Patiently Persisting For Pharma Profits
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TL;DR
2 African startups, Famasi Africa and Yodawy recently raised capital to tackle medication access for patients with non-communicable diseases
Non-communicable diseases are growing in prevalence and provide a huge market opportunity for startups
Amazon in the U.S. grew into the pharmacy market via the acquisition of a chronic medicines solution meanwhile Jumia, ‘the amazon of Africa’, has struggled
Building in Africa is difficult but patient capital, partnerships and persistence will ultimately bring profits
Amidst the maelstrom of the demonetization policy of the Nigerian central bank, news dropped this month that Famasi Africa, a startup that offers personalized drug deliveries received investment from Microtraction and a couple of angels (shout out to Dr Ayobami, my DHN co-founder who participated). The previous week, Yodawy, an Egyptian startup offering a similar, albeit more advanced, service in Egypt raised a $16 million Series B. Comparing both companies, Yodawy seems to represent a model of what Famasi could become.
Famasi, like Yodawy, connects people with recurrent medication needs to a convenient and predictable way to access their medications. They do this either via local community pharmacies or via deliveries from their own warehouses. Traditionally, Africa has been dominated by the scourge of infectious diseases. Conditions like malaria, typhoid and respiratory infections dominate death certificates. More recently, however, there is an ongoing evolution in the profile of mortality for Africans. Non-communicable diseases such as heart disease, diabetes and stroke now feature prominently in mortality rankings. The phrase, ‘ a double burden of infections and non-communicable diseases’ is now near-cliché in many Africa-related healthcare commentaries.
That cliché is with good reason, a chart of Nigeria’s healthcare expenditure by disease shows that Non-communicable diseases (NCDs) and HIV/AIDS make up nearly 20% alongside malaria’s 40%. (Note that thanks to excellent antiretrovirals, HIV is now essentially a chronic condition, with well-treated patients increasingly dying from non-HIV-related conditions.)
In absolute terms, NCDs account for around $1 billion in expenditure annually in Nigeria. A large and growing opportunity considering that NCDs often require the use of long-term medication.
In the U.S., NCDs have held sway as the cause of death for decades and have led to the consumption of a lot of medicines. Over 30 million U.S. adults take more than 5 medications a day. This was the milieu that T.J parker the pharmacist founder of Pillpack came into in 2013. He set about building a pharmacy that solved this challenge in a better way. Parker and his colleagues were so successful that in 2018, the tech behemoth, Amazon acquired it for $750 million. Amazon now has a pharmacy offering that’s powered by Pillpack.
Jumia, the self-styled amazon of Africa and well-known copycats, in a 2022 earnings report, floated the idea of entering the healthcare space. Following Amazon’s template, they thought healthcare could provide them with much-needed rapid growth. Techpoint a leading Nigerian tech blog led with this headline at the time.
Dear healthtech startups, Jumia is coming for your bread!
This however wasn’t to be.
Founded in 2012, Jumia went public 7 years later on the New York Stock Exchange. This rapid rise from founding to IPO however belies the underlying turbulence it has faced in that time. Following its initial pop, Jumia’s stock price has fallen by 70% since listing. The company posted over $200 million in losses in 2022 and is laying off people while closing down operations in several countries. A quote from an analyst captures Jumia’s current state.
“They (Jumia) cover multiple countries with over 600 million people but only had 3.1 million active customers as of Q3 2022, up from 3 million a year ago, this is not sufficient and can hardly be called traction.”
Jumia’s poor showing in Africa has lots to do with the difficult African business terrain. As an e-commerce pioneer, Jumia had to build a lot of infrastructure itself. Whereas Amazon had the US postal service and FedEx to rely on in its early days, Jumia had to build its own end-to-end delivery service from scratch. On the payments front, Amazon could tap into existing card schemes and charge credit cards from day one, Jumia on the other hand had to institute expensive cash-on-delivery options and build its own payment solution, Jumia pay. Customer-wise, Americans were already used to mail orders via catalogues and had built enough trust to wait for days for an order to arrive. Nigerians instead prefer to touch and feel a product before buying it as they don’t trust that a product will arrive in perfect shape. This constellation of differences meant that Jumia didn’t quite turn out to be the (successful) amazon of Africa, not least in healthcare.
The travails of Jumia despite the massive opportunity in African commerce suggest that similar obstacles await companies attempting to profit from the chronic medicines market. Market acceptance, payments and logistics are only a flavour of some of the many challenges inherent in the opportunity. Yodawy being further along in the journey provides some inspiration on a potential route to success. From the Techcrunch article announcing the Series B:
Yodawy is currently the primary partner for most corporates in the Egyptian market, about 300 in number, and serves their patients (employees) needing chronic medication. The Giza-based health tech upstart, which employs a B2B2C model, has partnered with 20 health insurance companies and 500 doctors, and 3,000 pharmacies have processed over 4 million prescriptions via individuals in these corporates.
This B2B2C approach and the pursuit of partnerships with existing players in the insurance and pharma space have enabled Yodawy to attain significant growth. Gritty founders supported by patient capital who pursue this route seem to stand the best chance of success.
Disclosure - My company Wellahealth works on similar problems to Famasi Africa and has had several professional and personal interactions with the team at Famasi.