Aspen Pharmacare euphoria over acquisitions’ big profits

ASPEN Pharmacare’s share price leaped 8.51 percent yesterday on the back of a strong set of annual results and on its recent acquisitions.

The pharmaceutical company’s share price closed the day at R309.84 on the JSE.

Part of Aspen’s good run during the year to end June can be attributed to two acquisitions, AstraZeneca’s global anaesthetic portfolio, excluding the US portfolio that was effective from September 1 last year, and the acquisition of GlaxoSmithKline’s anaesthetics portfolio, effective from March 1. The anaesthetics portfolio generated revenue of R7 billion.

Aspen acquired the commercialisation rights of AstraZeneca’s portfolio for an upfront consideration of $520 million (R6.8bn) and $370m for GlaxoSmithKline’s anaesthetics drugs.

Now the group has announced that it would pay $766m, an initial $555m for the remaining rights to the intellectual property and manufacturing knowledge related to the anaesthetic medicines, plus a further $211m based on the performance for AstraZeneca’s remaining rights.

Aspen deputy chief executive Gus Attridge said the group was excited about these latest developments, even though it initially did not plan to acquire the remaining rights.

“We saw an opportunity and we acted on it. The initial acquisition proved to be an excellent strategic investment for Aspen, particularly when allied to the subsequent acquisition of the GSK anaesthetics,” Attridge said.

Aspen increased revenue by 16 percent to R41.2bn and increased normalised headline earnings per share by 16 percent to 1 463 cents a share. The board declared a dividend of 287c per ordinary share during the period.

Byron Lotter, a portfolio manager at Vestact, said the results were good. “The first half was very tough and the numbers showed it. But the second half was fantastic and pulled the full year numbers to very impressive growth levels.

“Of course there were lots of moving parts here. The rand strengthening was a big lag on earnings, but is positive for their debt levels which are mostly in euros,” Lotter said.

However, he added that operationally many things were finally bearing fruit. “They decided to go full tilt international in 2013 and Stephen Saad said that these numbers are finally painting a picture of what they were trying to achieve,” he added.