Research archive for APN

First the price moves and then the news comes. I am talking about Aspen Pharma. The share price has dropped (admittedly along with the rest of the market) after what could only be described as very good results, this time there are reports suggesting that GSK are looking to sell half their stake in Aspen for a discount. The suggestion is a 5.3 to 10.2 discount to the closing price last evening, according to sources. They (GSK) would look to reap 890 million Dollars from the sale, and would agree not to sell the rest for the next six months. They have exited a third before. Why would they want to do this? In-between writing these two sentences above and now, the SENS announcement came from the company:

Well done Byron, last week he had a pretty forward headline in the daily message which was less than subtle, it said buy Aspen. And quite a few of you responded, this was in response to us covering the trading update, which was not favourably received by the market. They were trading at R413 that day, today we are back at R435 a share. The results themselves once again underscore why in this phase of high growth the company is tricky to value. The stock is up over 50 percent in twelve months. Why? For the half year the company grew revenues by 51 percent, thanks to all the acquisitions that the company has done. Gross profits grew by 52 percent. The strong Dollar globally has actually had quite an impact on Aspen. As much as 343 million rand for the half year or 67 cents of earnings per share can be attributed to foreign exchange losses. The Russian Rouble and the Venezuelan Bolivar performed poorly.

C'mon Harry, let us go some place warm, let's go to Aspen is what Lloyd said to his pal in that classic from 1994, Dumb and Dumber. OK, it is not a classic, it was exceptionally funny slapstick humour that I enjoyed. What has been a great investment and a wonderful company has been Aspen Pharmacare. Stephen Saad and Gus Attridge never sit still, they are the founders of this business. The company listed in 1999, there were 367 million shares in issue, the turnover was 522 million Rand. At last June, 15 years on, turnover was 29.5 billion Rands, number of shares in issue 455.9 million. OK, that aside, the company has bought numbers of businesses over the years, businesses from majors that they could sweat harder and "do better" than the big cumbersome majors. The company has announced this morning a transaction in which Aspen International will acquire the rights of a therapy called Mono-Embolex from Novartis, which as per the release is "an injectable anti-coagulant, for a consideration of US$142.3 million." At the ruling exchange rate, that amounts to 1.623 billion Rand.

Aspen Pharma. The company announced a major deal 11 days ago, they certainly never, ever stand still, yesterday announcing another. This time they announced a series of licensing agreements that will be done with a crowd called TesoRx, with rights to (copy paste time) "license select international rights to TSX-002, an innovative unmodified oral-Testosterone replacement therapy." Aspen will become a minority shareholder in TesoRx.

Aspen have released an announcement this morning, another in a long line of collaborations with shareholder and global leader Glaxosmithkline, in which the two will be shareholders in a newly established business in Japan. The business will be known as Aspen Japan K.K. in which Glaxo will hold 25 percent and Aspen the rest. Rather than me try and identify which points are the most important, let me rather do a copy paste. AGI is Aspen Global Incorporated:

There was something else that I wanted to add yesterday, about the character of Stephen Saad. We never quite know everything about the personal persona, to be honest that is too intrusive. I was amused at the headline yesterday, I didn't choose it, Byron did, well done champ. The truth is, even though Stephen Saad is wildly rich in his personal capacity as an Aspen Shareholder (he gets paid pretty well too), when he travels on the company, it is a different story. Let me explain, I had heard that when he travels locally here, a two or a one hour flight from Durban to Joburg, Joburg to Cape Town or Cape Town to Durban, he flies economy class.

A whole lot more important for our client base and a company that has grown exceptionally quickly over the last decade is a business called Aspen. The company released results yesterday afternoon, the presentation to investors is today. Why own a company like this? Well, you know that healthcare is a key part of the investment makeup here at Vestact, the whole idea that more and more people are going to have access to formal healthcare over time and that is great for many businesses in that sector. We could have chosen the cheaper Adcock Ingram in that time. And why I say cheaper, from a fundamentals point of view, Aspen has always looked expensive. That is because they have managed to grow so quickly, they have one of the most extraordinary South African businessmen in the form of Stephen Saad at the forefront of the business.

Aspen have just released a trading update, they are expecting normalised diluted earnings per share (you read right) to increase by between 25 to 31 percent for the full year to end June. Aspen categorise that as follows: NDHEPS comprises diluted headline earnings per share adjusted for specific non-trading items. NDHEPS is the primary measure used by Aspen to assess its underlying financial performance. The EPS range is expected to be 40 to 46 percent better, as the company points out in the trading update this is as a result of the sale of non-core products and forex gains from transaction funding. HEPS gains are expected to be in about the same range as NDHEPS, yowsers.

Why did Aspen get trounced like that? Well, there was a conference call in which the company told analysts many, many things. South American Merck portfolio products out of stock, but equally the South African anti-retroviral tenders have been weak and margins in this business have been impacted. That has been telegraphed though.

Aspen released half year results to end December yesterday afternoon. First question, why healthcare, why generics, why this company? Well, the whole idea that there are more middle class entrants globally with more access to therapies that they can afford, and that have become more affordable over time. There is no doubt that healthcare is just as much a demographics story as an other adoption of technologies that people want and need. I for one have no problem with expensive therapies, because the more adoption of these therapies, the cheaper that they become and that means that humankind gets to live healthier and fuller lives. That is why healthcare, that is why this company answered.

Aspen announced that the GSK sale had happened yesterday, I am more interested in who the buyer was. The announcement was pretty brief, the important line being: " .. its beneficial interests in Aspen Holdings now amounts to 12.4% of the total number of shares in issue." There you go, portion sold, they have taken all of their money off the table and now are still a significant shareholder. An old friend of the newsletter (he is not old, the newsletter is getting there) had this contribution:

Aspen. I saw the news that GSK were going to be selling one third of their stake in Aspen, selling 7 percent down from their 19 odd percent. Or, as per a Reuters article that I read 28.2 million Aspen shares. Here is the .pdf -> GSK announces intention to sell part of its holding in Aspen Pharmacare Holdings Ltd. The best source is always the company, I almost always find that. Investor relations went from an absolute shambles to possibly one of the most important part of a public companies armoury. The fairly short release explains it all:

Aspen closed out one of their pending deals yesterday, from their website: Aspen concludes the acquisition of an API Business from MSD. API? Active ingredient, the manufacturing facility of the ingredients that go into the finished product. As Byron once said (quick update, he is in Colombia now, perhaps he will run into Rene (El Loco) Higuita who started off life as a striker apparently!), you need a chemistry degree sometimes to analyse the products that the company is manufacturing and selling. Of course the broader theme of getting middle income people getting richer and therefore having access to therapies that were unreachable is a major part of the investment thesis.

Aspen. The company that keeps on giving, at least for the stock holders and at least on paper. We will deal with the valuation of the company in the second part of this, the first part will deal with the company itself and their full year numbers that hit the screens at 30 minutes past midday exactly. Just as we were tackling our chicken salads, that is what we all ate for lunch! Paul pushed his computer screen back the other day and commented that perhaps that was the right length away in terms of viewing his computer. Pity that the keyboard is not detachable!

OK, Aspen had a big and well received trading update on Friday and Paul said something that made sense. He said, now that was better worded than the Discovery one. And the reason being that the company points out that for the purposes of reporting whilst the company is in acquisitive growth is a measure of diluted normalised earnings per share. But the company points out the following, to help you understand: "DNHEPS from continuing operations comprises diluted headline earnings per share adjusted for specific non-trading items. DNHEPS is the primary measure used by management to assess Aspen's underlying financial performance."