A Ghanaian startup is buying Kenya’s second-largest pharmacy chain, Haltons, in an unprecedented deal for the African startup ecosystem, Quartz reports.
The transaction, which sees mPharma, which manages prescription drug inventory for pharmacies and their suppliers, enter the East Africa regional market for the first time, means the young company will take control of the 20 Haltons stores split between Nairobi and Mombasa. The deal comes as mPharma works on completing a Ksh 1. 2 billion ($12 million) Series B funding round led by 4DX, an Accra/San Francisco venture capital firm, and Nairobi-based Novastar Ventures.
So far it has confirmed Ksh 176 million ($9.7 million) and the full round is expected to be completed in a couple of weeks with other investors including Unbound Ventures, the VC arm of India’s Bharti Mittal Family office, early Facebook investor Jim Breyer and former Novartis chief executive Daniel Vasella, who has joined MPharma’s board, according to Quartz.
MPharma was founded by Greg Rockson to significantly improve the efficiency of pharmaceutical supply chains in African countries. Its proprietary Vendor Management Inventory (VMI) system is already being used in over 250 pharmacies in Ghana, Nigeria, Zambia and Zimbabwe.
Typically, the media outlet says, young startups are more likely to be acquired by traditional or established businesses rather than the other way round. It quotes Rockson as saying the unusual deal came about as part of conversations to market its VMI platform to the chain, but realized there was an opportunity to prove just how much the efficiencies of managing the both front end and back end could help African pharmacies drive down their biggest costs: inventory.
“We’ve not always been able to control the customer experience and fully address the issue of drug affordability with our pharmacy clients particularly because they manage their profit margins,” said Rockson.
The best manifestation of that strategy has been its QualityRx franchise model, which replicates similar features seen with Co-operative retailers in the US and Europe employing common branding, inventory systems and collective purchasing.
“Through our QualityRx service, we’re starting to invest in improving the customer experience and pricing that patients get from pharmacies,” says Rockson. “Haltons will serve as testing ground for us to develop patient-centered services we can provide to our franchise pharmacies. This way we can encourage lower margins and pass the savings on to the customers.”
The startup is taking control of Haltons from Fanisi Capital, a Mauritius-based private equity firm, but senior management at Haltons will retain a stake in the business.
Mary Ngige, Haltons’ managing director, is quoted as saying the attraction to the deal was about improving efficiency within the pharmacy’s supply chain using better inventory management software which ultimately aligned with Halton’s own mission to improve drug accessibility and affordability.
“This is a volume business and their technology will help us fine-tune our model and improve competitively.
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While terms of the deal are not public, mPharma is believed to have paid under Ksh 0.5 billion ($5 million) for the chain, which at one time was the largest in Kenya. Last year, Haltons did around Ksh 151 million ($1.5 million) in revenue, according to Ngige.
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