Sensiblu: profitability, primary challenge of the pharmaceutical retail in 2009

If in the past, many pharmacies were working with a roughly null profit margin, in the midst of economic downturn the already low margins can trigger snowballing bankruptcies, both for drug chains and for independent ones in Romania.

“These days, a pharmacy in Romania works with profit margins at half of what would allow a break-even outcome, not to mention profit”, said Claudiu Opran, Chief Operating Officer at Sensiblu.

The open targets, Opran notes, are those located in rural areas or at the outskirts of large cities. “Almost all pharmacies are working now with 9-10% profit margins, and if these margins don’t change, the industry inches forward to downfall. It takes 20% margins to design a leveraged and sustainable pharmacy, and I am confident that the new Minister of Health grasped the players’ concern and will take the appropriate measures to cure the health system, in favor of the patient”, Sensiblu’s representative pointed out.

In order to hamper the bankruptcies and sustainability difficulties in sight, Sensiblu is not excluding shutdowns or relocations of retail units nor layoffs, in an effort to improve efficiency. “In 2009, there is no major extension plans in sight, as the main priority is to withstand the crisis rather than expand your chain aggressively. This is why we don’t exclude a possible relocation or even shutdown of unsustainable units”, said the representative of Sensiblu, a drug chain that now encompasses 215 units.

The drug retailer Sensiblu delivered in 2008 a new pioneering concept of a pharmacy that consists in arranging products according to the urgency of the need (hair care, mother care, baby care) and to the price categories which reduces the consumer’s time to decide on a product. “We hope to complete the process within 3-5 years. Last year, we’ve reshaped about 25 pharmacies to the new pattern and we hope the same for this year”, Opran added.

Even since last year, Sensiblu started a business reorganization process which is set to continue this year. “We are monitoring the efficiency of each pharmacy and we remain focused on consolidating the network. Certain positions may be affected by this reorganization process. We will try to find other jobs in the company for the workers affected by this situation, and if it is not possible, they will benefit of severance pay packages and assistance in finding a new job. These measures will help them cope with the situation for a reasonable period of time. It is important to mention that we will take into account the employment history and experience in the company in decision-making stages. Moreover, we will continue our capital expenditures projects in training programs for pharmacists that we are already running”, said the head of Sensiblu.

Sensiblu’s final earning report for 2008 is not yet available; however, Opran says the company registered a consistent growth on all segments, with a balanced product database which includes prescription drugs, beauty products and over-the-counter drugs, as well as baby care section with products addressed to babies under 3 years.

Sensiblu is the retail division of A&D Pharma, company founded in 1994 which includes Mediplus as its wholesale business line, the leading distributor of pharmaceuticals in Romania, as well as marketing & sales division of the pharmaceutical products.

A&D Pharma is listed at the London Stock Exchange. Its shares have been traded in the form of Global Depositary Receipts (“GDRs”) on the regulated market of the London Stock Exchange since October 2006 under the symbol 'ADPH'.

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