Medicine deliveries in ‘good shape’ despite Melbourne’s COVID hard lockdown, says Sigma boss

Sigma chief executive Mark Hooper has quelled fears that Melbourne’s hard lockdown will delay deliveries of essential medicines.

Chief executive Mark Hooper says the national distribution network is the “hidden” side of the business. Picture: Stuart McEvoy for The Australian.

Australia’s biggest pharmaceutical wholesaler is assuring Victorians that they will still be able to access essential medicines as Melbourne enters the harshest lockdown the country has ever seen.

While distribution centres across Victoria have had to slash their workforces by a third, including the major supermarket chains, fuelling fears of grocery shortages and panic buying, the Andrews government has granted Sigma Healthcare a full exemption.

Chief executive Mark Hooper said the national distribution network, which he described as the “hidden” side of the business, was continuing at full capacity to supply essential medicines to hospitals, aged-care facilities and pharmacies, playing a crucial role as Victoria stepped up efforts to curtail the rampant spread of the coronavirus.

“We’ve got an exemption from the Victorian government to continue operating. It’s been great to get that support,” Mr Hooper said.

Sigma operates four warehouses across the country, including one in Rowville in Melbourne’s southeast, which abuts their head office. It also owns the Amcal, Guardian, Chemist King, Discount Drug Stores and PharmaSave pharmacy brands.

Mr Hooper said overall the supply chain for medicines was in “good shape”, although he added that there was an “odd exception for some products when Donald Trump comes out and claims it as a cure” like hydroxychloroquine.

His comments came as Sigma sold two of its distribution centres in Sydney and Brisbane for $172m under a leaseback arrangement, which will strengthen its balance sheet and slash its debt to below $100m.

“Unfortunately, what we do is largely invisible to consumers. People just roll into a pharmacy and assume their medicines are going to be there,” Mr Hooper said.

“But both during the bushfires and during the COVID-19 pandemic, companies including Sigma have played a vital role in making sure medicines get to pharmacies. Indeed, we have had to proactively step in when COVID was at its peak and manage supply through to pharmacies to ensure there was equitable access across the board.

“That’s why the system we have in Australia is so fantastic. There is great redundancy in the systems and infrastructure that we have. For the people inside the Sigma business, it gives them a great sense of purpose because what we are doing is making sure patients get their medicines on a timely basis.”

That work extends beyond supplying pharmacies and hospitals to home delivery for some of the most vulnerable members of the community via partnerships with logistic start-up Yello, which Woolworths also uses.

“A lot of pharmacies do that (home delivery) themselves as well. Just like every other area of retail, online and home delivery has become a critical part of what pharmacy does, and the introduction of electronic scripts is helping facilitate that as well.”

Demand steady

Mr Hooper said demand for pharmaceutical products had remained steady, in line with Sigma’s forecasts from the beginning of the year. While demand had surged for personal protective equipment, social distancing measures had cut demand for seasonal cold and flu medication, he said.

“There is no doubt there has been less cough and cold because there have been fewer people that have had a cold this year but there has been higher sales of products in new categories like face masks and sanitisers, so it has all evened out at the end of the day.

“So for us, overall, business has been about the same, which has been a real positive.”

Sigma launched a $300m spending spree on its warehouse distribution network in 2018. Mr Hooper said the sale of two of its distribution centres had benefited from an $80m uplift in commercial property values.

“We have made quite a significant gain on these two transactions — about $80m higher than what we paid for these two properties — and because we have accumulated tax losses, we don’t expect we will pay any tax on that.

“By utilising our tax losses, the whole $80m will be realised to Sigma shareholders.”

As part of the agreement, Sigma entered into a 15-year lease agreement with two five-year options to extend, with first-year lease cost around $8m annualised.

The company retained ownership of its newly constructed distribution centres in Canning Vale in Western Australia and Truganina in Victoria, which is under construction, as well as its automation technology across all sites.

Mr Hooper said the sale of half the network gave the company flexibility to enter a similar deal with its remaining sites.