Aspen share price dives af­ter fine

Neg­a­tive sen­ti­ment to­wards debt-laden SA phar­ma­ceu­ti­cal firm deep­ens af­ter it ad­mits it was party to il­le­gal deal

Business Day - - FRONT PAGE - Ta­mar Kahn Health & Sci­ence Writer [email protected]­nesslive.co.za

In­vestors on Wed­nes­day frowned on news that Aspen Phar­ma­care is to pay the UK’s Na­tional Health Ser­vice (NHS) £8m af­ter ad­mit­ting to an­ti­com­pet­i­tive be­hav­iour, knock­ing its share price to its low­est level in nine years. While the scale of the pay­ment is rel­a­tively small for a com­pany of Aspen’s size, the news deep­ened neg­a­tive sen­ti­ment about the com­pany, which has been pun­ished by in­vestors over con­cerns about the scale of its debt.

In­vestors on Wed­nes­day frowned on news that Aspen Phar­ma­care is to pay the UK’s Na­tional Health Ser­vice (NHS) £8m af­ter ad­mit­ting an­ti­com­pet­i­tive be­hav­iour, knock­ing its share price to its low­est level in nine years.

While the scale of the pay­ment is rel­a­tively small for a com­pany of Aspen’s size, the news deep­ened neg­a­tive sen­ti­ment about the com­pany, which has been pun­ished by in­vestors over con­cerns about the scale of its debt.

Aspen is SA’s big­gest phar­ma­ceu­ti­cal man­u­fac­turer, with a mar­ket cap­i­tal­i­sa­tion of R31.75bn, and saw its shares reach an in­tra­day low of R66.80, its worst since Fe­bru­ary 2010, be­fore clos­ing at R69.55, down 6.66% on the day.

“I don’t think the fine is a big is­sue, but it has con­trib­uted to neg­a­tive sen­ti­ment,” said Asief Mo­hamed, chief in­vest­ment of­fi­cer at Aeon In­vest­ment Man­age­ment. “Their debt lev­els are still quite high af­ter the sale of the in­fant-milk busi­ness and are still a con­cern,” he said. Aspen had sig­nalled it was con­sid­er­ing sell­ing more as­sets, but this placed it in a weak po­si­tion with prospec­tive buy­ers, he said.

Sas­fin eq­ui­ties an­a­lyst Alec Abra­ham said in­vestors were wor­ried that Aspen might be forced into a rights is­sue to raise capital if it failed to sell as­sets at the right price.

Aspen sold its in­fant-milk busi­ness to French dairy com­pany Lac­talis in May, in­ject­ing €740m into the debt-laden firm. It has yet to dis­close the ef­fect of the sale on its net debt po­si­tion, which stood at R53.5bn at the end of De­cem­ber.

Man­age­ment has had to an­swer to com­pe­ti­tion au­thor­i­ties in sev­eral dif­fer­ent ju­ris­dic­tions in re­cent years. It lost its ap­peal against a €5.2m fine levied by the Ital­ian Com­pe­ti­tion Author­ity in 2016 for ex­ces­sive pric­ing and faces an on­go­ing probe by the Euro­pean Com­pe­ti­tion Com­mis­sion for steep price hikes in sev­eral off-patent cancer drugs it ac­quired from Glax­oSmithK­line.

The SA Com­pe­ti­tion Com­mis­sion an­nounced an in­ves­ti­ga­tion into the price of some of Aspen’s cancer drugs in 2017, which it sub­se­quently dropped.

Aspen’s agree­ment to pay the NHS fol­lows an in­ves­ti­ga­tion by the UK Com­pe­ti­tion and Markets Author­ity (CMA) into al­leged an­ti­com­pet­i­tive be­hav­iour by Aspen and two ri­val phar­ma­ceu­ti­cal com­pa­nies over flu­dro­cor­ti­sone, a drug used to treat Addison’s dis­ease.

The CMA said it sus­pected Aspen had paid com­peti­tors to stay out of the mar­ket in 2016, en­abling it to set prices.

The CMA said on Wed­nes­day Aspen had re­cently ap­proached it with an of­fer to re­solve the mat­ter. It said Aspen ad­mit­ted by way of set­tle­ment that it was party to an il­le­gal, an­ti­com­pet­i­tive agree­ment. In ad­di­tion to pay­ing the NHS, it had agreed to re­store com­pe­ti­tion by open­ing the mar­ket for flu­dro­cor­ti­sone to at least two other com­peti­tors.

The CMA said it was still in­ves­ti­gat­ing Aspen, which could face a fine of up to £2.1m if it is found to have bro­ken the law.

“The CMA launched this in­ves­ti­ga­tion be­cause we con­sider it un­ac­cept­able for the NHS — and the tax­pay­ers who fund it — to have to pay mil­lions of pounds more than they should for this life-sav­ing drug,” CMA CEO Andrea Coscelli said in a state­ment pub­lished on its web­site.

The CMA said it was con­tin­u­ing its in­ves­ti­ga­tion into the two other phar­ma­ceu­ti­cal com­pa­nies that are al­leged to have col­luded with Aspen, but did not iden­tify them.

Graphic: KAREN MOOLMAN Source: BLOOMBERG

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