pharmacists who will see increased margins, but the use of generic drugs instead of named brands will also be encouraged by the Government in an effort to reduce the cost of the scheme.

There is lots of speculation about consolidations, and more competition from generic brands. Sigma are strong with their generic brands, and are looking to expand the generic products they offer. The uncertainty would come from it being more likely that competitors would also expand their generic ranges to compete for the subsidized PBS dollars.

A few points from the presentations that caught my eye :~

- A key focus for 2009 will be to grow the banner member base (Amcal and Guardian pharmacies) and introduce programs combining the pharmacist's role as a provider of advice with the sale of products and services. Programs including on-line training program, Xndo weight loss program and digital interactive healthcare kiosks to be rolled out to banner stores.

- The Dandenong facility redevelopment was completed during the year, and whilst taking longer than expected to complete, the plant is now fully operational. Sigma remains the largest contract manufacturer in Australia, and also has the largest manufacturing capability. Expected to realise efficiency gains from the Dandenong manufacturing plant.

- Herron business/brand whilst maintaining profitability, to be reinvigorated with new 'contemporary' packaging and 20 new products scheduled to be released over the next 12 months.

- Sigma will have a generic equivalent for all major patent expiries over the next five years.

- Orphan Australia acquisition completed in February 2008 and is to date outperforming initial expectations.

- All resolutions of AGM were passed.

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Write up from Sydney Morning Herald :~


Sigma says can't update guidance yet

SMH - May 22, 2008

Sigma Pharmaceuticals Ltd says industry uncertainty in the lead up to pharmaceutical benefits scheme (PBS) reforms means it won't be in position to update the market on its guidance until much later in the year.

Sigma in March forecast a reported net profit between $83 million and $88 million for the year ended January 2009.

"There is unprecedented market uncertainty in the lead up to the introduction of the PBS reforms in August 2008, with pharmacy customers de-stocking to minimise the impact from the price reductions," chief executive Elmo De Alwis told shareholders at the company's annual general meeting.

"As a result, we will be better placed to provide an update on performance in conjunction with our half year results presentation in September, at which time I expect to be in a position to confirm guidance."

Chairman John Stocker told shareholders that Sigma was still in the hunt for acquisitions.

"Going forward we will continue to review and pursue opportunities for growth where we perceive there to be a good strategic fit with the business," he said.

"The Australian pharmaceutical industry is poised for a period of consolidation.

"We have publicly stated our interest in participating in this."

Sigma had been investigating with Metcash Ltd the possibility of jointly bidding for Symbion Health's consumer brands and pharmaceutical wholesaling assets.

"Following analysis, Sigma submitted a bid for the consumer assets," Mr Stocker said.

"Primary's advisors have since informed us that our bid was not accepted.

"With due regard for our investment criteria, Sigma will not be pursuing this acquisition any further.

"However, we have signed a memorandum of understanding with Metcash in relation to the establishment of a back office and logistics joint venture should they be successful in purchasing the Symbion Pharmacy assets," he added.

© 2008 AAP