Aspen Pharmacare Holdings CEO Stephen Saad’s move to buy piles of the group’s shares to shore up confidence in the company after a contractual dispute threatened to cost it about R2.7bn has not yielded the desired results, with the market still waiting to see how the quarrel will be settled.
Saad, who cofounded the group in its current iteration in 1997, has over the past two months bought nearly R200m worth of shares in the group.
The purchases took place after SA’s largest generic drugmaker in May warned that its manufacturing business faced a “material contractual dispute” that might lead to core earnings plunging as much as R2bn.
The company said the dispute might see it impair R770m in the 2025 financial year, adding the trade war initiated by the US was likely to affect its manufacturing business.
Despite Saad showing a brave face, the group’s stock has plunged 30.5% year to date, and 51.6% in the past 12 months.
Saad is the group’s second largest shareholder after asset management major, the Public Investment Corporation.
The group, which is now valued at R52bn on the JSE, having lost half of its value over the past year, is yet to shed light on the material aspects of the dispute.
The only information it has released so far is that the dispute involves a manufacturing and technology agreement “with a contract manufacturing customer for mRNA products”.
Aspen has a sterile manufacturing contract for mRNA vaccines. Last year, it said the sterile manufacturing contract for mRNA filling had reached commercialisation stage.
The group might shed more light on the dispute in September when it releases its full-year results.
Asset manager Allan Gray in June increased its shareholding in Aspen to just above 5%. Cape Town-based Coronation has also bought a strategic position in Aspen, with the money manager now the group’s third-largest shareholder.
“We have added Aspen to the portfolio as the share price has sold off this year, despite recently delivering better-than-expected results,” analysts from the company said, looking back at the moves they made in the first quarter of the year.
“An entrepreneurial owner-run business, Aspen has had mixed fortunes over the years as its aggressive expansion into a multinational pharmaceutical business has been affected by emerging market currency weakness and restrictive legislation in varying regions,” they said.
“Despite these travails, it has degeared its balance sheet, appropriately structured its debt and now has an enviable manufacturing base, presenting the business with opportunities to grow revenues off a relatively fixed cost base.”
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