Aspen em­braces China’s ba­bies

Drug maker eyes op­por­tu­ni­ties in sales of epidu­rals and anaes­thet­ics af­ter end of one-child pol­icy in 2016

Business Day - - FRONT PAGE - Michelle Gumede Health and Ed­u­ca­tion Writer gume­dem@busi­

Multi­na­tional drug man­u­fac­turer Aspen plans to ag­gres­sively push its prod­ucts in China as it ex­pects a baby boom fol­low­ing the end of the coun­try’s one-child pol­icy. China marked the end of its 35-year-old one-child pol­icy, al­low­ing cou­ples to have two chil­dren, in Jan­uary 2016.

Drug maker Aspen Phar­ma­care plans ag­gres­sively to push its prod­ucts in China as it ex­pects a baby boom fol­low­ing on the aban­don­ment of its one-child pol­icy. China marked the end of the 35-year-old mea­sure in Jan­uary 2016, al­low­ing cou­ples now to have two chil­dren.

On Thurs­day, Aspen CEO Stephen Saad said the pol­icy change cre­ated op­por­tu­ni­ties for Aspen in the ter­ri­tory, es­pe­cially for prod­ucts such as epidu­rals and anaes­thet­ics that are set to ex­pe­ri­ence higher de­mand as more peo­ple give birth.

Buy­ing into the anaes­thet­ics di­vi­sions of As­traZeneca and Glax­oSmithK­line in 2016 gave Aspen en­try into China.

“It is a high-risk en­vi­ron­ment,” Saad said. “But, we’ve been en­cour­aged by our early progress there so far.”

Anaes­thet­ics and throm­bo­sis medicines are its big­gest prod­ucts dis­trib­uted in China.

Aspen’s anaes­thet­ics di­vi­sion posted rev­enue of R7bn, while its throm­bo­sis di­vi­sion re­ported R5bn in rev­enue.

Aspen deputy CEO Gus At­tridge said China had al­ways been on Aspen’s radar, although the com­pany had been wary of en­ter­ing that mar­ket be­cause of its high com­plex­ity.

Through the ac­qui­si­tion of well-known prod­ucts in China, Aspen had been able to use the ex­pe­ri­ence as a low-risk op­por­tu­nity to en­ter Chi­nese mar­kets, At­tridge said.

Port­fo­lio man­ager at Gryphon As­set man­agers Cas­parus Treur­nicht said Aspen was a busi­ness built on ac­qui­si­tions and man­age­ment and “con­stantly re­minded us that they made sup­pos­edly good deals which will ben­e­fit the busi­ness in the fu­ture”.

Aspen’s largest sales force is in China, with more than 600 peo­ple em­ployed there.

Aspen said it had ac­quired the re­main­ing rights of the in­tel­lec­tual prop­erty and man­u­fac­tur­ing re­lated to As­traZeneca’s anaes­thet­ics port­fo­lio. In ex­change for these rights, Aspen will pay $766m in per­for­mance pay­ments over the next two years. Treur­nicht said this was “a lofty sum of money”.

The mar­ket took the re­sump­tion in deal mak­ing as a strong pos­i­tive, Ni­tro­gen Fund Man­agers di­rec­tor Rowan Wil­liams said. “It does ap­pear that the com­pany has made a healthy turn­around from a lack­lus­tre full-year 2016 and is back on its growth path.”

Aspen’s group rev­enue rose 16%, to R41.2bn.

But Treur­nicht pointed out that if anaes­thet­ics rev­enue was stripped out it would come in at R34.2bn, fall­ing short of the pre­vi­ous year’s fig­ure of R35.6bn.

“Last year, rev­enue went down by 2%. I am con­cerned when a busi­ness shrinks its rev­enue by 5.3% over two years and in­vestors pay in ex­cess of a 20 price:earn­ings ra­tio for it,” Treur­nicht said.

“So far, Aspen seems like a busi­ness that is strug­gling to keep its head above wa­ter.”

Nor­malised head­line earn­ings per share were also up 16%, to R14.63 per share.

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