Pharmaceutical manufacturer Aspen Pharmacare has signed a $41.5m (R773.9m) deal with drugmaker Eli Lilly to market and distribute a portfolio of its products in Sub-Saharan Africa.
They include tirzepatide, an injectable diabetes drug that US regulators are expected to approve soon as an obesity treatment.
Studies submitted by Eli Lilly to the US Food and Drug Administration show tirzepatide, branded Mounjaro, reduced weight by as much as 15% in users, potentially positioning it as an even more powerful weight-loss drug than popular treatments Ozempic and Wegovy.
It is also being evaluated by SA’s medicines regulator, the SA Health Products Regulatory Authority.
“Having a stake in this category is a very important position for us,” Aspen CEO Stephen Saad told Business Day shortly after the company released its annual results for the year to June 30.
Aspen reported a 5% increase in revenue to R40.7bn, but headline earnings per share fell 4% to R14.05.
The group’s financial performance was hit by net financing costs of R753m, primarily driven by foreign exchange losses of R434m as a result of weaker emerging market currencies and higher interest rates.
Eli Lilly’s sub-Saharan portfolio generated sales of R440m in 2022, but this figure is expected to “increase materially” with the launch of new products, including Mounjaro, Aspen said.
Aspen’s 10-year agreement with Eli Lilly, which can be renewed for as many as 10 more, comes after an Amgen marketing and distribution deal for Southern Africa that was announced in May, and the $92m acquisition from Viatris of a portfolio of well established brands in Latin America.
The Eli Lilly deal, which is subject to competition authority approval, is expected to close in the first quarter of 2024.
“The agreement with Aspen offers remarkable potential to reach more patients and expand access to Lilly’s medicines,” said Cesar Buendia, GM at Eli Lilly Export SA.
Aspen also announced that it had secured three sterile manufacturing agreements with undisclosed multinational pharmaceutical companies for production at its French manufacturing facility, and was close to finalising another for its sterile manufacturing site in Gqeberha.
The deals, together with an agreement reached in 2022 with the Serum Institute of India to help manufacture childhood vaccines, were expected help utilise its spare sterile manufacturing capacity, it said.
Saad said Aspen had spare capacity in its sterile facilities with a potential annual contribution of at least R8bn. The company was on track to realise its previously stated guidance of a R2bn contribution in calendar year 2024, increasing to R4bn in calendar year 2025, he said.
Aeon portfolio manager Zaid Paruk said Aspen’s results, which included a 6% increase in revenue at its commercial pharmaceuticals division and 3% sales growth for its manufacturing business, were weaker than consensus estimates, due to low organic growth in the company’s core business.
“The market was anticipating higher utilisation of manufacturing facilities which appears to not have come through in the reporting period. Furthermore, the Chinese segment appears to have been affected by volume-based procurement which resulted in lower volumes,” Paruk said.
The contract manufacturing deals announced by Aspen were encouraging, as they would drive longer term manufacturing income, he added.
Aspen declared a dividend of R3.42 per share, up 5% from last year.
Sanlam Private Wealth chief investment officer David Lerche said the market responded negatively the results due to a few different factors, including that the guidance for the next six months was a bit below expectations, “with the company suggesting no growth in the first half of the calendar year”.
There are also “price pressures in China, increased competition and one of its products is sold in Russia”.
“On the positive side, Aspen’s normalised headline earnings per share ... came out marginally ahead of our estimates and the group’s guidance for the 2024 financial year as a whole is positive,” Lerche said.
Aspen’s shares initially rose 3.5% to an intraday high of R192.66 on news of the Eli Lilly deal, before falling 7.9% to close at R171.35 after the earnings were released.
Update: August 30 2023
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