Aspen Pharmacare, SA’s biggest pharmaceutical manufacturer, warned investors on Wednesday that the war in Ukraine poses direct and indirect threats to the business, adding to the pressures arising from the coronavirus pandemic.
While Aspen’s operations in Russia and Ukraine do not make a significant contribution to the group, the conflict is pushing up energy prices and putting pressure on already high inflation rates in Europe that could have knock-on effects on the wider business. The two countries generate R1bn in annual revenue, about 2% of the group’s total, said Aspen CEO Stephen Saad.
“Covid-19 has already affected costs. What Russia and this conflict do is worsen this. My other concern is contagion — that the whole of Europe gets involved. I worry about the inflationary affect, the geopolitical situation, and what follows after Ukraine,” he said in an interview after Aspen released its interim results for the six months to December 31.
Group revenue from continuing operations rose 4% to R19.4bn for the period under review, while headline earnings per share rose 37% to 777,2c, in line with expectations. Net debt increased to R19.3bn, up from R16.3 bn on June 30, due to payments related to prior year business transactions, a dividend paid to shareholders on September 27 and the weaker rand.
Normalised earnings before interest, tax, depreciation and amortisation rose 10% to R5.7bn.
Growth was driven by strong volume growth, as Aspen’s branded medicine division benefited from increased demand during the pandemic, resulting in economies of scale and improved margins, said Saad.
Earlier in the day investors cheered Aspen’s announcement, after the stock market closed on Tuesday, that it had concluded an agreement with Johnson & Johnson to make its own version of J&J’s coronavirus vaccine, which it will brand Aspenovax. The news sent shares up as much as 7.5% in early morning trade to reach an intraday high of R188.71, before closing 5% higher.
Aspen was contracted by Johnson & Johnson in November 2020 to formulate, fill and package vials of its Covid-19 vaccine, but until now J&J has controlled which countries can purchase the shots, and determined the price. While most of the Aspen doses have been shipped to Africa, some were initially sent to Europe, triggering international criticism.
The Aspenovax deal will enable Aspen to sell the jabs directly to AU member states and to multinational organisations such as the vaccine-sharing mechanism Covax, and the African Vaccine Acquisition Task Team.
“This licence comes at just the right time,” said Saad. “Africa is undervaccinated. It needs to administer at minimum 1.8-billion doses — two doses to 900-million people — but has administered fewer than 200-million so far,” he said.
African countries import 99% of the vaccines they administer, a situation that left them at the back of the queue when vaccines against Covid-19 first became available in late-2020. It thus lags the rest of the world, and to date only about 12% of its population has been vaccinated.
Saad said Aspen has to date produced about 180-million doses of J&J’s Covid-19 vaccine at its Gqeberha plant in Eastern Cape, 120-million of them in the six months to December 31. Vaccine sales to J&J generated R800m in the period under review, said Saad.
He declined to specify how much Aspenovax would cost, saying only that it would be in line with international pricing, pegged between $5 (R75) and $10 a dose.
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