Picture: SUPPLIED
Picture: SUPPLIED

Ascendis Health said in a trading update on Wednesday that it was too soon to tell what the financial effect of a rapid increase in demand for chloroquine would be, after the US Food and Drug Administration (FDA) authorised the use of the antimalarial drug for Covid-19.

The group’s Cyprus-based Remedica unit manufactures chloroquine, and while there are no approved treatments for Covid-19, it is being used in emergencies. Chloroquine has been submitted to the FDA for testing to establish long-term efficacy and safety in the US, resulting in a significant increase in demand.

Remedica manufactures generic pharmaceuticals focusing on antiretrovirals (ARVs) and antibiotic treatments, which remain  important both in combating HIV/Aids as well as offsetting the effects of Covid-19 on those who have compromised immune systems, Ascendis said.

The group said in an update that its Ascendis Pharma business in SA continues to manufacture at maximum capacity, and is seeing increased demand. However, the group’s medical devices business is  expected to be hit by Covid-19, as elective surgeries have either been cancelled or postponed during the pandemic.

The export of medical devices to other African countries is also being affected, the group said.

In morning trade on Wednesday, the Ascendis share price had jumped 17.39% to 54c, though it has still lost more than 85% of its value over the past 12 months.

Graphic: DOROTHY KGOSI
Graphic: DOROTHY KGOSI

Debt levels

The group has been grappling with a heavy debt burden that far exceeds its market capilisation, which stood at R264m on Wednesday morning.

CEO Mark Sardi said Ascendis is working on bringing down its debt levels as quickly as possible. The group had net bank debt of R5bn as of its six months to end-December.

Though the company reduced its debt from R5.3bn to R5bn in the six-month period, it still has a long way to go and has turned to its lenders to extend and amend its debt profile, Sardi said.

Anthony Clark, of Small Talk Daily Research, said Ascendis is well-positioned to work in the fight against Covid-19 and that the market liked the trading update, with Ascendis’s share price having risen 30% on Wednesday.

“The company is actually quite well-positioned for the Covid situation, given that it manufactures many of the molecules that perhaps are going to be used in a vaccine, which [US President Donald] Trump is talking about. They are one of many globally that can do it so it is not exclusive,” he said.

Clark said Ascendis has medical equipment companies in SA supplying ventilators, personal protective equipment (PPE), masks and a healthcare business that supplies vitamins and other sorts of self-medication to boost immune systems, “so they believe that they are actually quite well-positioned”.

He said there are problems with its debt, of which about 67% is euro-denominated, “But given that most of their earnings are now offshore, depreciation of the rand also counter acts that. I think a lot is going on with Ascendis ... More good news is on the way.” 

Update: April 8 2020 
This article has been updated with comment and financial information.

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