Recovering from steep bear trend
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