PRESCRIBABLE medicines produced by GlaxoSmithKline (GSK), a British multinational pharmaceutical Group, like Augmentin, Amoxil will now cost more as the firm has announced plans to exit Nigeria after 51 years of operation.
As a result of the exit, Nigeria would now have to import and pay higher for these prescribable and off-the-counter drugs that, hitherto, were being produced largely in Nigeria by the company.
The firm is a healthcare company that researches, develops, and manufactures pharmaceutical medicines, vaccines, and consumer healthcare products.
The company’s product line includes panadol, Andrews liver salt, Macleans, Ampiclox, Sensodyne, and others.
The Group has hinted at its exit plans, as the government policies on foreign exchange unification keep creating currency problems for the manufacturing sector, with dollar scarcity taking its toll on its production.
“In our published Q2 results, we disclosed that the GSK UK Group has informed GlaxoSmithKline Consumer Nigeria PLC of its strategic intent to cease commercialisation of its prescription medicines and vaccines in Nigeria through the GSK local operating companies and transition to a third-party direct distribution model for its pharmaceutical products,” GSK Nigeria Plc said in a statement seen by The ICIR.
It added, “The Haleon Group has also separately informed the Board of its intent to terminate its distribution agreement in the coming months and to appoint a third-party distributor in Nigeria for the supply of its consumer healthcare products.”
“The Board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations,” GSK Nigeria said in an official statement signed by its company secretary, Frederick Ichekwai.
“Today, we are briefing our employees whom we will treat fairly, respectfully and with care, meeting all applicable legal and consultation requirements,” the company said.
The company noted that its board is conscious that shareholders will have many questions; “We have been working assiduously with our professional advisors to agree on the next steps, and we will be shortly submitting to the Securities and Exchange Commission (SEC) a draft Scheme of Arrangement which may if approved, see shareholders other than GSK UK, receive an accelerated cash distribution and return of capital.”
“The Board acknowledges the support of the GSK Group in its intentions to make this possible, full details of which we hope to publish shortly. In the meantime, however, we cannot give you assurance of the final terms of any scheme, or that any scheme will be approved by the SEC or by shareholders,” GSK said.
It added, “Shareholders are advised to seek professional advice and continue to exercise caution when dealing in the company’s shares until a further announcement is made.”
GlaxoSmithKline Consumer Nigeria Plc was incorporated in Nigeria on June 23, 1971 and commenced business on July 1, 1972, under the name Beecham Limited. Its Head office is located at 1 Industrial Avenue, Ilupeju, Lagos.
The Company was quoted on the Nigerian Stock Exchange in 1977. In 1982, in order to expand the operations in the country, an ultra-modern drinks factory was established in Agbara Industrial Estate, Ogun State, which has since been expanded to include facilities to manufacture Oral Healthcare (OHC) and Wellness products.
In line with our commitment to continuous improvement, we regularly update our facilities to meet the ever-increasing demands of our consumers.
Analysts’ reaction to GSK’s exit from Nigeria
Following the disclosure on Thursday, August 3, by the board of directors of GSK Consumer Nigeria to cease operations, a capital market operator, David Adonri, told The ICIR that the company had barely become a shadow of itself in the capital market.
“Well, from the fundamentals of the company, as stipulated in their financial reports, the company has not been performing well like it did in those days which made it very attractive to investors.
“It is probably losing its ability to compete in the industry and has lost its competitive edge,” Adonri, executive vice chairman of Highcap Securities Limited, said.
Adonri said, “the condition is likely driving them (GSK Nigeria) out of the stock market.”
A check by The ICIR showed that GSK Nigeria’s half-year sales dropped to N7.75 billion ($9.82 million) from N14.8 billion in the same period a year ago.
The company’s shares, in which British drugmaker GSK has a 46.4 per cent stake and Nigerian shareholders the remaining 53.6 per cent, closed at N8.10 on Thursday, August 3, down from a peak of N42.24 in 2014.
Reacting further and relating it to the realities of the fuel subsidy removal and exchange rate unification of apparently distorting many businesses, Adonri said, “I think it is a panic measure.”
“You can, therefore, see that the sustainable growth and development of the Nigerian economy cannot be built on the activities of foreign multinational companies because they are like briefcase investors; any little thing happens, they carry their bags and disappear.
“We are probably going to see more of that with a lot of these foreign enterprises that are only in another country to make a profit as long as their profit-making objective is not being realised,” Adonri said.
He, however, asserted that the unification of the exchange rate had created a blockage to the avenue through which a lot of multinational companies engaged in over-invoicing and siphoned capital away from Nigeria.
His words, “So with the floating of the naira and the foreign exchange market now allocating hard currency in the economy, everything is now transparent. Nobody can involve itself in the criminality of over-invoicing as a means of siphoning capital flight.
“They (multinational companies) have been profiting from the imperfection of the Nigerian economy for a very long time. Now that those imperfections are being removed, they are giving up.”
Adonri believes that the real investors required to make Nigeria’s economy development are Nigerian investors.
He added, “So, you can see why it is important for Nigerians to take control of their productive economy and not rely on foreign investors who can only come and take advantages and leave.”
An investment and portfolio analyst, Abel Ezekiel, noted that many companies are now exiting the Nigerian equities market.
He corroborated that GSK, which operates a “very big production facility” at Illupeju in Lagos state, where its manufactures its product, had since it sold off its main brand, Lucozade Boost, not been doing well and gaining investors sentiments in the equities market.
He also told The ICIR that the reality is that companies are exiting the equities market, primarily because of post-listing requirements, which compels quoted companies to disclose their quarterly and annual reports, among others.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.