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Pharmacies should review operations following Pharmacy2U sale rumours

Bricks-and-mortar pharmacies should ensure they respond to patients’ needs, as rumours suggest Pharmacy2U is looking at “strategic options” for the business, a broker has said.

Sky News reported last month (March 9) that Pharmacy2U has hired financial advisors at global firm Lazard to explore “strategic options for the business”, which include a possible sale to a new private equity backer.

A Pharmacy2U spokesperson told C+D today (April 12) the company has “nothing to add to the story” and Lazard also declined to comment.

“Further alarm calls”

Hutchings Consultants director Scott Hayton told C+D that this Sky News report, along with the news of Amazon Pharmacy obtaining a UK trademark, are “further alarm calls for traditional bricks-and-mortar pharmacies to absolutely ensure that they are engaging with their customers, listening to their needs and wants and taking a proactive approach to fulfilling those”.

Despite Pharmacy2U being the largest provider of NHS repeat prescriptions in England, the online pharmacy is “yet to demonstrate profitability”, which means it will need to adapt its business model to “make it viable”, Mr Hayton added.

“Acquisition by a company such as Amazon, with significant resources and existing infrastructure on the delivery side to boot, could create synergies that enable a successful operation to be realised,” Mr Hayton suggested.

Mr Hayton said that when Amazon “tried to disrupt the UK groceries market”, existing grocery chains were quick to adapt by offering their customers services they were looking for, so they would not feel the need to buy groceries from Amazon.

“Bricks-and-mortar pharmacy operators should review their operations in the same way,” Mr Hayton added.

C+D asked Amazon if it was planning to acquire Pharmacy2U. A spokesperson said the company “will decline to comment”.

In respect to the trademark application, the company added that Amazon has applied for pharmacy trademarks in different countries. The spokesperson pointed at the differences in the healthcare systems around the world, specifying that the service it currently operates in the US has been tailored to “serve the needs of customers in that specific market”.

Previous P2U investors

In 2018, healthcare private equity firm G Square became the “majority shareholder” of Pharmacy2U following a £40 million investment to support the growth of the online pharmacy’s NHS repeat prescription service.

Prior to that investment, Pharmacy2U attracted a £10m injection from independent investment company the Business Growth Fund (BGF), which stepped in to support the company’s merger with Chemist Direct in 2016. In May 2017, BGF put forward a further £7m – in combination with “other shareholders” – to also support Pharmacy2U’s NHS repeat prescription service.

Pharmacy2U reported a £16m loss in 2018-19, despite adding 330,000 new NHS patients, according to documents filed with Companies House in January 2020.

According to accounts it submitted to Companies House in December 2020, the group made a loss of £3.8m for the year ended March 31, 2020. However, Pharmacy2U said it had witnessed an acceleration in patients nominated to its service in the six-month period to September 2020, “with 553,000 patients nominated at the end of September 2020”.

What is your pharmacy's strategy to compete with online competitors?

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