Drugs wholesaler and pharmacy support services provider Sigma Pharmaceuticals has returned to profitability after gaining market share, cutting costs and winding back discounts to chemists.
Consequently, Sigma, which is behind pharmacy retail brands Amcal, Amcal Max and Guardian, has paid a special dividend to shareholders and expects to maintain a high level of dividends.
Sigma on Thursday reported a net profit of $49.17 million for the 12 months to January 31, 2012, a marked improvement on the loss of $235.38 million in the prior year.
The company declared a fully-franked final dividend of two cents per share, plus a special fully-franked dividend of 1.5 cents.
Sigma shares had risen 3.5 cents, or 5.69 per cent, to 64.5 cents by 1309 AEDT.
Chief executive Mark Hooper said Sigma had stabilised its business during 2011/12.
The next 12 to 18 months would be about rebuilding core capabilities and establishing options for growth.
“That is absolutely the path that we’re on, so that means a lot of this year is just about continuing that process,” Mr Hooper said.
In 2012/13, Sigma would continue reducing costs and discounts provided to pharmacists, which would negate the impact of pending price reductions for medicines listed on the federal government’s Pharmaceutical Benefits Scheme (PBS). The PBS subsidises the cost of medicines to the public.
From April 1, prices of about 180 generic medicines listed on the PBS, or about one third of the value of the PBS, are set to drop by about 23 per cent.
As a result, the amount of money going to drug wholesalers such as Sigma will fall.
“We’ve already moved to negate the impact on the Sigma business by looking at our own costs and winding back customer trading terms,” Mr Hooper said.
Mr Hooper said PBS growth over the last 12 months had been pretty flat, and the PBS reforms would slow growth even more.
“I think there’s probably now an increased likelihood that PBS growth might well be negative for the first time this year,” he said.
That may prompt large pharmaceutical makers to approach the government and suggest there is scope to accelerate the listing on the PBS of new drugs.
Sigma’s revenue for 2011/12 fell 2.1 per cent to $2.9 billion because drugs maker Pfizer decided in late 2010 to bypass Sigma as a wholesaler and distribute directly to pharmacies.
Mr Hooper said there were no indications yet that more large drug makers may follow Pfizer’s move. He said if other drug makers followed Pfizer, wholesalers such as Sigma, Symbion and API would have to rethink their business models.
That could jeopardise the wholesalers’ community service obligation (CSO) to deliver PBS-listed medicines in a timely manner.
Mr Hooper said while Sigma had talked with the government to ensure all PBS-listed drugs remained available through CSO wholesalers, the talks had gained no traction.
