UDG eyes Northern pharmacies stake sale amid overseas drive

UDG Healthcare plans to sell its 35 per cent stake in Northern Irish pharmacy chain MediCare as part of its overhaul and sole focus on providing outsourced services to drug companies internationally.

The group has classified its investment in Magir Ltd, parent of the Belfast-based owner of 46 stores, as an "asset held for sale," according to its annual results statement, published on Thursday.

Chief executive Brendan McAtamney said UDG is involved in "active discussions" on the stake but declined to comment further. Separately, MediCare, controlled by founding managing director Michael Guerin, said both parties are "now exploring their options".

The investment is no longer a strategic asset for UDG following the disposal in April of its Irish drug wholesale business and UK-based travel healthcare operation, Masta, for which it booked a €132.1 million net profit.

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Magir’s contribution to UDG’s results indicates that it made a €4.3 million profit for the year to September.

Two businesses

Following the transformational disposal, UDG is now concentrating on two businesses: Ashfield, which provides drugmakers including AstraZeneca and Pfizer with outsourced services, such as sales reps and healthcare communications; and Sharp Packaging, a provider of outsourced healthcare packaging in an increasingly regulated field for drug serialisation.

Operating profit from continuing operations rose 8 per cent during the financial year, to €104.2 million.

The period under review "saw the continuing business deliver another year of good growth as the group positioned itself for the next phase of its development, following the disposal of the United Drug supply chain businesses," Mr Brendan McAtamney said.

UDG, he added, “remains focused on delivering organic growth and executing strategic acquisition opportunities,” and that it has up to €500 million of firepower for deals.

UDG has proposed a 5 per cent increase in the full-year dividend, to 11.55 cent per share, continuing its 27-year history of consistent growth in investor payouts.

Broken down by division, Ashfield’s operating profit increased by 7 per cent to €63.6 million, driven by its commercial and clinical as well as its communications businesses. It bought Pegasus Public Relations, a UK healthcare communications company, in April in a deal worth up to £16.8 million (€19.8 million).

The commercial unit, which is involved in contract pharmaceutical sales, delivered robust growth in Europe and the US, though this was partly offset by a weaker performance in the UK.

Drag on business

Sharp Packaging recorded a 16 per cent increase in operating profit, to €34.4 million.

“Sharp EU remains a drag on the business and posted an operating loss of €1.2 million, although a large part of this was due to one-off costs associated with an FDA [US Food and Drug Administration] audit of the division’s new packaging facility in Belgium,” said analysts at US brokerage Jefferies. Sharp subsequently passed the audit.

New US drug track and trace rules, known as serialisation, are set to take full effect in November 2017. They will be a “meaningful growth driver” for Sharp, with 2018 set to be a particularly strong year for this part of the company, according to Jefferies.

Under the incoming rules, individual drug boxes must be marked with barcodes carrying a serial number, a lot number and an expiration date, in order to trace pharmaceuticals from source to pharmacy.