Wait and see
Reports in British newspapers last month that Aspen in 2014 had threatened to stop supplying Spain with certain generic cancer drugs unless prices increased by 4 000% sent the share price plummeting in mid-April. The reports, published in The Times and The Independent, alleged that Aspen had exploited a legal loophole that “allows drug companies to change the price of medicines if they are no longer branded under the same name”. Aspen acquired the brands in question from GlaxoSmithKline in 2009.
Aspen was fined over €5bn in October 2016 for unfair pricing of its cancer drugs in Italy, where prices were increased by as much as 1 500% after threats that it would halt supply unless Italian regulators approved the increases, Moneyweb reported. Aspen is appealing the ruling. The pharmaceutical company’s failure to inform shareholders of the fine last year – it said the size of the fine was “immaterial” in the broader Aspen context – contributed to a decline in its share price to 26 350c/share from a high at 36 500c/share.
The newspaper reports also triggered a request from the DA for the Competition Commission to investigate its pricing in South Africa. Aspen said in a statement that prices in SA are governed by the department of health, which establishes a universal fixed price for each pharmaceutical product, and that it has complied with this framework.
In terms of the European allegations, Aspen said the matter is sub judice and that it “looks forward to the opportunity to demonstrate the integrity and legality of its practices in the context of these legal processes”. How to trade it: Aspen recovered considerably in the last week of April within its medium-term bear trend. However, the resistance trendline would only be breached above 29 000c/share. A positive breakout would be confirmed through the 30 000c/share level, with potential gains to 35 000c/share and then 38 850c/share. Go long above 30 000c/share with a tight trailing stop-loss. Alternatively, failure to trade beyond 29 000c/share would mark defeat, or a lack of investor confidence – thereby attracting more sellers, who may drag the share price to 24 700c/share.
Aspen said in a statement that prices in SA are governed by the department of health, which establishes a universal fixed price for each pharmaceutical product, and that it has complied with this framework.