Aspen on the prowl for more acquisitions

Shares in Aspen surged 4.46% on the JSE yesterday to R205.50, buoyed by the robust acquisition activity. File photo

Shares in Aspen surged 4.46% on the JSE yesterday to R205.50, buoyed by the robust acquisition activity. File photo

Published Mar 5, 2024


Pharmaceuticals group Aspen Pharmacare is on the lookout for acquisition opportunities in both emerging markets and China, where some investors could be looking for exit possibilities.

Aspen raised revenues for the half-year period to the end of December by 10% to R21.1 billion, with normalised earnings before interest, tax, depreciation and amortisation (Ebitda) firming up by by 2% to R5.2bn.

Nonetheless, headline earnings per share (Heps) for the period decreased by 6% to R6.27 per share, although normalised headline earnings per share were up marginally by 1% to R6.88 per share.

Aspen group chief finance officer Sean Capazorio told “Business Report” in an interview yesterday that the discrepancy in the company’s interim Heps and normalised Heps was a result of intensified acquisition activity during the period under review which pushed up related costs.

During the half-year period under review, Aspen completed payment of R5.3bn for the acquisition of the product portfolio from Viatris for Latin America. The company also concluded agreements with Sandoz for the acquisition of the Sandoz business in China for a net upfront consideration of €27.9 million (R576m) followed by potential net milestone payments of €9.2m.

The elevated transaction costs relating to these and other acquisitions for the period, together with increased intangible asset impairments due to the VBP impact in China, resulted in operating profit declining, Aspen said.

The company’s operating profit sagged 10% to R3.5bn. Shares in Aspen surged 4.46% on the JSE yesterday to R205.50, buoyed by the robust acquisition activity.

Capazorio told “Business Report” that the company was still on the lookout for more acquisition activities, especially in China and in some of its emerging markets.

He said there were opportunities for additional acquisition activity from companies and investors seeking exit strategies or strategic partnerships.

“We are always attracted to the multinationals who want to enter into partnerships with us (because) you get access to good multinational partners. Those are opportunities we will look at (and) we feel that there are other players who may want to exit China and we are always on the lookout for opportunities in China,” he said.

Although emerging markets were “pretty much in the same boat” facing elevated interest rates and high inflation, price regulation in these markets was favourable as it allowed for increases. The higher interest rates in emerging markets, including South Africa, were putting a “squeeze” on consumers.

This contrasts some of the developed pharmaceuticals markets where there are mandatory price cuts, such as in Australia.

“In emerging markets we are able to get regulated price increases unlike in developed markets where, for example, in Australia you get regulated price cuts.”

Aspen generates about 20% of its revenues from South Africa, with the rest spread across its offshore markets. This provides cover for the company in cases of disruptions.

Aspen is not anticipating business disruptions, though, from South Africa’s upcoming elections. It expects to continue on its strong cash-generating capacity.

Aspen CEO Stephen Saad said: “We have successfully completed the necessary steps to reach the commercialisation stage for the manufacture of mRNA platform products, which will augment revenue in the second half of 2024. The transition to new manufacturing agreements for the Heparin business is expected to reduce inventory investment by R3bn by the end of the financial year.”

For the period under review, Aspen’s commercial pharmaceuticals division grew revenues by by 3% to R15bn, underpinned by organic growth in over the counter (OTC) and prescription. This was, however, offset by a decline in injectables revenue.

Its prescription brands division recorded revenue of R5.3bn as it benefited from “steady momentum of 7% aided by growth in its largest region, Africa Middle East” and the Americas. The Australasia market under prescription brands was adversely impacted by further regulated price reductions.