CAIRO: Investment firm Compass Capital has acquired 10th of Ramadan for Pharmaceutical and Diagnostic Reagents Company (RAMEDA) in a deal worth $40 million.
RAMEDA, established in 1994 in the Sixth of October industrial zone, specializes in manufacturing human and veterinary pharmaceutical products.
Founded with the intention of becoming an established player in the pharmaceutical market in the Middle East, the firm’s plans went slightly awry. “Due to a lack of strategy and management focus,” the company’s ambitions never materialized as hoped, Compass Capital’s founder and managing partner Shamel Aboul Fadl told Daily News Egypt.
Nevertheless, the firm is still one of the largest in the region, and by bringing in new management to work alongside current staff, Compass is intent on realizing the firm’s original objective of being a leading market force.
Ayman Abbas, managing partner and co-founder of Compass Capital, said Compass believes that “there is a window of opportunity … since current consumption levels are low, growth potential is high and the global trend for companies is to move towards generic drugs for their value proposition.”
Compass Capital, established in 2010, is working in concert with Sphinx Turn Around Fund, a firm that specializes in revamping distressed assets, which has invested $5 million into the venture, Fadl said.
Other investors, participating strictly on a financial level, are also involved, such as Raya Holding Company, which has a 30 percent share.
Fadl admitted that the firm is clearly a troubled asset from a management and sales perspective, but is optimistic that Compass’ gamble will pay off owing to the firm being well maintained, its strong product portfolio, with 83 current products and 26 in the pipeline and potential for expansion.
Going forward, Fadl explained that the short-term objective is rapid growth, and then strategy will shift towards cost containment as well as driving the research and development budget, geared toward the creation of new generic pharmaceutical products, forward over the medium-term.
Compass is aiming to triple and quintuple RAMEDA’s sales and profits, respectively.
In fact, Fadl’s firm believes that RAMEDA has the potential to be one of Egypt’s 10 largest pharmaceutical companies.
Compass will seek to exit the firm in three to five years — the typical timeframe for an asset management fund.
To ensure that their “aggressive” initial growth targets are met, Fadl said that incentive schemes would be established for its sales representatives.
Personnel, which numbers 450, will be retrained and redeployed where possible.
Fadl said that the fund’s strategy is not to shed employees given that the firm requires the maximum number of qualified staff so as to achieve its ambitious growth targets.
Currently, RAMEDA is “underutilizing” its potential, Fadl explained, noting that, for instance, the company is only using 6,000 square meters of the total 10,000 its factor — one of the largest in the Middle East at 38,000 square meters, in a region where factories usually range from 7,000-15,000 square meters.
Moreover, of the firm’s seven production facilities, capacity is running at 16-24 percent, and running on two rather than the standard three daily shifts, Fadl stressed.
Compass will invest in supplying equipment for the ailing firm, which Fadl believes isn’t a significant investment, given that infrastructure, representing 70-75 percent of costs, is already in place.
Given that the industry has grown at a five-year compound annual growth rate of 21.5 percent, and according to the IMS, a pharmaceutical market intelligence firm, the local retail market, including exports and institutional sales to reached between LE 19.8-22.8 billion, Fadl and Compass believe that RAMEDA is a sound investment that will pay dividends.
