Aspen dispenses right tonic for investors
Co-founder and CEO Saad’s rising fortunes propel him into the dollar billionaire league
IF EVER you needed further evidence that Aspen Pharmacare’s strategy of gobbling up companies here and overseas has provided handsome rewards for CEO Stephen Saad, a glance at this week’s results for the half-year to December would remove all doubt.
Aspen, to some extent the pharmaceutical equivalent of SABMiller when it comes to spreading the South African corporate brand across the globe, has come a long way since Saad launched the company in a small house next to Durban’s Greyville racecourse. For Saad personally, the 720% jump in Aspen’s share price since it listed on the JSE in 1998 has provided him with immense wealth, rocketing him into the Forbes list of dollar billionaires.
But the true value of Saad’s policy of expanding beyond South Africa’s borders when rivals shied away was evident last year when the rand fell out of bed so spectacularly.
The dollar earnings from overseas meant that revenue from Aspen’s international businesses rose 94% to R3.4-billion while that from its AsiaPacific business grew 27%.
Pretax earnings before amortisation from outside South Africa amounted to R2.1-billion, more than 71% of Aspen’s total of R3.2-billion.
Back home, the rand’s plunge against the dollar meant that Aspen ended up actually losing money on the sale of HIV drugs in South Africa, a significant fact considering that Aspen is South Africa’s largest generic provider of antiretroviral drugs to government.
Speaking from Aspen’s head office in La Lucia Ridge, north of Durban, a few weeks ago, Saad emphasised the value of retaining the entrepreneurial atmosphere at the pharmaceutical group.
“We want to stay nimble. We don’t want 5 000 people at head office creating non-productive work for the organisation just to make themselves relevant.
“We have about 60 people. We don’t want our operational teams wasting time with PowerPoint presentations placating head office.”
It’s an ambitious goal for a company with 8 200 employees and 23 manufacturing facilities on six continents. Aspen sells drugs to 150 countries, and it’s still expanding as the results clearly illustrate.
That has paid off handsomely. Aspen has doubled profit every year for the past 14 years. It is number one in South Africa in both branded and generic medicines, and one in every four medicines sold in South Africa is stamped with the Aspen brand. In Australia, Aspen’s medicines are sold more than those of any other pharmaceutical company, with one in five being stamped with its brand.
Back when the company was still operating from the Greyville house, Saad and his partner, Gus Attridge, saw the gap for a company providing affordable medicine. They already had an inkling, having turned over a handy profit distributing medicines in townships.
The problem, of course, was being able to produce affordable quality medicines. When Aspen did its first big deal to buy SA Druggists, it decided at the last minute to retain the manufacturing facility that was the “heart and lungs” of the business. So Saad and Attridge invested in the facilities and people, aiming to meet the most stringent global regulatory standards.
People tend to point to Aspen’s trail of acquisitions — particularly in Japan, Indonesia, Eastern Europe, Latin America and sub-Saharan Africa — as one factor behind its success.
But this is only part of the story. The other part is the extent to which Saad and Attridge broke the mould by convincing multinationals to allow Aspen to produce ARVs at a fraction of the cost of the branded equivalents and at a price locally not the same as in developed markets. It is a model that has been replicated by other companies in emerging markets.
Saad’s view is that you need to get the balance right between protecting the intellectual property of pharmaceutical companies and remembering that lives are at stake.
“If [a company that has poured millions into research] wants a patent on Viagra, they deserve it. [But] patents simply cannot be at the expense of lives — and sometimes it is.”
Saad said he still respected intellectual property, but there should be a careful review of what should and should not be allowed.