Management report - «Logistics & IT» segment
“Logistics & IT” segment
The “Logistics & IT” segment comprises the two sectors “Wholesale” and “Logistics & IT Services”. They operate and develop the logistics and IT platforms of the Galenica Group and offer services to all healthcare providers such as pharmacies, drugstores, doctors, hospitals and care homes. These activities focus on optimising and further developing the range of logistics and services as well as innovative solutions to promote digitalisation in the healthcare market.
“Logistics & IT” segment key figures
The “Logistics & IT” segment achieved net sales of CHF 2,933.3 million (+3.6%) in the 2022 financial year. CHF 2,820.4 million (+3.4%) of this was attributable to the “Wholesale” sector and CHF 130.7 million (+16.8%) to the “Logistics & IT” sector. Adjusted for additional sales in connection with COVID-19, which were exceptionally high in the previous year, sales growth for “Logistics & IT” amounted to 5.6%. Another sales driver was again the market share gains in the wholesale business with doctors.
Government-ordered price reductions led to a decline in sales of -2.1% in 2022. Excluding this effect, net sales in the segment would have risen by 5.6%.
The adjusted¹ operating result (EBIT), i.e. excluding the impact of the IFRS 16 (Leases) accounting standard, fell by -19.3% year on year to CHF 49.2 million and the adjusted¹ return on sales (ROS) fell from 2.2% to 1.7%. Excluding the extraordinary results from the COVID-19 initiatives (estimated at CHF 6 million) and the sale of the property at the headquarters in Bern (CHF 9.4 million), adjusted¹ EBIT growth amounted to a strong 8.0%.
Investments totalled CHF 52.8 million (previous year: CHF 37.0 million). These were primarily used for the modernisation and renovation of the Galexis distribution centre in Lausanne-Ecublens, for the gradual introduction of the new ERP software at Alloga and Galexis and for the development of the digital infrastructure in connection with the strategic “Omni-Channel” programme.
1) Excluding the effects of IFRS 16. See chapter “Alternative performance measures”.
Wholesale
In the “Wholesale” sector, sales grew by +3.4% to CHF 2,820.4 million. Adjusted for additional sales in connection with COVID-19, which were exceptionally high in the previous year, sales growth amounted to 5.5%. The Pharmacies customer segment recorded growth of 6.4% (adjusted for additional COVID-19 sales). Another sales driver was again market share gains in the wholesale business with doctors; sales growth in this segment was a strong 7.4%.
By way of comparison, market growth for bricks-and-mortar pharmacies amounted to 8.0% in the 2022 financial year. The physician market grew by 5.8% in the reporting year (IQVIA, Pharmaceutical Market Switzerland, 2022).
The positive trend of the first half of 2022 continued in the physician market: 7 additional medical centres and other specialist doctors benefit from the comprehensive range of services offered by Galenica.
New ERP system and a sustainable fleet
Galenica has always stood for quality logistics. In order to continue to live up to this standard, intensive work was carried out in the reporting year on preparations for the introduction of the ERP (Enterprise Resource Planning) system at Galexis. Construction of the system was almost completed. Extensive tests will take place in the 2023 financial year and the introduction is planned for 2024 and 2025. The sustainability of the vehicle fleet and electric cars is also being tested. The aim is to greatly reduce the percentage of the fleet using fossil fuels in the coming years.
Modernisation of Lausanne-Ecublens distribution centre completed
Galexis successfully completed another complex project in the reporting year: the renovation and modernisation of the Lausanne-Ecublens distribution centre. A celebration for all suppliers, customers, employees and their families marked the resumption of operations at the central location for supplying the population of French-speaking Switzerland.
Important commitment to security of supply
Galenica is committed to providing the Swiss population with pharmaceutical and medical care at various levels. Alloga stores a large proportion of the compulsory stocks of medications, which must be kept by the industry on behalf of the federal government. Galenica engages in a regular, constructive exchange with the authorities. Through his active involvement in the ‘Verband der Schweizer Pharmavollgrossisten’ (Swiss Pharma Logistics Association; pharmalog.ch), the Head of Wholesale & Logistics is a member of an interdisciplinary working group that defines specific improvement measures on behalf of the Federal Council. He also serves on the Initiative Committee of the Pharmaceutical Initiative (Arzneimittelinitiative).
Logistics & IT Services
The “Logistics & IT Services” sector generated net sales of CHF 130.7 million (+16.8%) in the 2022 financial year. The main driver of the strong growth was additional invoicing for internal Group IT services due to the new organisational structure introduced in 2021.
Acquisition of great strategic importance
At Galenica, the ideal combination of medication and service is paramount. The acquisition of Aquantic will give Galenica access to a digital ecosystem that, by linking pharmaceutical companies and health insurance providers, will significantly simplify the assumption of the costs of specific medicines. This benefits the specialty pharmacy Mediservice in particular.
Smooth ERP migrations
The introduction of ERP continues to make successful progress at the pre-wholesale specialist Alloga. In the reporting year, the processes of around one-fifth of the business partners were migrated smoothly to the new software solution. In order to ensure that everything runs smoothly, Alloga will endeavour to complete the outstanding partner migrations by means of an accelerated procedure.
Valuable experience with e-prescriptions
The HCI Solutions Business Unit once again launched promising initiatives to digitalise healthcare in the reporting year. One of the most important projects of the highly specialised team is the e-prescription. After concentrating on technical interfaces and various tests in the first half of 2022, the focus in autumn 2022 was primarily on the suitability of the solution for everyday use for patients, doctors and pharmacies. HCI Solutions was able to gain further valuable experience in pilot projects with Medi24 and Online Doctor, a company specialising in dermatology. It is becoming apparent that e-prescriptions represent real added value for everyone involved – patients, doctors and pharmacists. Galenica will therefore continue to drive forward its own project and play an active role in the development of national standards.
The Documedis medical and pharmacy software also continued to develop in the reporting year. Over 100 million “Clinical Decision Support Checks” (CDS) to review medicine indications have been carried out on the basis of Documedis solutions. CDS help healthcare professionals make clinical and medical decisions and play an important role in increasing patient safety. Checks on vaccinations are also integrated into Documedis.