Aspen aims to raise growth with new R1bn drugs production facility in PE
Export plans for the facility dovetail with the government’s vision to make SA a leading exporter of high-tech products
Aspen Pharmacare’s new R1bn high-containment facility at its Port Elizabeth production site will soon be making drugs for treating late-stage cancers, Parkinson’s disease and medicines that prevent organ rejection in liver-and kidney-transplant patients.
At full capacity the facility will produce about 3.6-billion tablets a year and package about 3-million bottles a month. Production will start in June.
The JSE-listed company with a market capitalisation of more than R100bn is the world’s largest exporter of eye drops to the US and is the largest supplier of generic medicines in SA. It also mass-produces antiretrovirals for the state’s HIV/AIDS programme and for other parts of Africa.
Aspen’s export plans for the facility dovetail with the government’s vision to make SA a leading exporter of high-technology products. Its opening precedes a R4.5bn investment at the same complex, set to be completed in 2023. It will cement the group’s place as the world’s second-biggest producer of general anaesthetics and injectable anticoagulants, after the US.
Trade and Industry Minister Rob Davies, who presided over the facility’s opening earlier in May, says public sector procurement of pharmaceuticals in SA makes up only 15% of the total. Private sector demand for medicines takes up 85%. This means the government needs to procure far more locally, Davies says.
Aspen’s products are available in 150 countries, with 25 manufacturing facilities in Latin America, the US, Europe, Africa, India, Australia and New Zealand. The company has sales representation in 43 nations. China is its largest market, while Japan is a big destination for generics, anaesthetics and antithrombosis drugs.
"Aspen’s capital investment into the South African market over the past two years has outstripped investments made into the [local] pharmaceutical industry by the entire domestic and international industry over the past decade," says Aspen CEO Stephen Saad.
About 80% of yearly group revenue of roughly R41bn is from abroad. Offshore growth will continue, he says. But Port Elizabeth will remain the company’s global flagship production facility, making more than 100 lines of medicines. About 40% of Aspen’s more than 10,000 employees work in SA.
The latest investment creates 500 new jobs at the Port Elizabeth plant, in addition to more than 2,000 existing posts. Most of these will be filled locally with training on site.
Saad says the new facility will generate export revenues for Aspen and be important for import substitution in SA.
"To make SA work you need to invest. Our biggest investments [in Port Elizabeth] are yet to come," he says.
The R4.5bn investment at the Port Elizabeth site will be part of the relocation of the group’s anaesthetic facilities from Europe to SA. This will reduce production costs by 30%-40%.
"The investment climate in SA has improved very significantly," says Davies.
He witnessed a positive change in investor mood towards SA at the World Economic Forum in Davos in early 2018, with President Cyril Ramaphosa’s plans to attract R1.2-trillion in investment in the next five years being a catalyst for this.
Davies says the South African pharmaceutical industry is worth about R47bn a year, but that an estimated growth rate of 6.6% a year over five years will increase the sector’s worth to about R54bn a year.
There is a trade deficit of nearly R22bn in the pharmaceutical industry, which Aspen’s export production from the new facility will help alleviate, he says. In this respect, the facility was built under the department’s 12i greenfield investment programme, providing Aspen with R209m in tax credits.
Saad echoes Davies in saying Ramaphosa’s accession to the presidency has boosted investor sentiment. With its new investments totalling R5.5bn in due course, Aspen will become the second-largest employer in the Nelson Mandela Bay metropolitan area after German car maker Volkswagen.
Nelson Mandela Bay mayor Athol Trollip says the biggest challenge in Port Elizabeth is unemployment. "It’s an incredible investment that has been made in this city."
He expressed thanks for the "incentivisation and facilitation" of the government.