Shares in Africa’s biggest pharmaceutical manufacturer, Aspen Pharmacare, plunged by a third in intraday trade on Wednesday after it announced that a contractual dispute could slash core earnings for its 2025 financial year by as much as R2bn.
By market close the share price was down 30.71% to R112, with the fall cutting about R22bn off its market cap, which now amounts to R50bn.
Aspen did not disclose the company involved in the dispute, saying only that it related to a manufacturing and technology contractual agreement for mRNA products.
These products require sterile manufacturing facilities, which it operates in SA and France.
It said an impairment of R770m in related technology could also arise as a result of the dispute.
Aspen reported normalised earnings before interest, tax, depreciation and amortisation, a core profit measure used in SA that strips out certain one-off items, of R5.2bn for the year to June 30 2024.
The market appeared impervious to Aspen CEO Stephen Saad’s efforts to assure investors that the company’s foundations remained solid despite the disagreement.
“There is no permanent damage. The foundations are intact, and the opportunities remain,” Saad said on an investor call before the stock market opened for trade on Wednesday.
Aspen’s shares fell by as much as 34.6% to R105.75, the biggest intraday fall since September 2018 when the share shed 17.8% of its value after the company announced the sale of its global nutritionals business to Lactalis.
Aspen said the dispute would potentially affect the profitability of its sterile manufacturing plant in France. That plant has been assigned capacity towards future manufacture of GLP-1 products, which are used to treat diabetes and obesity, but still has between 100-million and 120-million units of annual available capacity. Aspen said it was engaging with third parties about the potential use of that spare capacity.
This is the second major blow to Aspen’s sterile manufacturing business. It invested millions of dollars in its Gqeberha plant at the height of the coronavirus pandemic, with a view to making its own Covid-19 vaccines, but did not secure a single order. It has now switched that facility to making insulin.
“The Aspen investment case for the past two years has been premised on filling capacity in its manufacturing facilities, so this development is a big blow for the company. If the reasons for the dispute relate to quality issues in the products produced, this could have further consequences on other contracts,” said Aeon Investment Management analyst Muneer Ahmed.
“Unfortunately for Aspen they have a long history of overpromising and underdelivering for investors and it will therefore take them a long time to recover from this,” he said.
Saad told investors that Aspen had been caught on the back foot by the dispute. “We have been taken from left field. We didn’t see it coming.”
He declined to answer any questions about the nature of the contract or the company involved.
However, last year he told investors that Aspen’s sterile manufacturing contract for mRNA filling had reached the commercialisation stage.
Urquhart Partners fund manager Richard Cheesman said that while Aspen was to be commended for its communication about the financial implications of the dispute, it nevertheless raised concerns about the group.
It “may point to underlying operational or strategic challenges. This uncertainty may persist until more detailed information emerges,” he said.
Aspen said it saw both risks and opportunities in the turbulent global environment.
US President Donald Trump has imposed tariffs on the US’s trading partners and launched a trade war with China, as well as cutting foreign aid that enabled countries hard hit by HIV to purchase medicines.
Saad said that pharmaceutical companies that sold products in the US were likely to source their products from sites within the US to avoid paying tariffs on imported goods.
That might affect sales from Aspen’s European sites, Saad said.
Update: April 23 2025
This story has been updated with new information.
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