Aspen Pharmacare shares jumped the most in 23 years on Wednesday after SA’s largest generic drugmaker painted a rosy picture heading into the second half of the financial year and beyond.
The shares jumped 13.29% to close at R160.75 on the JSE, adding R8.4bn in market value.
Aspen said on Wednesday it has made progress in contract negotiations with four multinational customers seeking to secure a portion of its sterile manufacturing capacity, but did not reveal the details.
“We are pleased to report that we are at advanced stages of contract negotiations to fill a portion of the additional sterile manufacturing capacities we have developed,” CEO Stephen Saad said.
“Once concluded, this new manufacturing business is anticipated to realise a contribution of R2bn in the 2024 calendar year, increasing to R4bn in calendar year 2025.”
Aspen also aims to close “important product portfolio transactions which will further enhance the commercial pharmaceuticals businesses in Latin America and SA”, Saad added.
The brighter outlook came after the company reported a 15% drop in first-half profits. Headline earnings per share, a measure of profit that strips out one-off items, fell to R6.61 in the six months to end-December, hobbled partly by the fallout of the Russia-Ukraine war and lower Covid-19 vaccine sales.
“It is a tale of two different worlds. During the first half, we had the Russia-Ukraine war, and China effectively shutting its borders with its zero Covid-19 policy,” Saad said in an interview. “But we see a big shift in our manufacturing business as we go into the second half.”
Aspen secured a 10-year agreement with Serum Institute of India in August 2022 to bottle four vaccines used in childhood immunisation programmes that it will market and distribute under its own brand in Africa. The agreement was aimed at using spare capacity in Aspen’s sterile plant in Gqeberha, which has lines lying idle due to slower-than-expected demand for Covid-19 shots.
Sihle Siswana, equity analyst at Aluwani Capital, said the market reacted to the “revised outlook” on the use of sterile capacity. “Management previously guided to [a] R3bn contribution from filling sterile capacity. The long-term contribution is now revised upwards to at least R8bn,” Siswana said.
While the utilisation of the sterile capacity will be driven mainly by vaccines from Serum Institute of India, he is awaiting details on the contract negotiations with four manufacturers.
Aspen’s footprint stretches across 115 countries, making it a global company.
Group revenue for the period was flat at R19.15bn. Commercial pharmaceuticals sales were up 2%, but manufacturing revenue declined 10%.
Updated: March 01 2023
This article has been updated with additional information
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.