Umuthi Healthcare Solutions Plc (LON:UHS), the technology led healthcare business focused on the distribution of pharmaceuticals and the provision of medical facilities in remote areas, has announced the admission of its shares to the Official List (by way of a Standard Listing under Chapter 14 of the Listing Rules) and to trading on the London Stock Exchange’s Main Market for listed securities.
Dealings will commence at 8.00 a.m. on 4 March 2021 under the ticker “UHS” with ISIN number GB00BJ56HG01. Upon Admission, the Company will have 92,000,000 ordinary shares in issue.
Umuthi is a revolutionary healthcare group which combines healthcare and technology in a seamless platform which has been developed by its experienced management team over the past 10 years. This MedTech model is exciting in terms of market trends and leading-edge technology.
Umuthi currently has its main operations in South Africa but is looking to expand organically and by way of acquisition in the regions of Africa and Europe. This is possible due to the low-risk business model being ideal for the current global environment caused by the COVID-19 pandemic.
Whilst operating in a highly regulated environment and due to South Africa having clusters of highly developed cities and expansive rural areas, general practitioners (“GP’s) are required to dispense medicines from their consulting rooms. Large pharmaceutical companies are not permitted to transact with GP’s directly, therein giving an opportunity for companies such as Umuthi to provide the warehousing and distribution capabilities to GP’s.
|·||Umuthi’s technology platform, which has been developed over many years, utilises a highly innovative mobile application available to download on any smartphone.|
|·||The Company is launching its proprietary app which bypasses traditional distributors and trades directly with healthcare suppliers with a direct-to-market solution with standardized fulfilment and distribution services, which are fully integrated with both multi-channel order management and accounts receivable capabilities.|
|·||Umuthi has contractual access to 25,000 clients and exposure to advertising platforms to continuously grow its base to target all practitioners in South Africa.|
|·||Umuthi onboarded 2,000 clients during the previous financial year which represents a single digit fraction of the immediately available customers to its MedTech platform and have booked revenues as a result of these sales, ensuring tangible proof of concept.|
|·||The bespoke platform enables the Group to pursue joint ventures with other companies and groups for providing access to the distribution network.|
|·||Umuthi is in discussions to distribute COVID-19 vaccines and related products via its distribution and warehousing capabilities.|
Gert Viljoen, Chief Executive of Umuthi Healthcare Solutions, commented:
“Our listing on the London Stock Exchange represents a major endorsement of both our business and our team and we believe that our quoted status provides an ideal platform from which to accelerate our growth ambitions. Now is the right time to be focusing on advancing healthcare and medicinal provisions with a heightened awareness brought on by the current global pandemic. The listing will provide us with the momentum needed to progress with our strategy of expanding organically and by way of acquisition as we create further value for shareholders, I look forward to providing further updates as we develop.”
The Company’s prospectus published in connection with its listing is available on the Company’s website at www.umuthiplc.com. Defined terms used in this announcement shall, unless the context provides otherwise, have the same meaning as set out in the Prospectus.
Objectives & Business Strategy
In 2010 Gerhardus Viljoen, now a Director, identified what he believed to be a gap in the market pertaining to the healthcare industry whereby general practitioners and specialists’ consultants in South Africa required assistance with practice management and other financial aspects of their practices.
Gerhardus Viljoen established V Professional Services to provide these practice management and financial services, having worked closely with medical practitioners for a number of years, he then became aware of the requirements of such practitioners for a reliable and efficient supply of pharmaceutical products.
Lems, which commenced trading in January 2017 and was acquired by Umuthi in January 2019 pursuant to the Share Exchange Agreements, supplies prescription and other medicines to medical practitioners and health centres with onsite dispensaries in rural and non-rural areas of South Africa. Lems has purchase arrangements with two established pharmaceutical manufacturers and links with networks of doctors across South Africa via the V Prof Contract and V Professional Services.
The Directors believe that the Group’s strategy reflects anticipated changes to medical environments. Already, a growing number of inpatient health care services are being pushed to the home and outpatient ambulatory facilities; however, many complex and very ill patients will continue to need sub-acute (step down) inpatient services. With ageing infrastructure in some countries and demand for more beds in others, the Group plans to develop its business with a view to improving inpatient and outpatient service connections with consumers and integrating digital technologies into traditional hospital services.
The Group’s aim is to have four principal business segments, which will be:
|·||Supplying pharmaceuticals and other medical products to medical practitioners and dispensaries;|
|·||Owning and operating medical facilities, including hospitals and clinics;|
|·||Providing diagnostic solutions and facilitating medical research; and|
|·||Offering medical insurance.|
Current & Proposed Activities
The Group comprises a technology enabled healthcare business, which delivers medical products to medical practitioners in South Africa. The Group has also entered into certain conditional agreements or letters of intent with third parties with the aim of developing a portfolio of medical centres and offering a range of related services.
The main operating subsidiary, Lems, incorporated in South Africa, supplies prescription and other medicines (known under South African regulations as “schedule 1-6 medicines”) to medical practitioners and health centres with onsite dispensaries in rural and non-rural areas of South Africa.
The Directors have, among other things, relevant experience in the supply and distribution of pharmaceutical products and medicines in South Africa as well as in pharmaceutical licensing. The business is not subject to seasonal risks and the Directors believe that there will always be the requirement for medical facilities and suppliers of medicines for healthcare professionals.
Under the terms of the V Prof Contract, V Professional Services is obligated to give the Group access to its internal database of doctors and medical practitioners, refer doctors and medical practitioners to the Group and provide relevant sales leads. In addition, V Professional Services will advertise the Group’s services and make the Umuthi App available on its website.
Supplying pharmaceutical retailers
Lems supplies prescription and other medicines (known as MCC “schedule 1-6” medicines) to medical practitioners and health centres with onsite dispensaries in South Africa. Any medicine classified as schedule 3 or higher is treated as a prescription medicine. Lems purchases medicines from two established pharmaceutical manufacturers (Adcock Ingram and Aspen) and has links with networks of doctors across South Africa. Lems leases and operates from a 550 square metre warehouse near Johannesburg, South Africa.
Standard prices for medicines are set by the South African government. Lems therefore makes a set mark-up on each product sold. The gross margin made by Lems on products averages 20%. As a result, quick and efficient product delivery allows Lems to distinguish itself from the competition and reduce costs.
Lems operates in a captive, determinable market where there is a standard confirmed average spend per customer, no seasonal risks and where sales prices are governed by law. This ensures a clear, scalable model for continuous earnings and growth.
Lems, as a result of the V Prof Contract and its association with V Professional Services, has access to the medical professionals recognised by this SAMA. Lems therefore benefits from SAMA’s extensive network and the marketing benefits and opportunities that accompany this.
Lems plans to utilise the Umuthi App which has been designed to enhance its product delivery offering by providing its product catalogue online to customers and enabling them to view their order status and track deliveries. The Umuthi App is a healthcare platform which combines up to date infrastructure and software with professional medical and laboratory devices. The Lems App was developed by V Professional Services for and on behalf of Lems and V Professional Services assigned all rights and title to Lems along with all future profits to be generated as a result of the utilisation of the Umuthi App.
This app bypasses traditional distributors and trades directly with healthcare suppliers with a direct-to-market solution. The app has standardized fulfilment and distribution services, which are fully integrated with both multi-channel order management and accounts receivable capabilities. Significant development has gone into the app, inter alia to interface with updated medicine lists, updated weekly on the back-end. General practitioners select the required order in app and attend to payment through technology based payment portals. In a manner not dissimilar to food delivery apps, delivery is outsourced to medical courier companies, ensuring the risks and costs of delivery is not borne by Umuthi.
The interactive nature of the app allows for a seamless onboarding procedure of a doctor or pharmacy. The app will not only work for urban pharmacies and doctors but will also cater directly to rural dispensing doctors who currently have to drive far distances to the closest dispensing warehouse which is inefficient and reduces the time that can be spent on seeing patients and increasing revenue. The app also includes an interactive monitoring of minimum stock levels in the doctor’s dispensary. When minimum stock labels are reached, the app will generate a notification to the doctor of an order to be placed.
Directors believe the Group will distinguish itself from competitors as well as enhancing cash flow, as all in-app payments are virtually instantaneous. Whilst the Lems App has already been made available to certain clients of V Professional Services as part of a soft launch, the Company intends to conduct a formal launch shortly after Admission. This formal launch will include the Umuthi App being made available on the V Professional Services and SAMA websites (in accordance with the terms of the V Prof Contract) and will coincide with the conduct of the marketing campaign.
Market and Competitive Environment
Pharmaceutical demand worldwide was estimated at $1.25 trillion in 2019, of which 22% of that was in emerging markets. It is expected that growth in emerging markets will be driven by three primary trends:
|·||volume growth of inexpensive generic medicines used to treat chronic diseases such as diabetes, cancer, heart disease and HIV in a growing and ageing population. This is particularly added to by the likelihood that the ageing population will survive for longer, despite suffering chronic diseases such as those listed;|
|·||an increased ability of the population to pay for needed medicines, including through government supported programmes and/or charities and other donor supported initiatives; and|
|·||the rise of urban middle classes, who are able to increase household spending. This should lead to an increase both in the number of people with health insurance, and also in the ability of households to pay for needed medication or supplies where insurance is not in place. This also leads to an increased demand for higher quality goods and services from an increasingly well-informed consumer group.|
Supply chains of drugs and medical supplies are typically complex, with differing regulatory regimes and licensing laws potentially applying at different stages. In addition, visibility in these supply chains is often low, with little to no prior notice of deliveries. In addition, certain drugs require careful handling within temperature-controlled environments to ensure their safety. A breakdown of the supply chain could lead to such medicines being compromised, and therefore lead to a risk that consumers will receive low quality goods, or that the medicines will be unusable and therefore wasted costs.
Within Africa, the population of approximately 800 million (approximately 12% of global population) is estimated to bear a disproportionately high (estimated to be approximately 24%) of the global disease burden. This includes an estimated 22 million people with HIV, which represents approximately 67% of the global figure, and a high infant mortality death, of approximately 50% of global deaths of children under five years old. (source: IMF, World Bank, African Development Bank)
This is thought to be in part due to the difficulties in ensuring that medication and supplies are provided; the World Health Organisation estimates that more than 6.3 million children under the age of five die every year due to conditions that could be prevented or treated with simple, affordable medical care. Access to this medical care is made more difficult by transportation issues, including the “last mile” problem, which the Group’s proposed drone technology could work to overcome.
African economies are growing faster than the economies of all other continents and approximately one third of the countries are seeing annual GDP growth of more than 6% (source: IMF, World Bank, African Development Bank)
In South Africa the standard sale price of pharmaceuticals is fixed by the South African Medicines Control Council.
The Directors believe that the Group excels in pharmaceutical distribution by ensuring the consistent availability of quality medicines and supplies to pharmacies and doctors in South Africa, ensuring that the Group is the preferred supplier of its customers. It also has access to a large pool of potential customers through V Professional Services and SAMA.
Access to groups of doctors
The Group has a relationship with V Professional Services, a business owned by one of the Directors, Gerhardus Viljoen, which provides the Group with access to a network of medical practitioners in South Africa, being potentially a large customer base.
V Professional Services is a leading independent provider of accounting, administration, and practice management services to independent medical practices in South Africa. Lems and V Professional Services have entered into an agreement whereby the V Professional Services will, amongst other things:
|·||make its database available to Lems;|
|·||procure that Lems has access to the 25,000 doctors;|
|·||refer its clients to Lems;|
|·||seek to identify those of its clients that may be most interested in the Group’s services and notify Lems of the details of such clients; and|
|·||advertise Lems and promote the app on V Prof’s website and procure that SAMA do likewise.|
Gerhardus Viljoen is essential to the development of the Group and its business plan due to his vision for the Group’s future and the access to medical professionals that the Group is able to exploit by virtue of Gerhardus Viljoen’s ownership of V Professional Services. The Company is considering engaging a senior medical practitioner as a non-executive director to strengthen the Company’s relationship with the medical community, but no agreements have been reached to date.
In terms of the provisions of regulation 19 of the Medicines Act, the licensee must notify the Registrar of Medicines of any changes to any particulars that was furnished in the application or appearing on the license e.g. change in business address, change in Responsible Pharmacist.
The Board & Senior Management
Shaun Ivan Gresse, Non-Executive Chairman (aged 44)
Shaun Gresse graduated from the University of Pretoria, and was admitted as an advocate to the High Court of South Africa, and then worked at various attorneys as a candidate attorney from 2003 to 2005, where he carried out a variety of work.
In 2006 he founded SIG Labour Specialists, to fill the labour gap in the market by ensuring that the correct corporate governance compliance is implemented with all the changes in labour and collective agreements. Shaun also safeguarded companies against the incorrect implementation of these changes and attended to the negotiation with unions in terms of salary increases and also assists in the correct implementation of it. SIG also works to provide training to staff members, in order for them to have the necessary knowledge and skills to be able to perform to their maximum capacity, in order for the company or organisation to be able to survive in today’s marketplace.
Shaun founded PSC Brokers (Pty) Ltd in 2017 which also provides corporate governance guidance and short term insurance provisions.
Gerhardus “Gert” Petrus Viljoen, Chief Executive Officer (aged 41)
Gert Viljoen is a very experienced Executive in his field. His combination of knowledge and an extensive network within the medical fraternity in Southern Africa resulted in him pursuing the opportunity to use his background to expand and grow the Group within the European markets. He is the founder member and chief executive office of the Group. He developed V Professional Services which delivers a wide range of financial and administrative services to healthcare companies and medical practitioners in South Africa. This was the foundation for the birth of the Umuthi Group, which utilises the access points to customers on a healthcare technology-based platform. His vision which was created more than five years ago, showed the foresight which is relevant in current times. Through the experience gained in this business he identified and developed the model for the Group’s business. Gert has a B. Comm Accounting (UJ), and Finance Honours (CTA) from the University of Johannesburg and is a Member of South African Institute of Professional Accountants. Gert is also a member of the Institute of Directors.
Pieter Grimes, Chief Financial Officer (aged 39)
Pieter Grimes worked for 10 years at Equity Pharma Holdings Pty Ltd, now Clinigen SA. Clinigen forms part of the Clinigen Group, which is listed on the LSE’s AIM market. He was the Financial Manager, and therefore responsible for day to day accounting and financial functions of a number of the group’s subsidiaries, namely Equity Pharmaceuticals, Homemed, Glucolab, Equity Shared Services (Logistics), Equity Dental and Equity Australia.
Pieter came from Equity Pharma Holdings Pty Ltd (now Clinigen SA) where he worked for 10 years. Clinigen forms part of UK listed Clinigen group. He was the Financial Manager of Subsidiaries including Equity Pharmaceuticals, Homemed, Glucolab, Equity Shared Services (Logistics), Equity Dental and Equity Australia. Pieter holds a B.Com Hons. Financial from the University of Pretoria.
Colin Bloom – Non-Executive Director (aged 49)
Colin Bloom, aged 49 is an experienced senior executive with a proven record of excellent people management and leadership in large and medium sized corporate, charitable and political organisations. Colin was Chief Executive of Mission Care, a provider of social and healthcare to older people, people with disabilities and HIV. Mission Care had 500 healthcare workers, delivering services across London. In 2004 Colin set up Mission Care International, a charitable programme working in Africa, Haiti and India. Mission Care International partnered with other health and social care providers to build clinics, community kitchens, midwifery centres, orphanages and sanitation programmes. Between 2011 and 2015 Colin held the following commercial roles, Operations Director at Roy Bloom Ltd, International Director of Heritage Bathrooms Plc and Commercial Manager at Thomas Jourdan Plc.