Are patients taking their medications correctly, and are the medicines working? A handful of digital health startups tries to make it easier to tell — say, by embedding a tracking system into pills they swallow.



Only 25% to 50% of patients worldwide take medications correctly, and in the U.S., roughly 125,000 people die annually from not correctly taking their prescriptions, according to a&nbsp;<a rel="noreferrer noopener" href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6049050/" target="_blank">2018 study</a>&nbsp;led by Leah Zullig, a health services researcher at the Duke University School of Medicine. 



Failure to take prescribed medicines also increases costs to the healthcare system, by about $300 billion annually, Zullig estimates. Jonathan Watanabe, an associate professor of clinical pharmacy at UC San Diego’s Skaggs School of Pharmacy &amp; Pharmaceutical Sciences, says that number would likely be even higher if you included what it costs hospitals to treat symptoms that arise from improper medicine intake (for example, patients with high blood pressure who have strokes as a result of not taking their medicines)—more than $500 billion annually, or 16% of U.S. healthcare costs, he estimates.



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For the most part, the responsibility has been in the hands of the patient. Think pill boxes marked with the days of the week, or their high-tech versions—apps, like Medisafe and CareClinic, that help users self-report their own intake and schedules. These reminder devices don’t go far enough, say some doctors, because they fail to address a very human fault that patients report as their primary reason for not taking their medication: forgetfulness. &nbsp;



<h3 class="wp-block-heading">We Are Our Own Prince Charming</h3>



“We need to take responsibility for our own health and care, but when it comes to drug-taking and medication use, that may not be sufficient,” says Dr. Niteesh K. Chouhdry, a professor of medicine at Harvard Medical School and executive director of the Center for Healthcare Delivery Sciences at Brigham &amp; Women’s Hospital in Boston. “We need to leverage these devices in a way that closes the loop—doctors to pharmacists to patients back to pharmacists.”



Proteus Digital Health, a Redwood City, California-based tech health startup, hopes to create that loop. Founded in 2004 by Andrew Thompson and Dr. George Savage, the company makes a 1 millimeter sensor—“the size of a poppy seed or grain of sand,” says Thompson—that is embedded in medications, which are then swallowed. 



The sensor, made of “elements found in a typical diet,” including magnesium and copper, says Thompson, will turn on when it contacts a patient’s stomach acid. It then sends a signal a the palm-size patch that patients wear on their skin. The patch, which also tracks physiological signs like steps, rest and heart rate, then sends information to a smartphone app for patients and the desktop browser portal that doctors use.



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The idea for the system, called Proteus Discover, came to Thompson during an American Heart Association conference in 2003. Thompson, who had previously started two medical device companies with Savage, including the publicly traded FemRx, which was acquired by Johnson &amp; Johnson for $22 million in 1998, noticed that none of the companies presenting at the conference were doing anything with digital technologies.



 “Silicon and software was innovating every other industry at the time except for pharma,” Thompson says. So he brought his idea for a medicine that communicates with a computer to Savage.



“George looks at me and says, ‘That is the stupidest idea you’ve had in your entire life.’ And then we began to argue,” Thompson says.



In 2017, the FDA approved an antipsychotic drug with Proteus technology, the agency’s first-ever approval for a medicine with digital ingestion tracking system. Abilify MyCite, the drug made with Tokyo-based Otsuka Pharmaceutical, treats schizophrenia, bipolar disorder, depression and Tourette syndrome.



The company has raised $420 million in venture capital funding from investors including Novartis Venture Fund and Kaiser Permanente Ventures at a $1.5 billion valuation. Otsuka, which has a special focus on mental health drugs, announced in October 2018 an $88 million investment in Proteus to continue developing other medications that use the tech-health venture’s ingestible sensors. More than 1,000 patients have used the pill-tracking system, amounting to 195,000 pill ingestions, says the company.



<h2 class="wp-block-heading">EtectRx, Keratin Biosciences</h2>



Other companies have sprung up in the drug delivery space, including etectRx, a Newberry, Florida, health-tech startup with a similar digital health system model. Instead of working with a pharmaceutical company to embed its sensors in a pill, etectRx creates an empty gelatin capsule with an embedded wireless sensor. Its capsule has not received FDA clearance yet, but it can be used in clinical studies that have been approved by the agency’s Institutional Review Board, a committee that reviews and monitors scientific research.



Keratin Biosciences (formerly Microchips Biotech and KeraNetics before the two merged in July 2018) wants to improve medication intake by getting rid of human error altogether. Instead of a pill, this Lexington, Massachusetts, company makes a microchip with hundreds of sealed compartments, each of which can store up to 1 milligram of a drug. 



The chip, which originated in a lab at the Massachusetts Institute of Technology, can be activated by a wireless signal that triggers the compartments to release the drug, based on a preprogrammed dosing schedule.



Digital health startups must figure out how to get the new drug delivery methods they are delivering to patients and consumers in a scalable way, which will require collaboration and a commitment from Big Pharma. “The core thing we want the pharmaceutical industry to understand is that we want to integrate silicon software into the definition of their products in order to make information and data a part of what they do,” Thompson says.



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Then there is the matter of consumer hesitance about swallowing hardware that records private activity. While these inventions are meant to help patients, the monitoring aspect has raised&nbsp;<a href="https://www.consumerreports.org/prescription-drugs/New-digital-pill-tracks-when-you-swallow-it/" target="_blank" rel="noreferrer noopener">privacy concerns from consumer advocates</a>&nbsp;who worry that the information will eventually be shared not just with doctors but with insurers who want to raise premiums or even employers who want to know what drugs a job candidate is taking.



“Security of the data is very important, but in medicine, privacy can be lethal,”&nbsp;Thompson argues. He says that the main issue is not so much privacy but whether companies make it clear to patients where their data is going. “People are happy to share information and data if they know and understand exactly what it is being used for.”



Proteus can claim its smart pills are effective, but it’s still early for most startups that aim to improve the way patients take their medicine.



“This is a tough problem to fix,” says Choudhry from Harvard. “It’s all about forgetfulness, and that is a complex and, frankly, normal behavior.”



-Angel Au-Yeung; Forbes Staff

Mid-section of woman taking medicine, Cape Town, South Africa

Take Your Medicine: This $1.5 Billion Health Startup’s Smart Pills Keep Patients From Forgetting

Nestled on a ridge overlooking the sea to the left and Durban’s beachfront to the right, with Moses Mabhida Stadium on the horizon, is the view from the balcony of a multimillionaire. Michael Attridge is one of the guiding spirits of one of the world’s biggest pharmaceutical companies.
His stride is that of a man who knows where he is going in life. The handshake is firm but welcoming and his warm smile reassures you that Durban may be hot, humid and sticky but it’s a fun place to live.
Attridge, who’s been called Gus since his school days, is a charted accountant by training and the deputy group chief executive of Aspen Pharmacare, a R125-billion ($11.8 billion) company as of the beginning of April according to Reuters, listed on Africa’s biggest bourse, the Johannesburg Stock Exchange. If you bought $10,000 worth of shares, valued at R2,36 in 1998, what would it be worth now?
Attridge is one of four founding shareholders who built this business in their backyard in Durban.
It all began in an old Victorian house, converted into offices, near Greyville racecourse in 1997.
“It was in a rather less fashionable part of Durban, at that time this was sugar cane,” says Attridge, referring to their current offices in La Lucia.
Attridge made his debut on FORBES’ list of Africa’s richest in 2013, coming in at number 37, with an estimated net worth of $525 million. A listing he says he didn’t know about and would rather be without.
The debut was down to Aspen’s stock shooting up nearly 75% in 2012/2013 thanks to its booming business in Asia and Australia, says chief executive, Stephen Saad. Attridge is the second biggest individual shareholder, owning a 4% slice, with co-founder, Saad, who is also on the FORBES list with a net worth of $1.5 billion.
How two friends from Durban came to be worth $2 billion is an African story worth telling.
In 1981, Attridge completed a bachelor of commerce degree from the University of Natal [now University of KwaZulu-Natal] in Durban. He added a diploma in accounting, a year later, followed by another in datametrics before his training with Coopers &amp; Lybrand, now PricewaterhouseCoopers. This is where he met Saad. They worked together on assignments; Attridge was Saad’s senior, who was to climb the ladder at Coopers &amp; Lybrand to become a manager in the corporate finance division in London.
“I’d always set my objectives on becoming a partner in one of the firms. That was kind of my pinnacle as a trainee in the accounting profession,” says Attridge.
Just before the end of apartheid, he returned to South Africa to establish a corporate finance division in the Durban office of Coopers &amp; Lybrand.
During that time, Saad left the company, leaving Attridge behind, suffering from the entrepreneurial itch. But Saad returned. Not to the company, but to Attridge, whom he approached with a lucrative business idea.
“The day he [Saad] could first get out of there, he got out of there. I initially had some career ambition there. But I quickly realized that selling time was not very entrepreneurial and it was difficult to get rewarded effectively for your efforts when you were selling time because it did not measure what value you added to things. I was eager to find an opportunity in business,” says Attridge.
Saad and Attridge put their heads and money together.
“And that’s where my business partnership with Saad began, probably 20 odd years ago,” says Attridge.
He left his job at Coopers &amp; Lybrand in 1994, the year South Africa held its first democratic elections. Their first venture was to buy Varsity College, a struggling private tertiary institution, for R1.5 million ($142,000) and to apply a fresh idea.
“We embarked on quite a differentiated, let’s call it, advertising campaign where essentially we guaranteed students who attended all their lectures and did all their assignments that we would give them their tuition fees free the next year if they failed under those circumstances.”
“It was all built around adverts that went into the press which were around the F-word. It was F***, being fail, but it provoked some reaction generally as well because it was a bit provocative I suppose,” he says.
Few students fell foul of the F-word.
“In a student’s DNA, to go to all lectures is foreign. But really, with that diligence required to attend all lectures and to submit all your assignments and so on, you will pass. Unless you chose a course incompatible with your skills set,” Attridge says.
He and Saad also bought a private primary and secondary institution, Crawford College, one of which is opposite their head offices in this suburb of La Lucia in Durban. It worked. The partners turned the losses of Varsity College and sold it in 1996 for R10 million ($948,000).
This paved the way for another adventure.
“We’re not people with 10-year plans. We don’t even have a three-year plan. It’s a good thing we haven’t because we would have never stuck with any of those plans because we move too quickly, things change quickly,” says Attridge.
Three years into the pharmaceuticals business, Aspen took a big risk. It was a highly leveraged hostile takeover of South Africa’s oldest pharmaceutical business, South African Druggist (SAD), for R2.4 billion ($227.5 million).
“That changed our business forever and changed our business model,” says Attridge.
SAD worked in a number of areas, including the development, production and marketing of pharmaceuticals, within South Africa.
Aspen’s initial business plan was to avoid manufacturing. Its plan was to be a small business selling good margin products to build its name.
The takeover wasn’t going to be easy.
At the time, Fedsure owned 34.9% of SAD, but its attempt to buy the remainder of the company and then sell Pharmacare to Adcock Ingram was opposed by the South African Competition Board. Pharmacare was the main pharmaceutical unit of SAD.
“I remember I was driving from work and I was listening to a business program and I heard this deal had been cancelled or disallowed. I walked in the house, picked up the phone to Steve and I said, ‘you know a lot more about the history of SAD, you know their products well but I’ve just heard that this is cancelled, this deal is not going ahead,’” recalls Attridge.
It got even more complicated.
There were other companies involved in the acquisition. A business called Macmed Health Care initially did the running to buy SAD. They specialized in medical devises rather than pharmaceuticals. They had an agreement with Aspen to divide up SAD in a way that would allow other players, who wanted other parts, to enter into a consortium.
“We had to put up guarantees. It was a hostile arrangement. Management at SAD had their own ideas about acquiring the business for their own benefit. So there were a whole lot of different issues going down. We weren’t allowed to do due diligence,” says Attridge.
Luckily for them, SAD was a public company and Saad had a good knowledge of the product. Financing the deal was a problem but they were helped by property entrepreneur Jonathan Beare, who relished backing small businesses like Aspen. Beare introduced Attridge and Saad to Investec’s chief executive, Stephen Koseff. The two businessmen put up money and Aspen led the deal.
“We didn’t think we were going to buy the whole pharmaceutical business. I don’t know whether its fate or what, but we got it.”
With the deal done, the business grew to a $11.8-billion global corporation with Saad as the chief executive and Attridge the deputy.
The irony of this story was that Aspen were the new kids on the block but survived and prospered. Within 18 months of the transaction, Macmed went bust, about three years later, Fedsure followed.
“So we were the only ones from that consortium that survived and we were the small kids on the block. Those kind of things were instrumental in some of our thinking we try and impart on our staff. We now have a lot of management teams trying to impart on our people that you can never be complacent because you could be succeeding today, because both Fedsure and Macmed were highly rated at the time,” says Attridge.
“You should never be arrogant about your success, because success can be fleeting. You never know how the wheel is going to turn and who’s actually going to need who in the future. I do hope that our people [Aspen staff] understand that. When you’ve lived through and seen what happened to the management team with those businesses and so on, it’s actually very insightful because they all thought they were bulletproof.”
However, a business with a staff of 200 taking over a firm of around 3,000 was no mean feat. One newspaper called it a mouse trying to eat an elephant.
This little company had to get the buy-in from the staff at SAD. They had a small management team that was now going to manage SAD. It all played out at their old Victorian house turned into an office.
“The company which we still own today, Pharmacare Limited, was a company within the SAD label that housed the pharmaceutical business and we invited the chief executive of that business, Kobus Nel, to come to Durban and to meet us and talk about our plans and strategies and get to know him a little better. I think he took one look at that house and the day after he handed in his resignation,” laughs Attridge.
“I think he thought no, look at me sitting in this office park with a view of Johannesburg with a golf course and these guys are sitting here looking into the backyard of someone with a washing line.”
Today, Aspen supplies medicine to more than 150 countries, manufactured in 16 sites in: Kenya; Tanzania; Australia; Mexico; Brazil; Germany; South Africa; the Netherlands and the United States (US), with a French-based site becoming effective in May. It is the largest manufacturer of generic medicines in the southern hemisphere. Aspen is the first company on the continent to launch a generic anti-retroviral for the treatment of HIV and AIDS patients, thus becoming the largest supplier.
On the continent, Aspen has long-term plans for sub-Saharan Africa. Their challenge lies in its fragmented countries but they’re working on it.
“It’s not a big part of our business today but I think the investment in those difficult markets will pay back in time,” says Attridge.
In East Africa, Aspen bought 60% of Shelys, which has businesses in Kenya, Tanzania and Uganda. He says they hope to move away from the tender business into more of a business focused on brands.
They’ve also consolidated some of the manufacturing in East Africa, supported by the South African business, which Attridge hopes will help it to have its best year this year.
The business opened Aspen Nigeria last year. This is a collaboration with GlaxoSmithKline (GSK), a British multinational pharmaceutical company, where they share products and everything else, which has resulted in a strong business in Nigeria that is exceeding expectations.
“We’ve managed to get better market penetration than we thought we’d be able to, early on. It’s very small; it’s not going to influence anyone’s thinking on Aspen today. Everything has to start small. We know that very well at Aspen because we started small,” he says.
And that is how their Australian business grew. They started out with just two employees, but today it is one of their biggest revenue streams. Aspen aims to perform ahead of the market in Australia.
“We’re one of the top players in Australia now. The Australian business is getting to a certain stage of maturity. And the Australian market is challenging at the moment. It has had a series of price cuts which has taken a lot of profits off the table,” says Attridge.
Aspen has an agreement with Nestle that is helping the business ease into Australia. They plan to cut costs of goods through migrating product manufacturers from Australia back to South Africa and Asia.
“There is a big consolidation of manufacturing already well progressed and it continues well into Australia. When we bought the Sigma Pharmaceuticals unit, it had five manufacturing facilities and our target is to end up with one. We’ve got three at the moment,” he adds.
Aspen is Australia’s eighth largest pharmaceutical company by scripts generated. Following its October acquisition of the active pharmaceutical ingredient (API) manufacturing sites in the Netherlands and the US.
Aspen is ranked the ninth largest generic pharmaceutical producer out of 60 generic companies in the world by EvaluatePharma in 2013. It employs around 8,200 people.
But their success comes with problems they have no control over. The beginning of the year saw South Africa’s currency weakening steadily against the dollar, straining Aspen’s South African business.
But because Aspen has become diversified, its money comes in different currencies.
“The rand denomination results have a lot of protection against the weakness of the rand as a group,” says Attridge.
In January, Aspen Global, a subsidiary of Aspen Holdings, acquired the brands and business worldwide of Arixtra and FRaxiparine/Fraxodi, except in China, Pakistan and India, from GSK. As of May, Aspen Holdings will have acquired a specialized sterile production site that manufacturers the brands in France, a total consideration for the acquisition made through its subsidiary at an estimated R9.79 billion ($929 million).
Aspen has an expanding presence in Latin America and South East Asia. Their expansion plans will stretch as far as Russia and the former Soviet Republic, as well as to Central and Eastern Europe.
Attridge attests that though it’s going well, they’ve had some tricky times when they started out in Latin America. Their aim is to create a business model structured for success, similar to Varsity College’s plan.
“Varsity College was about getting an overhead base and would be covered by the revenues and we take the same approach in every business that we look at, that we have to make sure it’s a business model that’s sustainable,” he says.
They changed the business from one that relied on tenders to one based on brand equity.
“We restructured the business and got rid of some of the manufacturing which was not core to what we wanted to do… We’ve had a lot of challenges with management in Latin America. But in Brazil, we got that right a couple of years ago. It’s really doing well. It’s got a good foundation there.”
Brazil has been Aspen’s biggest part of the business in Latin America but the Spanish region of Latin America will soon overtake Brazil.
Spanish Latin America is a region where Aspen has struggled because they only had operations in Mexico and Venezuela. However, in the last 12 months or so, Aspen made a transaction with Nestle to acquire the infant milk business they bought from Pfizer; increasing their product portfolio offering. This has helped Aspen make inroads into Columbia, Chile, Argentina, Peru and Costa Rica.
Attridge hopes that the Latin American business will be as big as South Africa’s in the near future. Before that happens, they need to decrease debt from the latest acquisitions in Latin America.
This will be done through their cash flow from the business. Attridge says they’d rather use debt to build their business.
“We don’t see having money in the bank as a productive use of funds. If you’ve got money in the bank, you better have a very good investment plan and or you should give it to your shareholders. You shouldn’t be sitting with it in a government bank account,” says Attridge.
He believes the business model must produce a good return of cash. Aspen has also avoided giving equity as it is the most expensive way of raising funds.
“We’ve developed that model in all our businesses, so the profits from our business flow through to the business and to cash very efficiently. And most years our cash flow per share have exceeded our earnings per share before investments. But that’s a very important fundamental.”
Aspen made its way into Russia in January, with around 80 employees on the ground, promoting products acquired from GSK and Merck Sharp &amp; Dohme (MSD) SA.
“One of the philosophies we have is that the more challenging the market, the greater the opportunities that may exist. So Russia has been on our radar for some time as a potential investment area, a market with good growth fundamentals and evolving health sector. But it’s not the easiest market to operate in. If you can succeed in difficult markets, then you can succeed in any market and sometimes in the difficult markets you don’t actually have as much competition as you do in markets where it’s easy to operate in. People are scared of the circumstances,” says Attridge.
In Russia, Aspen will compete with a lot of local businesses who will defend their space and territory from the South African company. Attridge says Aspen is competing with a lot of products not as regulated as theirs.
“It’s not unique to Russia, but being able to access the distribution networks into the pharmacies is critical, so establishing and building on the relationships with the people (wholesalers) who are taking the products… they dictate a lot of what can be achieved. You can’t reach Russia on your own,” says Attridge.
But he says these are challenges they’re willing to take head on. He believes good leadership in other regions is one of the factors to their success of running Aspen from their modest offices in Durban.
“You’ve got to have the right people leading your businesses. We stumbled on that initially in America. We didn’t have the right leadership in place there. We inherited some that weren’t aligned with what we were trying to achieve.”
Besides challenges, the group hopes to enter into the two biggest markets by population, China and the United States (US), as well as making an entry into the Japanese market.
“That’s not to say we are going to rush in tomorrow. We now have a small portfolio in the US and one or two products in China.”
A family man, this father of two doesn’t take work home. He says with all the traveling, he makes sure that when he is home he spends it with his two sons and his wife. This 53-year-old, who celebrates his birthday this month, is a former rugby player, who played for the Kwa-Zulu Natal provincial under-20 team in 1981. He is also a cyclist, like his partner Saad, having taken part in the Argus and Amashova races.
He’s also an accountant who’s not afraid to take risks and this has made him rich.

How A Mouse  Ate An Elephant

At the end of April on a typically blustery Western Cape autumn day, a sleek private airplane glided into an airfield near the capital of South Africa’s fruit industry. Ceres doesn’t often play host to such finery and at the airfield’s perimeter fence, a huddle of children watched excitedly as the aircraft came to a halt and its door opened.
A small group of men emerged and the children seemed slightly disappointed.
They looked quite ordinary—and outwardly that was certainly the case—just a few friends on a weekend junket.
At their head was a man who shuns such attention; someone who has thrown off the shackles of a life in auditing; a man responsible for one-in-four of the private prescriptions being written at corner pharmacies and one-in-five in the public sector.
Stephen Saad is the chief executive and founder of a South African phenomenon—a pharmaceutical company that is the biggest in the southern hemisphere. It has found favor with American presidents. It has also defied the odds and based its manufacturing in a country dogged by the negative influence of a persistently strong currency; a lack of investment in infrastructure; poor skills and an attitude that has generally embraced these problems.
Saad is a multi-billionaire in rand terms and worth at least $650 million, according to Forbes, but his appearance in a private airplane, in a relatively remote rural region, is a world away from the allure and shimmer of wealth. He flew in for several hours of sweat and hard graft; a 240km cycle race to raise awareness of a condition that killed the 28-year-old son of his chairwoman and friend. The reason for the private jet? Saad assures us it is merely to save time so that he spends as little time away from what he calls his ‘big five’; his wife and four daughters.
I first met Saad in Monaco in 2004. Despite his modesty, I look back at that meeting and realize that he could easily have slotted into the glitz and glamor of the French Riviera. He was youthful in appearance and had a drive and ambition that laced every conversation.
We were at the World Entrepreneur Of The Year Awards. Saad represented South Africa having beaten off stiff opposition from stalwarts of the old guard of South African business. When the final votes were counted, an American pipped Saad at the post. The word on the night was that tactical voting had denied him the title that many believed was his.
Saad was visibly rattled. Being second in a global competition of such prestige would, for most entrepreneurs, be an accolade of which to be enormously proud.
Not he on that night.
Whether it was the nature of the defeat, with the whispers of voting to appease sponsors, or the disappointment of being second best that irked him, I’ve never quite worked out.
The disappointment in Monaco was merely one leg of a long journey. Saad graduated from the University of KwaZulu-Natal in South Africa as a chartered accountant in 1986. He joined Coopers and Lybrand as an article clerk.
“My father wanted me to extend the 30 years of family tradition by joining his practice but I knew, I absolutely knew, that there was no way that was going to happen. I couldn’t do it. One of the partners at the time recognized this and privately told me that in this industry he could see I was like a bird with its wings clipped.”
During this time, Saad was seconded to a small company that specialized in pharmaceutical wholesaling. The owner was impressed enough to offer Saad a job, which he accepted. Little did either of them know that this offer from an underperforming small business would launch the career of one of Africa’s great entrepreneurs and spawn a global pharmaceutical giant.
“We sold to markets and to people that other companies ignored. It was an eye-opener. Not many whites had ever been to a township let alone done business there. But this was where the huge potential was. I was a rep in the townships and I learnt a lot of life lessons in those days. My future thinking was modeled in those early days.”
Saad’s experiences at the grassroots of the pharmaceutical industry proved invaluable. It forged within him a philosophy that holds true in the doctors’ rooms of a remote township, as well as in the boardrooms; people don’t want to compromise when it comes to their health, but at the same time the price of medicine is crucial.
When interviewing Saad, the first few minutes are uncomfortable. He is clearly suspicious of a stranger probing his thoughts, but as the conversation progresses and the line of questioning moves to subjects that are of interest to him, with which he is comfortable, there is very little that can stop him from extolling the world according to Saad.
“When I was a rep I’ll never forget being in the surgery [rooms] of a township doctor and presenting him with two products; one was in fancy packaging and the other in a rather plain brown box. I suggested that he could give the first to his medical aid patient and the other to his cash customer, after all they were essentially the same and were based on the same active ingredient. He looked me in the eye and told me that a patient is sick no matter what his or her status, and that he wouldn’t treat them differently. He’d made his point, and I wouldn’t forget that.”
Saad became a 50% shareholder of his employer, QuickMed, and convinced the owners that the ownership of intellectual property was the only way to, not only grow the business, but to save it. He then set about employing the spirit of entrepreneurship that was to become a hallmark of everything he’s done since.
One of the early moves was to persuade Covan, a small, family-run business that manufactured eye drops, to merge with QuickMed to form a new entity named Zurich.
Zurich flourished in the early 1990s, as Saad threw himself into the business. Turnover doubled and suddenly the company was the focus of the attention of larger companies. Prempharm (today Adcock Ingram) couldn’t resist dominating the upstart and bought Zurich for R75 million ($9.1 million) in 1993.
With the purchase price came a restraint of trade on Saad. He wasn’t too worried at the time, with R20 million ($2.4 million) in his back pocket at the age of 29 and thoughts of early retirement, this technicality was a small price to pay. It was a time for reflection and planning.
Saad’s passion for the pharmaceutical industry was apparent, but education was also close to his heart. Varsity College was a private tertiary education institution that was managed poorly and under threat of closure. The idea of the college as a business opportunity was offered to Saad and his partner from QuickMed, Gus Attridge.
For a nominal sum they acquired the business. They set about restructuring the top-heavy overhead base, removing the founders and offering incentives to learners through aggressive advertising campaigns, not normally associated with the business of education. Potential students were offered a money-back guarantee should they not pass their exams, provided they attended a full program of lectures. The business began to thrive.
The business had cost just R1.5 million ($182,500), Saad sold it to LeisureNet for around R100 million ($12.1 million) at a time when education stocks on the Johannesburg Stock Exchange (JSE) were attracting significant premiums to the overall market. He had again turned a company riddled with inefficiencies into a success.
In 1997, as a wealthy young man, Saad teamed up with Attridge and Steve Sturlese to form Aspen Healthcare (Pty) Ltd.
“When I look back at the early days of Aspen my philosophy was based on the experiences gained during my days as a rep and partner at QuickMed. In those days, I’d asked whether the business was about moving boxes or owning intellectual property. It was so obvious that there was a market out there that was hungry for high quality but affordable products and that needed representation. Although this knowledge had been acquired through the little sphere of doctors that I serviced, I was convinced it could be applied on a bigger platform—even globally.”
During its first year of trading, Aspen recorded revenue of R105 million ($12.8 million). The philosophy was clear from the start: buy licenses from large multi-nationals for their non-core brands. These products were important in the life of the new company selling to a new market. It was a two-way street, the people were ready to buy pills they had never been offered before, the big players were happy to off-load them.
Aspen began to own intellectual property, such as patents, trademarks and pharmaceutical dossiers, without having the expensive overhead of manufacturing and its complications.
The management realized very quickly that they had a winning formula, but their ambitions were such that there was a real danger of being restricted by insufficient capital.
To rectify this, and make way for the grand plan, Aspen targeted Medhold Medical Ltd, a small company on the Johannesburg Stock Exchange. Aspen concluded a reverse takeover of the business and thus became a public company. Records show that at the end of June 1998, Aspen’s annual turnover was just under R119 million ($14.4 million).
A year later, it was more than R522 million ($63.5 million) and the investment community was taking notice. The company’s stock was moving.
Then the audacious deal, that defined the Aspen approach to business, was unveiled. SA Druggists (SAD) had been the object of desire of Adcock Ingram but the deal had fallen through. Despite the mismatch in terms of size, Saad went to his financiers with his plan to purchase SAD for the princely sum of R2.4 billion ($292.2 million). Fedsure was SAD’s largest shareholder at the time and would keep the insurance and manage the healthcare part of the business. Aspen kept the pharmaceutical business once all the transactions were rubber stamped, Aspen realized approximately R1 billion ($121.8 million) from the divestments.
The financiers had backed the upstart Aspen, but there was institutional investor reticence to the deal which seemed to defy conventional business logic. Aspen’s bank asked that shares in Aspen be discounted, but this was not an option for Saad and so the company was saddled with R1 billion of debt with an operating profit of around R123 million ($14.9 million).
Since the SAD deal, the story of Aspen has been one of extraordinary growth. Strategic agreements have been a key part of the growth story, not least the link with GlaxoSmithKline (GSK) in 2003, that allowed Aspen to market and distribute 40 branded products into the South African private sector.
Although the company’s phenomenal success has been based on its South African business, its ability to penetrate further afield, often a graveyard for others, has distinguished Aspen as a global pharmaceutical concern with which to be reckoned.
The Clinton Foundation chose Aspen as the first southern hemisphere-based company to provide generic anti-retrovirals (ARVs) for the United States’ government, while that country’s Federal Drug Administration pre-qualified the company for the provision of generic ARVs, funded by President Bush’s emergency plan for AIDS relief.
In 2005, Aspen secured the majority of the South African government’s ARV tender with an allocation of close to 60% of volume. At the same time, results showed that Saad’s company had generated an annual turnover of more than R2.8 billion ($336.5 million).
As the relationship with GSK became closer, and with an aggressive acquisition policy Aspen became truly global by expanding its footprint into the Asia Pacific region and into Latin America through an investment with Strides Arcolab Limited. In 2010, Australia was conquered with the massive R6.1 billion ($738.2 million) acquisition of Sigma Ltd pharmaceutical business.
I put it to Saad that perhaps the rapid expansion into so many new territories and jurisdictions would stretch the resources of a still relatively new player with a CEO who prefers not to travel too far from his home in Durban.
“I have a video conferencing facility,” he replied rather drily.
But there is clearly more to international success than the ability to talk to Rio de Janeiro and Sydney without leaving the boardroom.
“Most of my guys, the ones I’m in business with, have had start-ups and they understand my philosophy, the Aspen way of doing things. There’s no universal strategy, but on certain points there is no negotiation.”
This is where the media-shy CEO billionaire starts to become animated and I realized that to work under him is not for the faint of heart.
“I decided to bring all our people together from all our offices, from all over the world. So of course I chose Umhlanga Rocks for our conference! I stood in front of this group and told them that certain things were not negotiable. They must have passion for the business, and then people will follow them. At the same time, I told them it was essential to have humility and compassion, and that there was absolutely no negotiation when it comes to delivery. In business, you get leaders and you get managers, and there’s a very subtle distinction between the two. I want leaders, leaders are inspirational.”
Saad demands a lot of his people and clearly recognizes that as head of the company, as its inspirational leader, his behavior and his standards can never drop if his demands are to be adopted. When asked about his ability to maintain such a punishing pace, his stock response is “to rest is to rust”.
The choice of Umhlanga speaks volumes of the company’s grounding and of its CEO’s recognition of the importance of the South African part of the business. Again, the animation, even over the telephone, is palpable.
“We were told that we were mad to manufacture in South Africa. Some analyst asked me if I was doing this for my own ego. I pointed out as politely as I could that I was a shareholder and that it was the right thing to do. Today, I’m so proud to be able to have proved the doomsayers wrong. Today the billions [of rands] we invested in the Eastern Cape have produced one of the most competitive facilities in the world that sends products of incredible quality to over 100 countries. It’s up there with the very best.”
Saad is indeed a remarkable character.
On the one hand, there is a man that is driven by the old-fashioned values of integrity, hard work, passion, and one that has learned the traditional way of doing business. On the other, is a new-age thinker, one that recognizes that big business is built on layers of bureaucracy and structures but will not allow those structures to be an excuse for any of his team shirking a decision.
“At Aspen I will not tolerate a ‘cover-your-arse’ mentality,” he says with a hint of steely menace.
On the one hand there’s a CEO who is bursting with optimism for Africa and South Africa—who compares the high suicide rates of northern Europeans, who seemingly have everything, to those of the naturally optimistic African people who, in relative terms, have little; on the other, he is a sad South African who shakes his head and whose voice drops to a whisper when he tells of the union which has been enriched by Aspen shares at R6 ($0.7) (they are now R120—$14) and yet forgets the past when it comes to the negotiating table.
I wonder, when I hear him say he’d rather back a good leader in a bad industry than a bad one in an industry that’s thriving, if he might be in his own diplomatic way (and in the presence of a journalist) having a dig at South Africa’s government. I decide not to ask.
In March, Aspen’s interim results included the following highlights:
<ul>
<li>Revenue from continuing operations R7.5 billion ($903 million)</li>
<li>Operating profit R2 billion ($24 million)</li>
<li>Market capitalization R50 billion ($6 billion)</li>
</ul>
When I talk of money the enthusiasm for the interview starts to wane and there’s mutterings of most entrepreneurs that he knows not being in it for the money alone, which I believe, up to a point.
When I talk of personal goals and the future, his interest is revived.
“I still have lots of achievements that I need to focus on. It’s so frustrating living in a country where there’s great thought and great theory, great principles, but so little action. Maybe it’s my personality type but I just want people to stop thinking about it and just do it. If I was like that I’d never have gone into Brazil.”
At the end of April, Stephen Saad and the health minister, Dr Aaron Motsoaledi, started the gruelling 240km Aspen Trans Karoo mountain bike challenge to raise funds for paediatric healthcare facilities through the Sifiso Nxasana Paediatric Trust.
“The children of Africa need the support of large organizations” were his simple words.
Saad completed the race, and when he arrived at the finish line in Sutherland his airplane was  waiting to take him home to his own children.

Tag: Pharmaceutical

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