Shares fall below R100 after Aspen ends talks with potential European partner
Shares fall 7.8% as drug maker says caution is no longer required to be exercised when dealing in the company’s securities
Shares in Aspen Pharmacare opened sharply lower on Friday after the drug maker said it had ended talks with a potential partner in Europe that could have helped it cut debt.
The company’s shares fell 7.8% to R96.62 in early trade on Friday, the worst level since May 31.
The market “punished” Aspen on Friday because the potential transaction appeared to have been factored into the share price in the lead up to this announcement, said Paul Chakaduka, a trader at GT247.com.
Aspen — which has had a strategic partner before in London-based GlaxoSmithKline, which brought funding and intellectual property to the table — “is in need of capital to shore up its balance sheet despite its recent disposal of its nutritionals business”, Chakaduka said.
Aspen CEO Stephen Saad said in March that the company was looking at “strategic opportunities to reduce debt”, including partnerships in Europe that would help it build scale in the region. In May, Aspen said it was in exclusive talks with a potential partner there.
“Those discussions have been terminated and, as a result, caution is no longer required to be exercised when dealing in the company’s securities,” the company said on Friday.
“Aspen is now in a position to explore options with other potential partners so as to optimise its European commercial pharmaceuticals business,” it added.
The group’s efforts to cut debt were recently given a boost when it was granted approval to sell its nutritionals business.
Saad said in March, when Aspen’s shares halved in value within two hours of it reporting interim results that showed debt had increased further, that the group could also get “material” inflows from other asset sales.
Aspen wanted to “deleverage a lot quicker” as the company saw new opportunities, mainly in emerging markets, Saad said at the time. The “strategic opportunities” to cut debt included a review of the SA and European commercial pharmaceutical operations.
The company’s shares reversed some of their losses by 12.30pm on Friday and were last traded at R98.41, a 6.1% decline for the day.