Adcock Ingram seeks to reduce exposure to healthcare regulation

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Pharmaceutical company Adcock Ingram has set its sights on potential acquisitions in the personal care and baby care segments in a move to reduce exposure to healthcare regulations in the country, says CEO Andy Hall.

Business Day reports that through the single exit price mechanism, private sector medicine prices are tightly controlled and manufacturers can only hike prices in line with adjustments determined by the department’s medicine pricing committee, usually done once a year. This means they cannot pass increased input costs onto consumers, putting pressure on their margins. The single exit price mechanism lists the maximum price that a medicine can be charged at.

Speaking after the release of the company’s results for the year to June, Hall is quoted in the report as saying that Adcock was looking for growth away from the regulated segments of the industry.

As a result of the appetite for acquisition, Adcock has chosen cash preservation over generous dividends. Hall said the company would stick to its dividend policy of two to three times cover because it needed the cash for acquisitions.

Through the mooted acquisitions, Adcock will increase the share of non-regulated business in its portfolio from the current 35%, Hall said.

He said the company wanted to grow in the personal care and baby care segments through acquisitions “but there are not many assets available”.

Business Day report

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