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:
- Revenue from continuing operations R7.5 billion ($903 million)
- Operating profit R2 billion ($24 million)
- Market capitalization R50 billion ($6 billion)
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.