ferrets stock to watch: aust pharmaceutical, page-7

An API & Alphapharm partnership
A five year strategic partnership:
– Brings together two of the pharmacy industry’s leading brands
• Alphapharm is the industry leading generic pharmaceuticals company
• API is the leading retail pharmacy brand provider and a leading
pharmaceutical distributor
– API will be the preferred distributor for Alphapharm’s generic
pharmaceuticals
– For existing Alphapharm pharmacy customers to access their best
terms they will need to order through API
– Preferred pricing on Alphapharm products to be available for API’s
pharmacy brand members Financial benefits for API
Financial uplift and resolves strategic issues:
– Ongoing annual EBIT benefit of approximately $7.5 million once
operational (EBIT does not include interest costs from increased
working capital requirements)
– Participate in generic pharmaceuticals market
– No increase in base operating infrastructure required
– Minor investment in areas such as customer service centres to
manage increased level of customer calls
– Working capital increase can be accommodated Importance of generic pharmaceuticals
The generic pharmaceutical industry:
– Valued at more than $800m annual turnover
– Generic pharmaceuticals growing at +10% in Australia
– August 2007 PBS reforms only give further impetus to the generic
industry and the need for API to be well positioned
– Major molecules are coming off patent in the next three years
Choosing the right partner - Alphapharm meets the key criteria:
– Part of a globally competitive company with a strong pipeline
– Possesses the most comprehensive product range in the market
and is the leading supplier today
– Understands the pharmacist customer base
– The partnership will provide incremental value for API brands and
better choice for independents Implementation plans
API and Alphapharm have commenced working together on the
implementation plans
– API will purchase and hold all stock requirements from
Alphapharm
– Alphapharm’s 4000+ customers will have accounts opened
with API - if not already dealing with API
– Alphapharm will remain the primary contact for each
pharmacist to determine product pricing
– API brand members will have access to preferred pricing
– API to receive customer orders and despatch through
current branches Implementation plans
API and Alphapharm have commenced working together on the
implementation plans
– API will purchase and hold all stock requirements from
Alphapharm
– Alphapharm’s 4000+ customers will have accounts opened
with API - if not already dealing with API
– Alphapharm will remain the primary contact for each
pharmacist to determine product pricing
– API brand members will have access to preferred pricing
– API to receive customer orders and despatch through
current branchesImplementation plans
API and Alphapharm have commenced working together on the
implementation plans
– API will purchase and hold all stock requirements from
Alphapharm
– Alphapharm’s 4000+ customers will have accounts opened
with API - if not already dealing with API
– Alphapharm will remain the primary contact for each
pharmacist to determine product pricing
– API brand members will have access to preferred pricing
– API to receive customer orders and despatch through
current branches Leading pharmacy position
Superior retail offer
to pharmacy
Retail
Most comprehensive
product offers to
pharmacy
Generics
Leading position
after generics
implementation
Distribution
Providing better choices for pharmacists Major benefits for API
The partnership creates the most comprehensive business offer
across the industry:
– Provides a total package to pharmacists from one source
– Streamlines supply chain within the industry
– Increases customer service options for both companies within the
pharmacy market, eg API’s high service levels into retail pharmacy
– Increases eligible CSO payments for API
– Increases relationships with pharmacists for both companies
– Increases benefits for API’s pharmacy brands
• Priceline Pharmacy, Soul Pattinson, Chemworld, Pharmacist Advice Timing estimates
Key milestones:
– 8 October – announcement of partnership
– 9-15 October – transition requirements finalised
– 15 October – stock transfer commences
– 20 October – customer details finalised
– 29 October – supply commences from API warehouse