Genepharm revisited

Genepharm (ASX:GAA)

This month we are revisiting a small Australian generic drug maker that has made us great profits in the past and looks set to come up trumps again.

Genepharm markets and distributes a premium range of generic pharmaceuticals in Australia. With its
alliances with suppliers such as Douglas Pharmaceuticals and Europe's Genepharm Group, Genepharm Australasia sells a variety of medicines and is probably the fastest growing company in this sector. Generic pharmaceuticals are expected to double in total dispensed value to an estimated $2billion by 2009. Genepharm Australasia listed on the ASX in June 2004.

Below is the lastest ASX release. We also recommend that you read the previous articles on Genepharm in the report archives.

ASX Release.

 Genepharm alliance with Primary Health Care.

Genepharm and Primary Health to promote benefits of generic substitution. 

27 September 2006, Melbourne: Genepharm Australasia Limited (ASX:GAA) has entered into an
alliance with Primary Health Care Limited (ASX:PRY) to promote Genepharm generics at its medical
centres, and educate patients as to the benefits of a generic choice. Primary will also promote the
use of Genepharm products as a preferred supplier at the pharmacy outlets at Primary’s large-scale
medical centres around Australia. 

The consideration for this 3-year deal includes 3 million options for Primary to subscribe for new
Genepharm shares. 

The Primary Group operates and manages 31 large-scale medical centres. In the year to June 2006
there were more than 3.44 million patient attendances at these medical centres. This is about 3
percent of all general practitioner attendances in Australia.  There is a pharmacy located in most of the Primary Group medical centres.  Primary has agreed with Genepharm that Primary will endeavour to promote Genepharm products so as to be preferred by patients, doctors and pharmacies in the medical centres.  Primary sees this as a major long-term benefit for patients and taxpayers. 

“With the increasing cost of current and future healthcare needs, this is an area for significant
savings. Primary also sees a commonality of prescribing by practitioners as beneficial to good
practice,” said Dr Edmund Bateman, CEO of Primary Health Care.  

Subject to both Genepharm shareholder approval and criteria being met by Primary, Genepharm
will be granting 3 million options to Primary to subscribe for new Genepharm shares. The terms of
those options will comprise:

. 2 million options will be granted in July 2007 at an exercise price of $1.00 each
. 1 million options will be granted in July 2008 at an exercise price of $1.10 each

“The alliance with Primary Health care substantially increases Genepharm’s brand recognition with
the core customer base for generic medicines. Generic sales are skewed towards the aged patient
group which would mean that this agreement will allow Genepharm to build a direct relationship
with 15% to 20% of the consumers of generic medicines,” said Mr Dennis Bastas, CEO of
Genepharm.  

“The pharmacies in the Primary Health Care centres are higher turnover businesses than the
average suburban pharmacy. We expect them to be a significant sales channel for Genepharm’s
range of generic medicines, OTC and dermo-cosmetic products,” said Mr Bastas.  

The Primary Group already has a current holding of shares in Genepharm. Exercising the 3 million
options for shares would increase Primary's holding in Genepharm to approximately 5 percent of
the company. 

Buy Genepharm (ASX:GAA) up to AU$1.10