Drug pricing pressure working in favour of Irish pharma company UDG Healthcare
Dublin-based UDG Healthcare, a provider of medical equipment and healthcare services to big and small pharmaceutical companies, is set to benefit from a squeeze on drug prices in the US.
The US, which runs a free market system where drug makers can name their price, has seen the cost of drugs become a hot political topic in recent months.
The likes of wannabe super villain Martin Shkreli, a 32-year old pharma entrepreneur who hit the headlines after hiking the price of an aids and cancer drug by over 5000 per cent, and Democratic frontrunner Hillary Clinton, who slammed big pharma for "outrageous price gouging", have fanned the flames.
As firms bow to political pressure and reduce prices UDG expects companies to look for costs saving measures elsewhere.
Alan Ralph, UDG's chief financial officer, told City PM:
Once pharmaceutical companies feel the strain from pricing pressure then they will start to look at savings though outsourcing. We’re not linked into the price of drugs at all and that squeeze is only going benefit to us.
UDG is also in a strong cash position despite forking out for UK Health Comms business Pegasus just last month.
The company plans to spend the €500m (£383m) it has built up within the coming two years on further acquisitions as well as improving its back office systems.
Ralph added:
The most likely space is within Ashfield [UDG's commercial and medical services division]. There is a decent pipeline out there.
Earlier today UDG reported profits in the first half grew by 18 per cent to €41.2m with the group reiterating its earnings per share growth of between six and eight per cent based on current positive momentum.
Revenue rose to €472.4m, up six per cent, while the firm's first dividend of 3.05 cents represents a five per cent increase on the same period last year.
Brendan McAtamney, chief executive, said:
Following the completion of the disposal of the United Drug Supply Chain businesses and MASTA in April, the group is now in a net cash position.
Underpinned by our strong balance sheet and diversified client base, UDG Healthcare remains well positioned to continue to execute our international expansion strategy and meet the growing demand for our specialist services from our global healthcare clients.