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:
"AGI will transfer the marketing authorisations and grant perpetual distribution rights to Aspen Japan for all products currently being marketed and distributed on behalf of Aspen in Japan;
GSK will transfer the marketing authorisations and grant distribution rights to Aspen Japan for certain mature products in GSK's portfolio;
GSK will provide Aspen Japan with a pipeline of authorised generics for a number of GSK's products;
AGI will offer Aspen Japan the rights to all future products that it acquires or licenses in Japan; and
AGI will be responsible for the management of Aspen Japan and for the commercialization of all the products in Aspen Japan's portfolio."
Why Japan? Well. Japan is the second biggest pharma market in the world, around a 112 billion Dollar per annum market in 2012, not really growing. The US dwarfs the whole lot, 327 billion Dollars worth of sales in 2012. China is now the third biggest, perhaps it is going to overtake Japan soon. For the time being however, Japanese citizens are covered with social health insurance and the balance getting public assistance.
Why does this make sense for Glaxo? I think that Glaxo have obviously bigger fish to fry. During 2013 (according to the
annual report), they sold the drinks Lucozade and Ribena to a business called Suntory of Japan for 1.35 billion Pounds, or 2.19 billion Dollars at current value. Japan represents 7 percent of total revenues for Glaxo. For Glaxo this is not a growth market. Expectations are for prescription drugs in the developed world, including Japan, are for 1-4 percent growth. Here however is the clincher for me. In the Glaxo annual report there is a key as to why this happened:
"The government in Japan continues to progress a number of additional initiatives that are likely to affect the prescriptions medicine industry. These include the goal of having 60% of all prescriptions filled by generic medicines by March 2018, and the introduction of health technology assessments for evaluating pharmaceuticals and medical devices."
Ah-ha! Plus also remember that Japan has the second oldest population as a collective, after Monaco. Perhaps Charlene Wittstock, all of 36 years old and born in the same town as me (Bulawayo) brings the age down a little. The average age in Japan is nearly 45 years old, all 126 and a half million people, the population keeps shrinking and they are battling with that. The older the population, the more medicine you need. Equally Japan has an average life expectancy of 84.6 years. Older people. The other point worth noting is that Japan as a percentage of GDP spend around 10 percent on health. A little less than France, the Netherlands, Germany (around 11 and a bit percent) and a whole lot less than the United States.
Last little note of interest, the new president of the Glaxo Japanese region (portfolio expanded in September 2012) is none other than Abbas Hussain. Who? He is the brother of Nasser Hussain, the former English cricket captain and commentator. I love Nass! He is a legend. Perhaps Stephen Saad and Abbas Hussain can talk smack about one of their favourite sports. Perhaps they both have a view on the new book by KP.
All in all, this is another positive for Aspen and whilst GSK might have sold a stake (
GSK complete Aspen sale, PIC now biggest shareholder), they are the loser in this, over 100 Rand a share higher than where they sold! Yowsers. I suppose, unsurprisingly Aspen is trading at an all time high, surpassing the 351 Rand from a couple of days ago. Up over three percent in early trade.