Adcock Ingram Limited

1 New Road
Midrand
,
South Africa
Telephone: (27) 11-635-0000
Fax: (27) 86 553 0000
Web site: http://www.adcock.co.za

Public Company
Founded:
1890
Employees: 2,374
Sales: $440 million (2017 est.)
Stock Exchanges: Johannesburg Stock Exchange
Ticker Symbol: AIP
NAICS: 325412 Pharmaceutical Preparation Manufacturing

Adcock Ingram Limited is a South African pharmaceutical company that divides its operations into four divisions. The Consumer Division offers branded products, including cold and cough medicine, digestive products, vitamins, energy supplements, and feminine hygiene products. The Over the Counter Division offers a selection of premium- and economy-branded cold and cough, pain relief, and allergy medicine and digestive and energy products. The Prescription Division focuses on prescription generic drugs but also markets branded therapies through partnerships with multinational pharmaceutical firms. Finally, the Critical Care Division is a manufacturer and distributor of hospital and critical care products. Adcock is the second-largest pharmaceutical company in South Africa in both the private and public sectors. Besides South Africa, Adcock serves the other countries on the African continent. It maintains production facilities in Aeroton, Clayville, and Wadeville, South Africa, as well as a plant in Bangalore, India. Adcock is a public company listed on the Johannesburg Stock Exchange.

PHARMACY ORIGINS

Adcock Ingram traces its history to 1890, when 27-year-old Edwin John Adcock opened a pharmacy in the mining town of Krugersdorp in what was then known as the Zuid-Afrikaansche Republiek. He later sold the business to William Maxwell and Jack Blair. The Tannenbaum family became involved in 1918, when Blair made 18-year-old Hyme Tannenbaum his apprentice. Tannenbaum's parents had immigrated to South Africa from Poland around 1888. He eventually took charge of the pharmacy and brought in his brother Jack. They would be joined by a third brother, Len, and finally the youngest brother, Arthur.

COMPANY PERSPECTIVES

Mission: To provide quality products that improve the health and lives of people in the markets we serve.

ESTABLISHING SAPHAR LABORATORIES

One of Keatings's manufacturing partners was the Hungarian drugmaker Chinoin, which during the late 1930s sent Dr. Bondi Janovics to help persuade South African doctors to prescribe Chinoin-manufactured drugs. Janovics proved to be a poor salesman. but with war clouds on the European horizon, he was reluctant to return home. To remain in South Africa, he decided to propose to Jack Tannenbaum that he establish a pharmaceutical manufacturing operation. He partnered with Kuno Hoffer, a Hungarian chemical engineer who had been sent to South Africa to open a plant to manufacture chloride of lime. The project was abandoned, but like Janovics, Hoffer did not want to return to Hungary. Instead, he and Janovics developed ways to manufacturer pharmaceuticals for Keatings. Their laboratory, called Saphar Laboratories, began producing ethyl chloride and other products, and within a few years they had turned it into a thriving concern.

The third Tannenbaum brother, Len, made his own mark. During the 1930s he was sent to manage the new Fred Ingram pharmacy in Hillbrow. Under his direction, it became the largest pharmacy in South Africa. He also became involved in manufacturing through Hans Rose, a German Jew who escaped Nazi Germany in 1937. A trained chemist, Rose developed a skin cream for Len Tannenbaum. Marketed as Ingram's Camphor Cream, it became a best seller.

TAKEN PUBLIC

In 1940 Blair died and the Tannenbaum brothers acquired his shares in Adcock. The youngest of the brothers, Archie, ran Adcock's wholesale division, supplying all the pharmacies under Tannenbaum control. To better support the retail operations, he opened wholesale branches in Klerksdorp, Pretoria, and Welkom, South Africa. The manufacturing operation also enjoyed strong growth during the postwar years. In 1948 Janovics and Hoffer traveled to Chicago and secured a license agreement with Baxter Healthcare to manufacture Baxter intravenous fluids in South Africa. This new venture assumed the name Keagrams and expanded alongside the Saphar Laboratory, and within a few years a new plant was constructed in Aeroton, South Africa.

In 1950 the various Tannenbaum interests were combined into the holding company Adcock Ingram (Chemists) Limited and taken public on the Johannesburg Stock Exchange. The group consisted of E.J. Adcock Ltd., a chain of retail shops and wholesale outlets; Saphar Laboratories; and Keatings Pharmaceuticals Ltd. Adcock Ingram expanded on multiple fronts over the next quarter-century. ML Laboratories was acquired and merged with Saphar. Over-the-counter products were added during the mid-1960s through the acquisition of Crowden Holdings Ltd. Adcock Ingram also acquired the French Hairdressing discount line of toiletries and the Etkinds chain of retail photography stores.

TIGER OATS BUYS OUT THE TANNENBAUMS

The Tannenbaum family's ownership of Adcock Ingram came to an end during the 1970s. With Hyme Tannenbaum having passed away and his brothers growing older, the company also had to contend with the impact of South Africa's apartheid system of institutionalized racial segregation. Bending to intense public pressure, multinational corporations ceased doing business in the country. South Africa was also rocked by riots. In response to the worsening conditions, key Adcock Ingram personnel quit the company and fled the country. In 1977 the Tannenbaum family sold its shares in Adcock Ingram to Tiger Oats and National Milling Company, Limited, which secured a 50 percent controlling interest. Jack Tannenbaum remained as chair to recruit new managers, and subsequently the Tannenbaum family's ties to Adcock Ingram were severed entirely.

KEY DATES
1890:
Edwin John Adcock opens a pharmacy in Krugersdorp.
1940:
The Tannenbaum brothers acquire a controlling interest.
1950:
Adcock Ingram Limited is taken public on the Johannesburg Stock Exchange.
1977:
The Tannenbaum family sells its interest to Tiger Oats and National Milling Company, Limited.
2017:
Adcock Ingram acquires Virtual Logistics.

The new century brought further growth and diversification for Adcock Ingram. In 2001 it established Adcock Ingram Scientific, a medical diagnostics subsidiary that was created through the acquisition of Steri-Lab. In 2003 it acquired Abbott Laboratories' consumer business, which included the Citro Soda and Vidaylin vitamin brands. It also acquired Robertsons Homecare, adding brands such as Doom, Fastkill, and Airoma. Adcock Ingram was especially interested in expanding its generic drug holdings. The Parke Med generics business of Pfizer laboratories was acquired in May 2003. During this period Adcock Ingram also brought a pair of generic drugs to market: a short-acting sleeping pill and a cholesterol-lowering drug.

Despite Adcock Ingram's strong performance, it did not fit the long-term plans of Tiger Brands, which began limiting financial support. Adcock Ingram introduced new generic drugs, but it no longer grew through external means. It did, however, enter into a pair of joint ventures with Indian partners. In 2004 it teamed up with Ranbaxy Laboratories to produce 13 types of generic drugs, including anti-AIDS drugs. With about 11 percent of South Africa's population infected with HIV, antiretroviral drugs were in high demand. In February 2007 Adcock Ingram announced a major investment to manufacture locally three antiretroviral drugs, thus directly challenging Aspen Pharmacare, the country's largest supplier of generic AIDS drugs to the government. That same year Adcock Ingram joined with Medreich Limited to establish Adcock Ingram India.

RELISTING ADCOCK INGRAM: 2008

In the meantime, Tiger Brands had begun divesting noncore assets. In April 2007 it announced the desire to exit Adcock Ingram but was unsure whether to sell the business or “unbundle” it through a listing on the Johannesburg Stock Exchange. In August 2008 the latter course was chosen, and Adcock Ingram once again became an independent public company and was free to pursue a more aggressive expansion program. At the same time, it had taken time to repair its image. Earlier in 2008 Adcock Ingram and two other South African pharmaceutical firms were accused by the government of conspiring for more than 14 years to fix the prices of certain drugs. Adcock Ingram admitted to the wrongdoing and accepted a fine. Nevertheless, it won a government contract worth about $35 million in late 2008. That same year Adcock Ingram extended its partnership with Baxter International for 15 years and opened a new distribution center in Midrand, South Africa.

As a relisted company, Adcock Ingram expanded at home, across Africa, and overseas. In 2009 it acquired three South African companies: Tender Loving Care (Pty) Ltd.; Batswadi Biotech (Pty) Ltd., and Unique Formulations. It also launched operations in Kenya and upgraded its plant in India. The following year the company acquired a controlling interest in the Ghanaian-based Ayrton Drug Manufacturing Limited. It also opened a new distribution center in Durban, South Africa, and signed a five-year copromotion and distribution agreement with the U.S. drugmaker Merck, the world's second-largest pharmaceutical firm. The deal covered over-the-counter medicines and certain prescription treatments and represented an increasing emphasis of global drug companies on emerging markets, where strong growth was expected in the years ahead.

In 2011 Adcock Ingram acquired NutriLida Healthcare, a Johannesburg-based supplements manufacturer that added several niche products to Adcock Ingram's vitamins, minerals, and supplements portfolio. The following year Adcock Ingram expanded its Indian footprint by acquiring Cosme Farme Ltd. It also acquired the remaining half-interest in the Zimbabwean-based Datlabs, a manufacturer of pharmaceutical and personal care products, and opened a high-volume liquids plant in Clayville.

Joffe was appointed Adcock Ingram's chair in 2014 and a number of changes followed. Cosme Farme, which had been losing money in India, was sold the following year as Adcock Ingram worked to improve its operations at home. The company focused on less-regulated product classes and sought bolt-on acquisitions that did not require much in the way of capital upgrades. In 2017 it acquired Virtual Logistics (Pty) Ltd., a national distribution company that expanded Adcock Ingram's operational footprint and improved service to pharmacies and other customers. When the year came to a close, Adcock Ingram reported an increase in revenues and profits that exceeded market projections. Although South Africa's operating environment remained challenging, Adcock Ingram appeared well positioned for continued growth.

Ed Dinger

PRINCIPAL DIVISIONS

Consumer; Critical Care; Over the Counter; Prescription Division.

PRINCIPAL COMPETITORS

Johnson & Johnson; Merck & Co., Inc.; Novartis AG.

FURTHER READING

“Adcock Ingram Surprises with Share Earnings.” Mercury (Durban, South Africa), February 22, 2018.

Ginindza, Banele. “Adcock's New Strategy Brings Return to Profit.” Cape Times (Cape Town, South Africa), August 27, 2015.

Nyamambi, Naledi. “Adcock Ingram Chairman Resigns.” News Tonight, February 19, 2014.

Robbins, Tom. “Tiger Brands Likely to Unbundle Adcock Ingram.” Star (Johannesburg), October 10, 2007.

Rowe, W. Glenn, and Laura Guerrero, eds. Cases in Leadership. Thousand Oaks, CA: SAGE Publications, 2016.

Tannenbaum, Arnold. “How the Tannenbaum Brothers Started Adcock Ingram.” South African Pharmaceutical Journal 78, no. 8 (September 1, 2011).