United Drug has embarked on a challenging journey for many years. Once a market leading position had been attained in the Republic of Ireland, a strategy to diversify beyond Ireland and into new, but related, service areas was devised and has been pursued for the last 12 years. While the Healthcare Supply Chain (HSC) division is where we began, our Sales, Marketing & Medical (SMM) division, and our Packaging & Specialty (P&S) division have both been built through acquisition into significant additional business areas. In 2012 each of these took further major steps on their path to scale.
The SMM division, which at its core is market leader in the UK and Ireland in contract sales and marketing services, agreed in July to acquire Pharmexx, a large European Contract Sales Organisation (CSO), having operations in 18 countries across the globe. In a separate development, the division also entered into a commercial arrangement with a major Japanese CSO, expanding our reach into that important pharmaceutical market. With operations in North America, South America, Europe and Asia, the division is now one of the three leading global contract sales providers, and their mission in 2013 is to integrate and restructure the Pharmexx business to improve performance, capitalise on this position, and drive growth. In addition, some further acquisitions may be beneficial to further strengthen our market position in key markets.
Also during the year the SMM division acquired Watermeadow, a UK and US based medical communications business which combines well with our InforMed business acquired in 2010. In the US it also added Drug Safety Alliance Inc., which fits neatly with our Alliance Healthcare business acquired in 2007, giving us a very strong presence in the US pharmaceutical product safety monitoring and medical information market. It also added a small company, Synopia, in the US which provides advisory services to companies as they seek to obtain appropriate reimbursement for their products in the complex US insurance landscape. All these services are complementary to the division’s mission to support pharmaceutical companies in their sales and marketing needs as they adapt to patents expiring, fewer blockbuster products, and cost and pricing pressures.
The P&S division, which began with a small neutraceutical packaging acquisition in the UK in 2005, and which has since seen further pharmaceutical packaging acquisitions in Belgium, the Netherlands and most significantly of Sharp Corporation in the US, has long aspired to also service the specialist clinical trials packaging market. This market plays to two strengths in the Group; specialist packaging, and logistical management. Progress was being made in developing this business organically, but when the opportunity to acquire an established player arose during the year, we were delighted to add Bilcare Global Clinical Supplies to the division. With specialised facilities in the US and the UK and a team that has established itself in this market, our position in this market segment has been significantly enhanced.
The HSC division continued to make progress. Responding to the economic pressures in the Republic of Ireland, the division embarked on a major automation project, which is ongoing, to reduce cost to mitigate lower margins. They also initiated a major IT project to upgrade systems across the division with the goal of increasing efficiency.
The outstanding developments in the division during the year were the strong improvement in the performance of the medical and scientific business and the continuing excellent growth achieved by the Northern Irish operations and by the UK pre-wholesale joint venture, UDG.
In all, we spent €63.4 million on capital projects during the year, the largest single part of which was to buy-back our Magna Park warehouse for €29.9 million. The Board believes that having ownership of our full site in Dublin will give us important flexibility as the Irish market continues to evolve and we configure our business appropriately. The remaining €33.5 million was spent on various projects, some to automate and reduce costs, some to equip for growth, especially in our packaging businesses, and some to begin to replace our IT systems to ensure the Group has the platforms to support its ambitions.