Matthew Azoji is the Managing Director of Neimeth Pharmaceutical Plc.
With over 30 years of experience in the pharmaceutical industry, he spoke to journalists about how government policies affect the pharmaceutical sector and measures taken by the company to remain competitive.
HELEN OJI was there. Excerpt:
Local manufacturers complain of unfriendly government policies. Would you say the government is doing enough for the Pharmaceutical sector?
I do not think that the government has deliberately made unfriendly policies against the local industry. Rather some policies intended for other purposes may adversely affect local companies.
For instance, the decision of the government to provide subsidies only for Premium Motor Spirit (PMS) or petrol and not for Diesel and Aviation fuel has left the price of diesel, which manufacturers use to power their factories at the mercy of the forces of demand and supply.
As a result, the current disruption in the supply of petroleum products due to the Russia-Ukraine war has led to less than 135 per cent increase in the price of diesel but the price of PMS has remained largely stable except for the time the bad petrol supplied to the market caused scarcity and proliferation of black markets.
The current very high prices of diesel have therefore heavily affected the manufacturing industry, significantly increasing the cost of production, which cannot be passed 100 per cent to consumers because of the overall adverse economic situation in the country. The meaning is that profitability is significantly reduced for the average manufacturer but that is not the intention of the government.
Also, in the process of making open the procurement process, the government often throws open the purchase of drugs for government facilities and programmes to both local manufacturers and importers. And you know that some of the foreign manufacturers operate in environments which enjoy a low cost of production. This makes products of local pharmaceutical companies non-competitive.
This procurement policy has for a long time stifled patronage of local health commodities by the government and government agencies. There are many such policies with unintended negative consequences. Even the African Continental Free Trade Agreement (AfCFTA), which the government signed to promote trade in the continent can breed negative aftermaths if the industry does not rise to take advantage of the platform.
Regarding what the government is doing for the pharma industry, I can say that the government has done well in some areas but more needs to be done to unlock the industry’s potential and promote the sector.
The COVID-19 pandemic woke the government up to the cries of the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN) for a fund to boost capacity in the sector. Government through the Central Bank of Nigeria (CBN) gave out N100 billion capacity expansion low-cost loans from which many manufacturers benefited.
Last year the government launched the new National Drug Policy 2021. That policy seeks to promote the local pharmaceutical sector by encouraging local production. For instance, the policy seeks to ensure that by 2025 Nigeria would be able to achieve 75 per cent local manufacturing of essential medicines needed in the country.
The policy goes ahead to seek the use of fiscal and other measures to promote the local production of drugs in Nigeria. The pharmaceutical industry will need to rise to the occasion and work closely with the government to take advantage of this new policy.
However, we request the government to do more to actively create a better enabling environment for the local pharmaceutical industry to thrive for the benefit of Nigerians in the areas of enhancing access to medicines, jobs creation and foreign exchange generation through export to other African countries.
For instance, the pharmaceutical industry is a part of the larger economy and whatever happens to the economy is bound to affect the sector. All the problems of the economy, namely infrastructure deficit, poor power supply, high interest and exchange rates, corruption and others that perennially plaque the economy impacts the sector negatively. Addressing those challenges will help tackle many issues in the sector.
But specifically, incentives such as the CBN intervention fund is a welcome idea. This fund will definitely energise multiple efforts in the industry to ramp up capacity.
The fund will also assist ameliorate the issue of revenue and profit drop, which has bedevilled the pharmaceutical industry in the past few years because it offers a minimal interest rate of five per cent in the first year, which will later be increased to nine per cent.
There is an aspect that the government needs to look into. Being the biggest buyer of medicines, the government can deliberately make a policy to patronise local products.
They can only buy imported medicines if there are no locally manufactured alternative brands in Nigeria. The executive order to patronise made-in-Nigeria goods has not been extended to pharmaceuticals. Government should sign an executive order that medicines and other health commodities that are made in Nigeria are on the priority list of purchase in public hospitals. That is a way of creating an adequate market for local pharmaceuticals. So, if the government is buying from local manufacturers, this can boost their capacity.
Infrastructure development is another area we need government assistance. In moving drugs from one area to the other, we need good roads, and then a constant supply of power is crucial to local manufacturing. Every company manufacturing in Nigeria will have to run on a generator and this is quite expensive, especially with the current price of diesel at about N730.00 per litre. So, the power plan needs to be fast-tracked. And of course, low-interest loans being offered by CBN should be expanded.
How has government assisted pharmaceutical companies to achieve growth and improve capacity, especially in the light of the African continental free trade agreement ?
Government has been helping the pharmaceutical industry in many ways. Some of this assistance has come in the form of policy initiatives. For instance, the New National Drug Policy 2021 seeks to grow local production capacity by 70 per cent by 2025.
This, it plans to do by boosting local production through articulated policies that will enhance capacity. Among these are the use of tariffs and other fiscal measures to bar the importation of medicines that local pharma companies have adequate capacity to produce.
It also seeks to promote patronage of locally made medicines by encouraging public procurement entities in the health sector to give priority to locally made medicines. The government has also promoted the Nigerian pharmaceutical industry with capacity support funds such as the CBN’s N100 billion loan and similar facilities designed to make local producers manufacture with fewer pains.
But beyond these palliative measures, we need to institute structures and schemes that will galvanise the industry. For instance, we have been talking about the petrochemical industry for many years now. As I said earlier, the industry’s dependence on imported raw materials and other inputs is over 90 per cent.
Where local pharmaceutical manufacturers depend over 90 per cent on imported inputs, I see two key levels of action. The first will involve the development of the petrochemical industry. Substantial raw materials for synthetic medicines depend on the petrochemical industry.
Nigeria is a petroleum exporting country, as we are blessed with large deposits of this commodity, so all we needed to do is to develop that industry by extracting the rich reservoir of chemicals contained in crude oil, which can be used to synthesise many pharmaceuticals.
This process is called; ‘cracking the petroleum’, to get substances to synthesise Active Pharmaceutical Ingredients, excipients, and others for fertilizers, plastics and other essential industrial chemicals.
In other words, the development of the petrol chemical industry in Nigeria is critical to industrial development in this country, and the pharmaceutical sector is one of those industries that will benefit immensely from that development.
We, therefore, encourage the government, even though it is a capital-intensive project, but if Nigeria prioritises industrial development, we, as a nation can afford it. It is an investment that will positively impact many sectors of the Nigerian economy and has the potential to create millions of jobs.
If that sector can be developed, we shall rely less on imports. Similarly, we also need to develop the agricultural sector. For instance, starch is a major input in the pharma sector but we do not have pharmaceutical-grade starch in Nigeria.
Nigeria is among the largest producers of cassava, maize and other starch products. For instance, pharmaceutical-grade starch is still being imported into Nigeria. Nigeria is blessed with high-starch-containing agricultural products like maize, rice, and cassava among others.
Nigeria is Africa’s largest producer of maize with output estimated at over 33 million tonnes yearly, and yet we are importing pharmaceutical-grade starch, it should not be. Also, Nigeria is regarded as the world’s largest producer of cassava and there is a discussion going on how to develop pharma-grade starch from cassava. These products can be processed to generate the requisite volume of standard starch for the industry.
Therefore, the development of the petrochemical and agricultural sectors can reduce dependence on foreign inputs for active pharmaceutical ingredients and excipients by a large percentage.
Government can support the local manufacturing industry to take full advantage of the Africa Continental Free Trade Agreement (AfCTA). Now with the take-off of the initiative, the African market has become one. That means other African countries can supply medicines to Nigeria.
If Nigeria does not have the capacity to produce competitively, it means Nigeria may become a dumping ground. This must be avoided by all means by creating enabling environment for Nigerian pharmaceutical manufacturers to compete in the African space by producing quality and efficacious medical products that are affordable to the average African patient.
Again, this is why the PMGMAN has been clamouring for a loan of 300 billion naira to enable the pharma industry to develop itself so that it can produce competitively.
How are you managing counterfeit drugs in collaboration with agencies in the Pharmaceutical sector?
The incidence of substandard or out rightly fake products is a global phenomenon. It exists in every sector and economy. But this becomes a source of worry when it is rampant or tries to overshadow the good products the case appear with certain health commodities in the country.
I must also point out without being prejudiced that most of these fake health commodities come from outside the country. That puts the onus for their control on agencies that oversee the importation of products into the country.
It is gratifying that NAFDAC has been making a concerted effort to limit, if not eradicate the prevalence of these undesirable products. But that effort must be supported by other agencies and society.
Members of PMGMAN also support NAFDAC in efforts to curb the prevalence of fake and substandard medicines by complying with relevant regulations of NAFDAC and Pharmacists Council of Nigeria (PCN) regarding manufacturing, sales, marketing and distribution of pharmaceutical products and by taking specific individual corporate actions to prevent the faking of their own individual company products.
Beyond these efforts, I think the decision by Nigerians to reject fake products will play a key role in eradicating this menace. Nigerians can do this at two levels.
The first level is for people to stop patronising such products. I can tell you that many Nigerians ignorantly buy fake drugs by aiming to buy the cheapest products on the market. They do this as a result of poverty.
People go to medicine vendors to buy drugs but because of the higher prices of the good products they knowingly or unknowingly opt for the fake ones. This is because, in most Nigerian homes, illness is not provided for in the household budget. Rather, the purchase of drugs is done as an out-of-pocket expenditure when one or two members of the family fall sick.
This scenario can be contained with an effective health insurance package for most homes. The other way Nigerians can curb fake drugs is to encourage business persons who import these drugs wherever they can be identified by communities to jettison the practice by embracing quality control measures of both exporting and importing countries and where such persons refuse to adhere to advice, they should be made to suffer social isolation. If fake products are not brought into the country, we shall have little or no reason to encounter them.
Neimeth has been around for a while. How has the company managed to stay relevant in the Pharmaceutical sector over the years?
Neimeth International Pharmaceuticals Plc came into being as the result of the Mazi Sam I. Ohuabunwa-led management-buy-out of the 60 per cent equity Pfizer New York’s holding in Pfizer Products Plc.
The company had already been operating in Nigeria for 40 years manufacturing, marketing and distributing pharmaceutical and veterinary products under the Pfizer brand including tablets, capsules, ointments, creams, powders, injectables, and oral liquid forms.
During those first 40 years, the company that would become Neimeth established Nigeria’s first pharmaceutical manufacturing plant, although sadly that was destroyed during the Nigerian civil war.
Undeterred, in 1976 the company established the most modern pharmaceutical plant in the West African sub-region at Oregun.
Today Neimeth International Pharmaceuticals is focused on manufacturing essential family medicines.
It supplies its products to the Nigerian and West African markets and aims to expand its business to the entire African market.
Neimeth International Pharmaceuticals’ research and development are heavily targeted at the challenges that face its customers in Nigeria and Africa as a whole.
The staff are driven by a set of core values, which include customer delight, leadership, innovation, community, integrity, teamwork and God-consciousness. The pharmaceutical manufacturer has set itself the mission to promote healthy, confident living and be the leading healthcare provider in Africa.
Apart from being a respected healthcare provider, Neimeth is committed to supporting the society in which it does business. The company has expanded its remit, moving away from its position as a pure pharmaceutical company into something far more encompassing. It is now a healthcare company.
Why must shareholders partake in the N3.67billion right issues being floated by Neimeth and what do they stand to benefit in the short-long term?
The whole essence of the existence of the company is to continue to create value for all stakeholders, especially its investors. This is the essence of our being in business.
There are two ways we add value to investors. One is the declaration of dividends after a successful business year and the other is the multiplication of the wealth of the shareholders through capital gains. These are key driving factors for shareholders.
Neimeth returned to dividend payment in 2020 and we are determined to remain consistent in this direction with increase in the amount we payout to shareholders.
For instance, Neimeth increased dividend payout by eight per cent to 7.0 kobo for the 2021 business year. Sustaining the trend started in 2020 when the company paid a dividend per share of 6.5 kobo; after it had earlier successfully used its profit to restructure its balance sheet and counterbalanced earlier losses.
Beyond cash dividend payouts; shareholders of Neimeth have seen significant capital gains as the investing public continued to react positively to the improvements in the company’s fundamentals. The share price of Neimeth increased rose from 40 kobos as of September 30, 2019, to N1.75 kobo by the end of the last business year on September 30, 2021, representing a 338 per cent gain, more than an average of 100 per cent gain per annum.
This implies that a shareholder who had N1 million worth of shares on September 30, 2019, has seen its value rise to N4.75 million. The trend has remained largely the same in 2022.
In fact, I can see the share price of the company jumping astronomically in the months ahead, far beyond the current price below N2 for discerning investors this is the time to take advantage of the stock by investing in the shares of the company and the rights issue is one good opportunity.
This optimism is based on the very viable strategy and strong fundamentals of the company. Neimeth is pursuing a multi-prong strategy to strengthen its position as a leading Nigerian pharmaceutical company and to develop a competitive global capacity that allows it to tap into emerging continental opportunities.
As part of the expansion plans, the company is building a new multi-products manufacturing facility at Amawbia, Anambra State which will comply with the World Health Organization (WHO) current standards of Good Manufacturing Practice (cGMP). It is also upgrading its Oregun factory which is billed to be completed this year.
The Oregon factory upgrade alone is expected to increase Neimeth’s manufacturing capacity by more than 300 per cent, particularly for liquid products. This will enable the company to grow more rapidly in both turnover and profit.
The Amawbia project is also expected to have reached an advanced stage of implementation by the end of the current financial year and is expected to contribute to the next business year in 2023.
Also, in pursuit of its corporate vision to be the leading innovative healthcare provider in Africa, the company is pioneering research and development into African home-grown solutions to various diseases.
Already; it has many therapeutic formulations that will provide solutions to various human and animal diseases. Neimeth is also partnering with overseas pharmaceutical companies to formulate medicaments for various common ailments on the continent.
Currently; it has about 13 different human pharmaceutical lines undergoing registration while about nine veterinary products are underway.
About 25 other human pharmaceutical products are scheduled to be submitted to the National Agency for Food and Drug Administration and Control (NAFDAC) for registration soon. Most of these products are expected to be introduced into the market in the current business year, thus expanding the company’s product portfolio.
So the money we are looking for has been mapped out for highly strategic investments which will catapult the company into investment heaven.
What does it mean to win the 2021 Nigerian Investor Value Awards as the Best Performing Stock (Healthcare) in the Nigerian capital market?
The Nigerian Investment Value Award (NIVA) celebrates public companies which have created sustainable value through strategic intelligence, operating efficiencies, market leadership and organisational values for investors. It celebrates the wealth-building capabilities of quoted companies in Nigeria.
Neimeth International Pharmaceuticals Plc won the Award in 2021 as the Best Performing Stock, (healthcare) in f the Nigerian capital market.
This is the third time since 2019 the company has won a similar Award which is based on the performance of quoted companies on the Nigerian capital market, beating other leading pharmaceutical companies quoted on the Nigerian Exchange Limited (NGX).
Neimeth has shown consistent improvement in creating values for investors in Nigeria’s capital market through the performance of the company’s shares on the Exchange.
Over the years the firm has continued to improve its financial performance which has not escaped the watchful eyes of regulators of the Nigerian capital market.
Besides the NIVA Award, Neimeth was also nominated along with Airtel West Africa and FBN Holdings Plc for the Award of Listed Company of the Year in 2021. This recognition was made as a result of the wealth creation capacity of the company because the Listed Company of the Year Award is meant for only those organisations that created the most value for investors.
Neimeth was one of the few companies that increased shareholder value by over 300 per cent in 2021. These recognitions only remind us at Neimeth, of the value of hard work and to me, the reward for such hard-work is indeed more work.
Our corporate strategy is to continue to create value that would enable us to play greater roles in the healthcare industry in Nigeria, Africa and beyond.