Patients in Focus
In the first quarter of 2013, the Pelion Group generated revenue of PLN 1.9bn. This result was achieved due to an above-average sickness incidence rate caused by an exceptionally long winter, as well as an attractive offer prepared for the Company's clients. The Group's net profit for the period was PLN 35.7m, which translated into a net profit margin of 1.9%. Traditionally, it is the Company's best-in-the-industry service that has won it new clients.
The Company's strong performance in Q1 2013 was, to a large extent, due to the fruit of the geographical and business diversification strategy implemented by the Group.
Pelion Healthcare Group has consistently built its position in all segments of the pharmaceutical distribution business over a number of years. It is with great care that we serve the customers of our orange-coloured Dbam o Zdrowie pharmacies, and supply pharmaceuticals to traditional pharmacies, hospital pharmacies and other wholesalers. We are also present on the manufacturers' services market, which is currently opening attractive new prospects to industry operators. For five years we have been present on the Lithuanian market, which is growing steadily thanks to the patient-friendly legislation in the country. After the diversification of our business, the recent changes in the Pharmaceutical Law – which were so adverse to the industry – affected only a part of the Company's business (34%). The Group's retail segment suffered the most in 2012, due both to the way in which margins were calculated and following the ban on advertising by pharmacies. The retail segment underwent a deep restructuring, which involved vast measures ranging from closing unprofitable pharmacies to redundancies and salary cuts. We entered 2013 with a reduction in our wholesale margin to 6%, which does not fully compensate for the distribution costs on reimbursable drugs. These drugs account for nearly half of the wholesalers' turnover. To compensate for the effects of this reduction, the Group focused on cost-saving measures, implemented at the cost of service quality and development projects. The frequency of deliveries to pharmacies was reduced by half, with deliveries now occurring once a day. Service quality will be further limited, starting from January 1st 2014, when the wholesale margin on reimbursable drugs is cut again, this time to 5%. We are also considering the possibility of reducing the number of deliveries to pharmacies to two deliveries a week.
Pelion Healthcare Group has consistently built its position in all segments of the pharmaceutical distribution business over a number of years. It is with great care that we serve the customers of our orange-coloured Dbam o Zdrowie pharmacies, and supply pharmaceuticals to traditional pharmacies, hospital pharmacies and other wholesalers. We are also present on the manufacturers' services market, which is currently opening attractive new prospects to industry operators. For five years we have been present on the Lithuanian market, which is growing steadily thanks to the patient-friendly legislation in the country. After the diversification of our business, the recent changes in the Pharmaceutical Law – which were so adverse to the industry – affected only a part of the Company's business (34%). The Group's retail segment suffered the most in 2012, due both to the way in which margins were calculated and following the ban on advertising by pharmacies. The retail segment underwent a deep restructuring, which involved vast measures ranging from closing unprofitable pharmacies to redundancies and salary cuts. We entered 2013 with a reduction in our wholesale margin to 6%, which does not fully compensate for the distribution costs on reimbursable drugs. These drugs account for nearly half of the wholesalers' turnover. To compensate for the effects of this reduction, the Group focused on cost-saving measures, implemented at the cost of service quality and development projects. The frequency of deliveries to pharmacies was reduced by half, with deliveries now occurring once a day. Service quality will be further limited, starting from January 1st 2014, when the wholesale margin on reimbursable drugs is cut again, this time to 5%. We are also considering the possibility of reducing the number of deliveries to pharmacies to two deliveries a week.
Poland as a country of low prices and low margins
Pharmaceuticals in Poland are among the least expensive pharmaceuticals sold in Europe. This, however, does not translate into low prices for patients, who already cover nearly 40% of the price. Despite the gradual abatement of wholesale margins, the patients' share of the cost has been growing for a number of years. Additionally, as a result of depreciating service quality, the accessibility of medicines has worsened. For financial reasons, pharmacies have been reducing the volume of pharmaceuticals kept in stock, and patients must often wait for their medicine to be delivered from the wholesaler. Wholesalers in turn have been delivering less and less frequently. In view of another planned wholesale margin cut, this situation is set to be exacerbated, especially in the countryside and in smaller towns located far from the large logistics centres.
Patients in Focus
Pelion Healthcare Group, operating in the healthcare sector for over 20 years now, continues to make efforts to provide patients with access to all the pharmaceuticals registered on the Polish market, at good prices. This is particularly important today, when the amounts paid by patients for drugs have been growing, and the sick are increasingly unable to afford the cost of their treatment.
As such, advising patients on the possibilities for continuing their treatment at a lower cost is a top priority for the Group. Measures used to achieve this objective include the 60+ Programme, which has been running for three years, and an educational campaign conducted as part of the 60+ Programme under the auspices of the Ministry of Labour and Social Affairs. Experts from our 60+ Programme have also successfully battled for lower drug prices for the elderly – over 1.3m people aged 60 and over can now take advantage of a special price on more than seven thousand non-reimbursable prescription drugs and a vast array of OTC drugs specially selected with senior citizens in mind. These initiatives were recognised by the Wprost weekly magazine, which honoured our 60+ Programme with their Kod Sukcesu award, for unconventional measures taken on the Polish market, as well as for courage in doing business and the ability to take on serious challenges.
The ban on advertising by pharmacies and their operations still presents an obstacle to informing customers about the possibilities of reduced treatment costs. It prevents patients from obtaining information about offers and programmes designed to lower the costs of pharmacological treatment. The result of the current wording of the provision is that all activities undertaken by pharmacies to help patients in these respects are considered illegal advertising– even those which lower drug prices and enhance the availability of medicinal products to patients, in line with the objectives of the Drugs Reimbursement Act. This is why DOZ S.A., a Group company, has been forced to suspend its patient programmes at the Dbam o Zdrowie pharmacies. These were the Pharmaceutical Care Programme, the Mum and Baby Programme, and the I Care for My Blood Sugar Level programme. The suspension of these programmes does not mean, however, that the Dbam o Zdrowie pharmacists have stopped providing patients with professional pharmaceutical care. Our customers can still count on comprehensive pharmaceutical care and top-quality pharmaceutical services, even if we cannot inform them of this.
In a situation where the peculiar ban on pharmacy advertising prevents us from advising patients, even on available medicinal products, state-of-the-art customer communication tools become particularly important. The Group continues to develop solutions that are unique on the Polish market, including the healthcare web portal at www.doz.pl, which already gets over three million hits every month, and a mobile application for ordering medicine.
As such, advising patients on the possibilities for continuing their treatment at a lower cost is a top priority for the Group. Measures used to achieve this objective include the 60+ Programme, which has been running for three years, and an educational campaign conducted as part of the 60+ Programme under the auspices of the Ministry of Labour and Social Affairs. Experts from our 60+ Programme have also successfully battled for lower drug prices for the elderly – over 1.3m people aged 60 and over can now take advantage of a special price on more than seven thousand non-reimbursable prescription drugs and a vast array of OTC drugs specially selected with senior citizens in mind. These initiatives were recognised by the Wprost weekly magazine, which honoured our 60+ Programme with their Kod Sukcesu award, for unconventional measures taken on the Polish market, as well as for courage in doing business and the ability to take on serious challenges.
The ban on advertising by pharmacies and their operations still presents an obstacle to informing customers about the possibilities of reduced treatment costs. It prevents patients from obtaining information about offers and programmes designed to lower the costs of pharmacological treatment. The result of the current wording of the provision is that all activities undertaken by pharmacies to help patients in these respects are considered illegal advertising– even those which lower drug prices and enhance the availability of medicinal products to patients, in line with the objectives of the Drugs Reimbursement Act. This is why DOZ S.A., a Group company, has been forced to suspend its patient programmes at the Dbam o Zdrowie pharmacies. These were the Pharmaceutical Care Programme, the Mum and Baby Programme, and the I Care for My Blood Sugar Level programme. The suspension of these programmes does not mean, however, that the Dbam o Zdrowie pharmacists have stopped providing patients with professional pharmaceutical care. Our customers can still count on comprehensive pharmaceutical care and top-quality pharmaceutical services, even if we cannot inform them of this.
In a situation where the peculiar ban on pharmacy advertising prevents us from advising patients, even on available medicinal products, state-of-the-art customer communication tools become particularly important. The Group continues to develop solutions that are unique on the Polish market, including the healthcare web portal at www.doz.pl, which already gets over three million hits every month, and a mobile application for ordering medicine.
Strategy for the following months
The Group’s strategy for the coming quarters of 2013 provides for optimisation of processes and leveraging of synergies between all business lines. In the segment of wholesale to pharmacies, our goal is to adapt to the significantly more challenging market legal environment. In the segment of distribution to hospitals, we intend to retain a leading market position, while maintaining a sound portfolio of receivables. In retail, our objective is to improve our performance and focus on pharmaceutical care, whereas for drug producers we will be expanding the range of services we provide.
However, the unfavourable legal environment and lack of a sound return on investments made over the last 15 years (PLN 1.3bn) encourages investment in other European retail markets.
The table below presents the Q1 2013 financial highlights, along with the year-on-year comparative data:
| Q1 2013 | Q1 2012 | Change | |
| Revenue (PLNm) | 1,921.6 | 1,663.3 | 15.5% |
| EBITDA (PLNm) | 63.2 | 28.2 | 124.1% |
| EBITDA margin (%) | 3.3% | 1.7% | 1.6pp |
| Operating profit (PLNm) | 54.4 | 18.6 | 192.4% |
| Operating margin (%) | 2.8% | 1.1% | 1.7pp |
| Net profit attributable to owners of the Parent (PLNm) | 35.7 | 5.1 | 601.4% |
| Net margin (%) | 1.9% | 0.3% | 1.6pp |
| Earnings per share (PLN) | 3.12 | 0.43 | 625.6% |
Based on data in PLN '000
For further details please contact:
Renata Borkowska-Kubiak Press Officer for Pelion S.A.
Tel. (+48 42) 200 79 19
Fax (+48 42) 613 35 35
Mobile (+48) 785 858 991
E – mail: renata_borkowska-kubiak@pelion.eu
Renata Borkowska-Kubiak Press Officer for Pelion S.A.
Tel. (+48 42) 200 79 19
Fax (+48 42) 613 35 35
Mobile (+48) 785 858 991
E – mail: renata_borkowska-kubiak@pelion.eu
Pelion S.A., formerly Polska Grupa Farmaceutyczna S.A., has operated on the market for twenty-three years. Initially, it was a local pharmaceutical wholesaler. In 1998, the Company shares were floated on the Warsaw Stock Exchange. Proceeds from the initial public offering fuelled the Company’s dynamic growth and allowed it to embark on consolidation of the pharmaceutical wholesale market. Since its floatation, the Company has secured a top position among domestic distributors of medicinal products. Today, the Pelion Healthcare Group is one of the largest groups operating on the healthcare markets in Poland and Lithuania. Its services cover all market segments (wholesale, retail and sale to hospitals) and are targeted at individual patients, pharmacies, hospitals and manufacturers. As a holding company, Pelion S.A. oversees all areas of the Group’s operations, which are conducted by PGF Hurt Sp. z o.o. and Pharmapoint Sp. z o.o. (wholesale), PGF Urtica Sp. z o.o. (sale to hospitals), CEPD N.V. (retail sale), and Pharmalink Sp. z o.o. (services for manufacturers).
