Aspen sidesteps its pig problem
With swine flu affecting supply of the key ingredient of the blood-thinning drug heparin, pharmaceutical giant changes its manufacturing arrangements and sets itself up for strong earnings growth. By Neesa Moodley
Multinational pharmaceutical manufacturer Aspen Pharmacare is poised for strong organic earnings growth after changing manufacturing agreements for the supply of heparin-based syringes to a toll contract manufacturing arrangement.
The move will reduce Aspen’s investment in heparin inventory and increase operating cash flows in the current financial year and the next one. In the six months to the end of December 2023, Aspen’s investment in heparin inventory shrank by R1-billion, with a further R2-billion reduction anticipated by the end of June this year.
The active ingredient for heparin, a blood-thinning drug, is sourced from pig intestines. An outbreak of swine flu and African swine fever in recent years raised concerns globally, even prompting a major recall of the injectable anticoagulant by the US Food and Drug Administration (FDA) and its equivalents in Europe, Australia and New Zealand.
Aspen has countered this weakness in its supply chain with the transition to a toll manufacturing agreement, which means the company’s customers will own and source the active ingredient, and Aspen will handle the manufacturing contract.
“It effectively takes away the drag on our bottom line and makes it a working capitallight model,” says Sean Capazorio, group finance officer.
The other big move Aspen made in the first half of the year was the conclusion of a Sandoz agreement, which included acquiring the Sandoz business in China for a net upfront consideration of €27.9-million, followed by potential net milestone payments of €9.2-million. Management expects to get competition authority approval for the deal in May. Capazorio says the deal will materially mitigate the negative impact of
volume-based procurement on Aspen’s existing business in China from next year.
Stephen Saad, Aspen group chief executive, adds that the company has completed the necessary steps to reach the commercialisation stage for the manufacture of mrna-platform products, which will augment revenue in the second half of the year.
Revenue climbed 10% to R21.1-billion, whereas operating cash flow per share jumped 44% to 553.2 cents.
The second half of the year will be further boosted by the distribution and promotion
agreement with Lilly for sub-saharan Africa and the product purchase agreement with Viatris for Latin America.
The agreement with Lilly was effective from January 2024. In subsequent years the company will benefit from the launch of key pipeline products including Lilly’s tirzepatide, marketed globally as Mounjaro.
Viagra, Lipitor, Norvasc, Lyrica and Celebrex are key brands included in the product portfolio acquired for Latin America. Aspen’s share price has climbed 16.55% over the past year.