Villar brother raising P2B in November IPO for his med equipment supply firm

MANILA, Philippines—Medilines Distributors Inc., one of the Philippine government’s top suppliers of specialized medical gear, like CT scan and cancer screening machines, is going public through a P2 billion listing this November.

The company is raising funds to pay off debts and expand in the high-growth medical consumables market, which includes surgical masks, nasal swabs and test kits, according to an Aug. 23, 2021 prospectus that was filed at the Securities and Exchange Commission.

Medilines is seeking to ride the booming segment amid surging demand during the COVID-19 pandemic while traditional medical equipment business slows.

Medilines was established two decades ago. At its helm is chair Virgilio B. Villar, who saw an opportunity to supply medical equipment from brands like German companies B. Braun and Siemens to Philippine hospitals that were starting to modernize.

Villar, who spent 21 years as the managing director of B. Braun Medical Supplies Inc., is the brother of billionaire and former senator Manuel B. Villar Jr.

Through the initial public offering (IPO), arranged by PNB Capital and Investment Corp., the company is selling up to of 825 million shares at a maximum offer price of P2.45 per share.

This was equivalent to 30 percent of the company, with the top price suggesting a post-IPO market value of P6.7 billion.

The primary offer would consist of 550 million shares and Villar himself was selling 275 million shares worth as much as P673.7 million.

He currently owns 58.18 percent of Medilines while his spouse Ma. Theresa V. Villar owns 14.55 percent.

The company’s other major stockholder was a firm called Two On Inc., which owns 27.27 percent. Two On became a shareholder last July 27, the prospectus showed.

The primary offer proceeds would go to existing products and medical consumables (P541.5 million) while the majority of P743.1 million would be used to pay debts to Bank of the Philippine Islands and Rizal Commercial Banking Corp.

The prospective IPO pricing date was set on Nov. 8 while the offer period would run from Nov. 11-17 this year. Medilines is targeting to make its trading debut on the Philippine Stock Exchange by Nov. 25.

Medilines controlled a 50.5 percent market share for dialysis machines, 90.4 percent for cancer therapy equipment and 18.2 percent in diagnostic imaging.

But its expansion in medical consumables would boost its product portfolio and allow the company to become a “one-stop shop” for customers.

It also pointed to the sector’s significant growth prospects.

An attached industry report from Ken Research said the medical consumables segment grew 11.8 percent in 2020 over the previous year. At the same time, revenues for the medical equipment sector dropped 11.3 percent.

Based on the report, medical consumables cost less than specialized gear but offered better margins since these were disposables.

Citing Ken Research, it said consumables had an average gross margin of 40-50 percent versus medical equipment, which had a margin of 20-30 percent.

The whole market, including consumables, would be worth P127.8 billion by 2025— 66 percent higher than 2020’s figure, according to Ken Research.

In its prospectus, Medilines also revealed plans to diversify its customer base, which was mainly comprised of government hospitals.

It noted that its single-largest customer was the Department of Health while majority of customers were public hospitals, accounting for 89 percent of all revenues in 2020.

Based on its audited financial report, Medilines recorded a net income of P103.06 million in 2020, up 54.6 percent. Total revenues hit P1.5 billion, up 8.4 percent while operating expenses dropped 16.7 percent to P81.75 million.

TSB