Debt-laden Ascendis Health is set to sell its Hungary-based sports nutrition business Scitec for about 30 times less than it paid for it in 2016.

Ascendis will sell Scitec for €5m (R100m), having spent €170m acquiring it, but the group has said that the business has underperformed as increasing competition forced it to discount heavily.

Ascendis is selling off assets to reduce a debt burden far in excess of its market capitalisation.

The former management of Ascendis overpaid for Scitec, and have a lot to answer for in terms of the value destruction, said Small Talk Daily’s Anthony Clark. The sale of Scitec, however, supports the narrative from management that asset sales will proceed and debt will be reduced, said Clark.

The group’s net bank debt stood at R5bn as of the end of December, which compares unfavourably with its market capitalisation of about R660m on Thursday morning.

Ascendis’s debt problems have resulted in its share price losing about 95% of its value over the past three years, although it has seen a recovery recently, having tripled over the past month.

The group said earlier in April that its Cyprus-based Remedica unit, which manufactures chloroquine, may get a boost after US regulators authorised the use of the drug in the treatment of Covid-19.

Ascendis still needs to sell Remedica, and the recent surge in the group’s share price can’t be justified, said Clark. “There needs to be continued and consistent asset sales for the debt to be seen to be falling, and for the share price to be supported.”

Scitec, which produces sports nutrition and dietary supplements, contributed about R620m of Ascendis’s R3.9bn in revenue during its half-year to end-December.

In afternoon trade on Thursday, Ascendis’s share price was down 3.13% to R1.24. The group’s share price remains volatile and surged 140% on April 9 — its best performance on record.

Update:  April 16 2020
This article has been updated with additional financial information.