Stephen Saad. Picture: FINANCIAL MAIL
Stephen Saad. Picture: FINANCIAL MAIL

Aspen Pharmacare is expecting further acquisitions in the next 12 months as strong revenue and lower capital expenditure restore its firepower, after the purchase of two anaesthetics portfolios in 2016.

The potential deals will probably be made in the South African company’s existing pharmaceutical markets, with women’s health a possible area of expansion, CEO Stephen Saad said in an interview at Aspen’s headquarters in Durban, on Friday.

The drugmaker, which has operations in more than 150 countries, will focus on emerging markets, rather than developed ones, the billionaire said.

Graphic: RUBY-GAY MARTIN
Graphic: RUBY-GAY MARTIN

"We’re in a great space to make further acquisitions because we have our teams in the right place and we’re generating cash," Saad said. "The more we can build on emerging-market platforms, the more excited we are. To perform in Asia Pacific is going to be important for Aspen. Latin America and Africa are important for Aspen."

The CEO’s comments reaffirm his commitment to the dealmaking that’s propelled the business he co-founded as a generic drugs specialist 20 years ago into SA’s ninth-largest listed company, with a market value of R130bn.

The 2016 purchases of anaesthetics portfolios from UK giants GlaxoSmithKline and AstraZeneca for at least $885m, trebled the group’s borrowings to R35.7bn rand as of end-December, according to Aspen’s most recent financial results.

Organic growth across the company should bring that down, the CEO said. Sales are expected to have risen 19% to R42.3bn rand in the year to the end of June, according to analysts polled by Bloomberg.

Specialty pharma

Purchases in categories such as anticoagulants would help Aspen increase its ability to offer different types of existing medicines without incurring the cost of research and development for new drugs in areas such as cancer, Saad said. That differentiates the company from other makers of generic drugs, which simply copy products after their patents have expired.

"What we’ve done over the last three to five years is we’ve moved out of commodity products," Saad said. "We’re not in research, but we’re in that middle band where we’ve got a big chunk of speciality pharma products."

The shares slid 0.8% to R284.85 by 2.56pm on the JSE on Monday, paring the stock’s gain for the year to date to 0.5%. Saad owns about 12% of the drugmaker, with his stake valued at about R15.5bn rand.

Regulator probes

Saad was defiant when addressing a €5.2m fine imposed on Aspen by Italian regulators for raising the price of cancer drugs by as much as 1,500%, saying the extent of the increase overshadowed the low price of the treatment in question, which had not been raised for more than 50 years.

Ramping up prices to unreasonable levels "isn’t in our DNA — it’s not what Aspen stands for", the CEO said. "We’ve clearly got some regulators very comfortable with our pricing."

He said he could not comment on a similar investigation by EU regulators because it was still in progress.

One change Aspen is making to the way it does business is to alter how the company reports financials, Saad said.

As of full-year earnings to be released in September, the drugmaker will categorise performance based on type of pharmaceutical — such as anticoagulants — as well as geography. This followed criticism from the analyst community, who he conceded were justified in their complaints about a lack of transparency.

"They are right, you can’t understand the Aspen business in the way it was shown," Saad said. "It has been a massive task and will take another year or two to get to the level we want. But at least we’ve got the base numbers now."

Bloomberg

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