Re­cov­er­ing from steep bear trend

Finweek English Edition - - MARKETPLACE - edi­to­rial@fin­week.co.za By Mox­ima Gama

Phar­ma­ceu­ti­cal group Aspen Pharmacare may have started the year on a good note, with an an­nounce­ment on 31 De­cem­ber that it has fi­nalised two deals with Glax­oSmithK­line (GSK). In the one trans­ac­tion, Aspen ex­er­cised its op­tion to ac­quire the rights to two generic med­i­ca­tion brands in a num­ber of coun­tries, no­tably China, for £45m. In ad­di­tion, Glaxo agreed to can­cel its col­lab­o­ra­tion with Aspen in Glaxo’s sub-Sa­ha­ran African op­er­a­tions, with Glaxo pay­ing £45m to end the col­lab­o­ra­tion.

This fol­lows Glaxo’s de­ci­sion to sell its share­hold­ing in Aspen, which it held for seven years. The last tranche of shares was sold in Septem­ber last year for R8.47bn. Glaxo started grad­u­ally di­vest­ing its stake in Aspen in 2013 in or­der to in­vest in the de­vel­op­ment of new prod­ucts and di­ver­si­fy­ing its busi­ness.

Aspen said at the time that the Glaxo sale “in no way af­fects the on­go­ing col­lab­o­ra­tion be­tween Aspen and Glaxo in South Africa and a num­ber of other trad­ing re­la­tion­ships be­tween the two com­pa­nies”. David Red­fern, chief strat­egy of­fi­cer of Glaxo, also re­mains a mem­ber of the Aspen board. Glaxo’s exit pro­vided a floor to Aspen’s plum­met­ing share price, end­ing an over­hang caused by the un­cer­tainty around the sale. Aspen shares found sup­port at 26 510c/share and seems to be re­cov­er­ing. How to trade it: With the 26 510c/ share level pro­vid­ing strong sup­port from a 32% fall, Aspen could be set to re­cover and aban­don its steep bear trend. A pos­i­tive break­out would be con­firmed above 28 800c/ share – go long – with po­ten­tial up­side to 35 000c/share. Main­tain a tight stop-loss at first, then es­tab­lish a fair trail­ing level as the share price rises. Al­ter­na­tively, con­tin­ued down­side through 26 510c/share could see Aspen retest the 21 000c/share sup­port level or even the 18 000c/share mark. In this case, re­frain from go­ing long.

Aspen ex­er­cised its op­tion to ac­quire the rights to two generic med­i­ca­tion brands in a num­ber of £45m.coun­tries, no­tably China, for

Aspen Pharmacare’s of­fices in Dur­ban

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