Break­ing out of its bear trend

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

Phar­ma­ceu­ti­cal group Aspen, which has come un­der fire in re­cent months from reg­u­la­tors in Italy and the EU over the pric­ing of its cancer drugs, is ex­pect­ing to an­nounce fur­ther ac­qui­si­tions in the next 12 months with a fo­cus on de­vel­op­ing mar­kets, CEO Stephen Saad told Bloomberg in an in­ter­view on 30 June.

The group has more fi­nan­cial room to ma­noeu­vre as strong rev­enue growth and lower cap­i­tal ex­pen­di­ture strength­ened its bal­ance sheet, which has come un­der strain af­ter two ac­qui­si­tions in 2016. The pur­chases of the anaes­thet­ics port­fo­lios from Glax­oSmithK­line and As­traZeneca for at least $885m led Aspen’s bor­row­ings to tre­ble to R35.7bn at the end of De­cem­ber, Bloomberg re­ported. Saad be­lieves organic growth across the com­pany should bring that fig­ure down.

He is also con­fi­dent that pur­chases in cat­e­gories such as an­ti­co­ag­u­lants should help Aspen in­crease its abil­ity to of­fer dif­fer­ent types of ex­ist­ing medicines with­out in­cur­ring the cost of re­search and de­vel­op­ment for new drugs in ar­eas such as cancer, Bloomberg re­ported.

Saad said the size of the in­crease in the cost of cancer drugs in Italy by as much as 1 500%, which led the reg­u­la­tor to im­pose a €5.2m fine on Aspen, was over­shad­owed by the low price of the treat­ment in ques­tion, which has not been raised for more than 50 years, Bloomberg re­ported. It is not in Aspen’s DNA to ramp up prices to un­rea­son­able lev­els, he ex­plained. How to trade it:

Aspen has been slid­ing since Au­gust 2016. Re­cently breach­ing the re­sis­tance trend­line of its bear trend, up­side through 30 225c/share should present a good buy­ing op­por­tu­nity with po­ten­tial gains to 36 420c/share. Al­ter­na­tively, go short be­low 26 350c/share. The down­side tar­get would be at 21 200c/share. ■

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