Pharmacy shakeup: Sigma Healthcare and Chemist Warehouse forge deal worth billions

Pharma News: Chemist Warehouse has made a game-changing decision that is set to shake up the community pharmacy industry. The company has awarded a substantial shareholding to its competitor Sigma Healthcare in exchange for a lucrative supply contract. This move is expected to generate an astonishing $3 billion in sales in the first year alone.

Sigma Healthcare, the owner of renowned pharmacy brands such as Amcal, Discount Drug Stores, and Guardian, has signed a binding term sheet with Chemist Warehouse. Under this five-year contract, starting on July 1, 2024, Sigma will supply Pharmaceutical Benefits Scheme (PBS) medicines and fast-moving consumer goods (FMCG) to Chemist Warehouse. The announcement has left Sigma Healthcare’s CEO, Vikesh Ramsunder, ecstatic.

“The decision by Chemist Warehouse to award Sigma this supply contract is wonderful news for our company and our shareholders,” Ramsunder expressed. He further highlighted that the contract will allow Sigma to capitalise on its highly automated distribution centres and tap into its latent spare capacity. After years of investment and hard work, securing this contract signifies a turning point for Sigma Healthcare, providing them with real scale and momentum as they move forward.

However, this development is not without its implications for another player in the market. The Ebos Group, which currently holds the contract to supply prescription drugs to Chemist Warehouse stores in Australia, is now set to lose out on a deal worth approximately A$1.9 billion in revenue per year.

Ebos had won the exclusive wholesale distribution contract from Sigma Healthcare in 2019 and has been supplying pharmaceutical products to over 450 Chemist Warehouse stores in Australia ever since. This contract represents a significant 18% chunk of Ebos’ A$10.7 billion in annual revenue.

Ebos CEO John Cullity acknowledged the risk of losing this contract and stated that the company had been developing strategies to mitigate the impact on earnings and explore alternative growth opportunities.

“Had we been successful in retaining the contract, it would not have been on the same terms and margins as what we’ve got in the current contract,” Cullity said.

Ebos Group has rapidly established itself as the largest distributor and wholesaler of healthcare products in Australia and New Zealand. In addition to their animal care business, they have been expanding into medical devices through recent acquisitions of LMT/National Surgical Group and LifeHealthcare. Cullity highlighted the company’s multiple growth drivers.

While Ebos still holds a separate contract with Chemist Warehouse in New Zealand, which is not deemed significant to their overall business, the loss of the Australian contract will undoubtedly have a notable impact. As Sigma Healthcare celebrates its newfound momentum, all eyes will be on the evolving landscape of the pharmacy retail industry and how this shift will shape the future for both Sigma and Chemist Warehouse.

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