Research archive for APN

Aspen released numbers for their six months to end December this morning. This is a business that has transformed from being a small to major generics business, to now positioning themselves as a (in their words) "global, multinational organisation focused on therapeutic specialties." Anticoagulants (to treat thrombosis) and anesthetics, much of this is new business. This compliments their older businesses, infant nutritional (formula and the like) and lastly the High Potency & Cytotoxics division.

I read (thanks to Google alerts) that Aspen to appeal Italian Competition Authority fine for alleged excessive price hikes. When is it acceptable to stick up the price of a therapy? Aspen are arguing, as per the news article, that they were charging 2 Euros (30.41 Rand) per pill. A pill a day for a month is then 912 Rand, 60 Euros of course. These are blood cancer drugs and were approved for sale back in 2013.

It was bound to happen sooner or later, the news filtered through Wednesday evening via Reuters that GlaxoSmithKline (GSK) were selling their remaining stake in Aspen. Stephen Saad was asked at the CNBC Africa's awards ceremony on Thursday evening what he thought of all of this, and about the future of the business. 28.2 million shares, or 6.2 percent of the business was placed via an accelerated bookbuild. No price was given. Back to the interview, Saad was given the "All Africa Business Leaders Award for Southern Africa" - here is the interview: Aspen CEO wins the AABLA 2016 Entrepreneur of the Year award.

Aspen results! Those were released mid afternoon here in Jozi, the stock reacted positively, notwithstanding being smashed last week when the trading statement revealed the BS they have to put up with in Venezuela. Stephen Saad said that when the Venezuelan Deputy President was here in Msanzi not so long ago, spewing garbage about their awesomeness (how can you tell I am not a fan?), there were assurances of being paid, and guess what? They didn't materialise! What a twist, socialists lying!!! In theory sharing is actually caring, when big purple dinosaurs tell you to do so with biscuits or crisps or plastic play things, when we grow up instinct kicks in. I am afraid whilst we can organise ourselves into some sort of working patterns in cities and in the workplace (and so on), the early instincts of oneupmanship still remain, it is hard coded to perform better than your peers. You can try and take that away, sorry, it doesn't work.

Aspen released an update that had several parts to it. This is all ahead of their results which are tomorrow, with the presentation of said results on Thursday, Michael is heading off to the results. I hope he sleeps on Wednesday night and isn't too excited. You can find the release from yesterday here - Aspen GSK Announcement. The first part of the release deals with a transaction in which Aspen Global Incorporated (AGI) will acquire from GlaxoSmithKline (GSK) a series of five established medicines, one general anaesthetic (Ultiva) and then four muscle relaxants (Nimbex, Mivacron, Tracrium and Anectine). According to the Ultiva website, the drug is rapid response and has an equally rapid recovery. Used for spine, orthopaedic, Ear Nose and Throat (ENT), cardiac and other procedures. Wikipedia suggests that the active ingredient in Ultiva, Remifentanil, is 100 to 200 times as potent as morphine. Whoa!

Another stock that is taking heat this morning is Aspen Pharmacare. They released a trading statement yesterday afternoon late, after market closed. The company is taking a 870 million Rand hit on the Venezuelan Bolivar having devalued so much. That country is broken. The bus driver president, hand picked by Hugo Chavez, has inherited dumb economic policies that have driven the country off a cliff. Herewith the table that lays out the comparable and what they are likely to be:

Two sets of news from Aspen yesterday and then this morning. First, the news came yesterday afternoon that the company had obtained funding facilities of 3 billion Euros. I will do a copy and paste of the announcement:

Aspen Pharma released numbers yesterday afternoon, remembering that we covered their trading update a while ago -> Aspen Trading statement. That was pretty detailed, for a trading update. I guess the reason why we went into all the detail was simple, the stock has really performed badly. And often people refer to the company and the stock price as one and the same, we are all guilty of that. So, I guess when the share price is sliding away, there is something "wrong" with the company, when the stock price goes up, it has to be a "good one". Human nature dictates this to be so, for many of us.

Finally. And by that I mean the share price of Aspen Pharma moving northwards in a serious manner. Year to date the stock is still down 6.62 percent, the move yesterday was up nearly nine and a half percent. The stock is up over 21 percent in less than two weeks. As we pointed out, the stock is still down year to date and over the last 12 months the stock is down over 31 percent. 5 years? Up 246 percent. As ever with stocks, it depends where you draw your line in the sand when measuring performance. Why has the stock moved so much in the last little while? Yesterday the company released a trading update, we can do a copy and paste of the table from the SENS announcement:

Aspen released results for their full year to end June 2015. This is a company that operates in 70 countries across the world and distributes their products across 150 countries. Wow. They have divested 800 million Dollars in a number of transactions, equally they have done three large transactions in the same year, not ideal to do them all in the same year said the CEO Stephen Saad. Revenue grew 22 percent to 36.1 billion Rand, operating profits increased by 14 percent to 8.4 billion Rand. Of that, South Africa is now around one quarter of revenue (23 percent to be exact, 21 percent of profits), as Stephen Saad says, it will always be their home. See segmented revenues below per region:

Why did Aspen seemingly sell a sizeable portion of their Australian business? It took me a little while to figure it out, first and foremost the Price Disclosure Reductions for 2015 April Cycle from the Australian government Department of Health might reveal that margins for manufacturers Down Under are going to become harder to maintain. If the government, anywhere in the world, wants to get your business to sell your manufactured goods at a lower and lower rate (and not let the market decide ultimately) then I guess it may be a good idea to sell that business. I think if the Australian government covers all and sundry for their healthcare needs, then I guess they can set or stipulate the prices, all I know in the long run, setting prices promotes less and less competition. If you do it in an orderly manner, then I suspect you still attract business.

Aspen is selling more non-core assets, this time to Stride Entities in Australia: Divestment Of Portfolio Of Branded And Generic Products To Strides Entities. They are doing two transactions the first is a deal to sell 130 products for A$265 million, which contributed A$26 million in pre-tax profit. The second is the selling of 6 branded products for $92 million, which contributed $10 million in pre-tax profits. Given that these are non-core assets and they are being sold for what would appear good prices, I think it is a good move. These funds can be used to pay down debt or used to purchase other assets that Aspen feel they can get better growth and value out of. Remember that they are still trading under a cautionary because there is a possible baby formula deal in the pipe line, which could be huge and require the funds that they are freeing up. The management team have proved that they are solid and shrewd deal makers, we back them to know where the best returns can be made for shareholders.

Aspen out with a very short announcement post market yesterday: "Shareholders are advised that Aspen is currently engaged in discussions regarding a possible acquisition of an infant nutritionals business." Seeing as the business is global in nature these days (see, currency volatility!), the company could be making this acquisition almost anywhere. Any guesses, Brazil perhaps? Or perhaps somewhere in Eastern Europe? South East Asia? And perhaps the existing business of one of the majors.

What happened with Aspen and Litha? You may have seen in the news that there was a deal of some sort, for 1.6 billion Rand. This was Aspen selling their injectables and established brands business unit to Endo, who own Litha. It looks like a decent price, this business that Apsen are selling for that 1.6 billion Rand price had revenues of 362 million Rand and pre-tax profits of 136 million Rand, as of June 30, 2014. At the same stage, group revenue was 29.5 billion Rand. As you can see, this was a little over one percent of group revenue, and an even smaller part of profits.

Holy smokes, what has happened to the Aspen share price? Well, a lot actually and unless you were short the shares I am afraid that it has not gone in the right direction for you. We have been a little puzzled, there are three explanations and it is possibly a combination of these things. First and foremost, Glaxo have sold shares and have indicated that they are possibly exiting out the business in time. It has been a good relationship of injecting assets, on Glaxo's part, in return for greater ownership of Aspen. Relative in size and scale it was a lot more significant in the life of Aspen than Glaxo. The relationship between the two however went back some .... excuse my use of street language! With Glaxo exiting, there is a likelihood that the market would anticipate another bout of share price weakness and perhaps even another discounted placement. There is a connection between the cash flow needs of Glaxo (results yesterday) and them possibly exiting the remainder of Aspen pronto. Take every cent you need, in this case it is negative for the Aspen share price.