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Send  Share  RSS  Twitter  20 May 2012

PHARMACEUTICALS: Boost For Pinelands Vaccine Plant


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THE Pinelands-based Biovac Institute – which plans to shift its business model from vaccine distribution to vaccine production next year – could be the big beneficiary of a change of shareholding at parent company, Litha Healthcare.

Last month Litha issued shares to Canadian-based pharmaceutial company Paladin Labs in exchange for ownership of a generics manufacturer, Pharmaplan.

Paladin, which also acquired Litha shares from Blackstar, has now emerged as the biggest shareholder in Litha with a 44.5% holding.

While the increased generics capacity is the main focus of the deal, it is significant that Paladin has a strong emerging market focus. Paladin’s participation at Litha should allow for more effective competition and momentum for African expansion.

This might have a huge bearing on Biovac. According to Litha’s latest investor presentation, it will – over the longer term want to push into other African markets.

The current distribution-based model already hints at how compelling this market is – especially with government (or governments, as African expansion unfolds) – providing the regular demand underpin.

In the year to end December 2011, Biovac pumped an imposing R1.3 billion in revenue (up 53% on last year) and generated R67.5 million in operating profits (up 34%).

When manufacturing capacity kicks in there should be a gradual fattening of margins as more product lines are manufactured at Biovac.

Commentary on the year end results by CEO Selwyn Kahanowitz suggests another R35 million needs to be spent at the Biovac Institute in 2012.

Progress at Biovac looks encouraging. The Pinelands facility has already seen commercial equipment installed with the commissioning of a manufacturing site also underway.

Litha says technology transfers with international suppliers will be a key development for Biovac.

These transfers will add momentum to the strategic positioning of Biovac in the SADC vaccine market, as well as drive operational efficiencies through the future manufacturing facility.

Another significant development has been the securing of WHO funding to support seasonal and pandemic flu vaccine manufacturing capacity at Biovac.

Although government is the other strategic partner at Biovac, CBN wonders whether Paladin will not look at ways to hike Litha’s effective shareholding (now 85% of the Biovac consortium) in this very promising business.

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