- Aspen's sale of its prescription medicine brands to a Swiss company, Acino, is seen as a decent price.
- Swiss pharma group Acino is expected to gain a stronger foothold in the SA market through the sale.
- The ~R1.8 billion transaction is expected to be finalised by the end of the year.
Aspen Pharmacare's move to sell a batch of its brands to a Swiss pharma company, Acino, for R1.8 billion is seen as a "decent price" and would shift the focus of the company to its core business.
The group announced on Friday that it had concluded an agreement to offload six of its branded products, barely a year after it hit a sweet spot with the agreement to manufacture the single-dose Johnson & Johnson Covid-19 vaccine out of its facility in Gqeberha.
According Karl Gevers, portfolio manager at Benguela Global Asset Managers, Aspen seems to have gotten a decent price for the business.
"Aspen's strategy to reduce its debt levels has been to sell off assets, and in the process clean up its portfolio. I don’t think at this point Aspen is forced to sell, as it has made some good progress in reducing its debt levels to more manageable levels," said Gevers.
Aspen, which had in the past years embarked on an acquisition drive that included the buying of a GlaxoSmithKline manufacturing plant, anaesthetics rights from AstraZeneca and an infant milk formula business 2014, had raked in debt, which saw it withhold dividend payment for the 2019 and 2020 financial periods. It later sold the formula business in 2019.
Now, the company's brands, Altosec, Aspen, Granisetron, Ciavor, Grantryl, Trustan and Zuvamor - of which some are used for treatment of gastroenterology, erectile dysfunction and cardiovascular diseases - are being chopped off.
According to Gevers, the portfolio makes up about 1.35% of Aspen's group revenue and 3% of regional brands revenue.
"It is sizeable, but probably won't change Aspen's market position much."
Although Aspen's debt has been reducing, as indicated in its last financial statement, Schalk Louw, wealth manager at PSG, believes that the transaction would assist it further reduce its debt levels which had spiralled following its intensive acquisition trail.
"I think this is meant to address their debt levels and focus the company. They took a lot of debt with the expansions, and that came back to bite them," said Louw.
Last month, Aspen said it had cut its net debt to R16.3 billion as at the end of June, compared to R35.2 billion of the previous year.
"If you look at the history of Aspen, the company has really been focused on growing and has been highly successful in doing that, and that is what investors want."
The Zurich-headquartered Acino operates in emerging markets with a focus on affordable healthcare, where it supplies leading companies through contract manufacturing and out-licensing.
According to Aspen, the brands being sold brought in revenue of R512 million in the financial year to end of June. The two companies also entered into a manufacturing agreement, which will see Aspen supply its manufactured products to Acino for seven years.